Victor Grauer writes:
The film, “The Big Short,” and the book, “No One Would Listen,” offer instructive object lessons on the dangers of blindly accepting a consensus, no matter how convincing it might sound.
The following is lightly edited version of a comment originally submitted to the RealClimate blog, but predictably it wound up in the “Bore Hole”:
I recently had the opportunity to view, for the second time, the very amusing and instructive film, “The Big Short.” And, by coincidence, I just completed the fascinating book, “No One Would Listen,” by would-be whistle blower Harry Markopolos. And I could not help but notice a theme common to both works: the potential dangers involved in uncritically accepting a widely held consensus view.
The protagonists of “The Big Short” see very clearly that the US housing market is unstable, and that the huge financial industry produced by the questionable packaging of mortgage-backed securities is about to collapse, taking the world economy with it. Seeing an opportunity to profit from their insights, they decide to short the market for such securities, but when they explain their strategy to the bankers, they are met with derision and laughter. After all, the consensus of literally everyone in the financial world is that the housing market is and always will be solid. And after all, the financial organizations dealing in such securities are among the most successful and highly regarded in the world. A powerful consensus indeed!
Harry Markopolos is a financial expert who, many years ago, figured out, on the basis of a critical analysis of the data, that Bernie Madoff was a fraud. Yet no matter how many times he tried (as I recall it was 8 times in all, dating back to 1999), he was never able to convince the Securities and Exchange Commission to properly investigate. Nor was he able to convince almost anyone investing with Madoff to look more closely into his operation. Why?
Once again, the consensus of just about everyone in the financial world was that Madoff was honest, forthright, solid, reliable and completely trustworthy. After all, he had produced impressive returns year after year for a very long time, he’d been “investigated” by the “experts” at the SEC (in a half-hearted effort that turned out to be a sham), and passed with flying colors. Markopolos was routinely ignored, mocked, and dismissed as some sort of crackpot. After all, he was bucking an overwhelming consensus in the world of finance that Madoff could do no wrong. Ironically it was not Markopolos, who had him figured out from the start, but Madoff himself, who finally blew the whistle. There was literally too much at stake for anyone else to do so.
The financial crisis anticipated by the protagonists of The Big Short shook the entire world and is still having dire repercussions everywhere. And if Bernie Madoff’s scam had been allowed to progress for another few years, his collapse might have had equally disastrous repercussions.
I’ll leave it to readers to draw their own conclusions regarding any possible parallels with the consensus on climate change.