An Investment In Bad Ideas

Recently, my family had a nice visit to Norfolk, Virginia. Norfolk is not a very large city, but it is large enough and unfamiliar enough to get lost in. I was driving at night from Virginia Beach, another nearby city, and exited too soon off of the freeway. I then compounded the mistake by turning right instead of left. Pretty soon we were in very unfamiliar territory and my wife was very nervous, (it was a nice residential community, not a slum). She asked me, “Please go back to the freeway,” but I refused. I was certain that I could get us to the hotel. I felt sure that I was getting closer to our hotel and we would soon cross a familiar street and all would be fine. Eventually, my wife panicked and started yelling and my son started crying and I stopped driving. I let my wife drive.

The example of driving down the wrong road can be both a literal example and a metaphor for a particular type of bad thinking: “After investing so much in a particular idea, I am determined to make good on that investment.” A rational person would see the evidence for what it is and cut his losses. But people aren’t always rational. Once you have a lot invested in a project or in an idea, you are likely to become obsessed with proving that your original investment was a good one.

In mathematics, there was a whole school of thought devoted to the study of determinants. They found a million and one wonderful uses for these things. Only one problem: determinants exhibit a terrible curse of dimensionality problem that makes using them in any practical calculation almost useless. Surely someone must have questioned the wisdom of studying these things at some point. But once you have made your reputation as the world’s foremost expert on determinants, it might be hard to admit to yourself that your life’s work has been a waste of time.

In politics, you see many parties cling tenaciously to bad ideas that the average public really doesn’t care for. Why would they do this? In large part, it is the ego of the politicians that drives this phenomenon. These politicians could say, “I used to believe in X, but X didn’t work, but I’m still a good politician, I still have good ideas, and I’m moving on.” No, the politician is wedded to X for life. Even if X is obviously a bad idea, the politician is bound to support it and give X a respectability that X does not deserve.

In India, the Communist Party is still viable and still has considerable influence, despite the fact that socialism obviously did nothing for India. If India had embraced the free market fifty years ago, it would be the world’s wealthiest nation. It citizens would have the kind of prosperity that you see in Singapore and Taiwan and Korea. But instead, India is still a poor nation in which hundreds of millions of people don’t get enough to eat and live in substandard housing. Why would anyone listen to what the Communists have to say? Does anyone really believe in communism anymore? The Communists have invested a lifetime in a particular way of thinking and cannot rewire their thinking. And a person who has voted for the Communists for 40 years is unlikely to say one day, “I’ve been wrong for 40 years, I need to move on.”

In the United States, the Democrats have supported the cause of labor unions for a century. This seemed a wise decision in the 1950’s when most workers belonged to labor unions. But today, only 12 percent of the workforce belongs to a union and this percentage is steadily declining. The unions today tend to represent workers who really don’t need a union: professional athletes, airline pilots, and government employees. In elections, most labor union members vote Democrat but both the share of the electorate that is union and the percentage of union members that vote Democrat are shrinking. These statistics should convince Democrats that they need to move on. But they cannot move on. They have invested in the rhetoric of unionization for a century and the politicians cannot admit that this investment had brought them no returns.

Getting back to the original story about being lost in Norfolk, we did eventually get back to the hotel. In fact, I was going roughly in the right direction and we only needed to go a little farther to see a familiar road. Sometimes in driving around a city, the wrong road can get you near where you want to go. But in life, wrong roads lead nowhere. We always need to ask ourselves, “Are we investing in bad ideas?” If you are a little unsure, you need to give this subject a lot of reflection.