Misinformation and the reliance on "experts"

The events of this week at the Fukushima Daiichi nuclear power plant in Japan--and the resultant panic in world financial markets--reminded me just how fickle and easily frightened people can be when they are dealing with things they don't understand. Along those same lines, it is amazing how powerful the voice of an "expert" can be in times like these, and how careful people in those positions must be with their words.

The first example of this "expert" dynamic comes courtesy of Barry Ritholtz, who passes along the curious case of MIT "research scientist" Josef Oehmen.

The tragedy in Japan is still unfolding. To those of you who are curious as to how your own brains operate, and what various reactions mean to your investments, this is what we might call a teachable moment.

Back on March 13th, Ron Dodson sent me a Tweet touting an “MIT scientist’s take on Japan.”

I clicked over to read this blog post — titled “Why I am not worried about Japan’s nuclear reactors” — and was immediately suspicious. It was the FIRST and ONLY blog post from this individual. It had 100+ comments in a few hours (so much for taking years to develop a following).

Given it was only a few hours old post, I was surprised to see that Google showed it been reposted over 30,000 times elsewhere on the web...

My curiosity sent me to MIT’s site, to look up their faculty list. The author of the post was  Josef  Oehmen “LAI Research Scientist.” The first paragraph made clear what his Nuclear Physics bonafides:  He had none. “The main research interest of Dr. Josef Oehmen is risk management in the value chain.”

WTF?  Value Chain?

That was where my search ended. There was no expertise in either Nuclear energy, Physics, or anything else even remotely relevant, and I tweeted as much (here).

I thought that would be the end of it, but smart people who should know better (Cramer, Tom Keene) kept on Retweeting it.

Last last night Rob Bullerwell gave me [a] heads up that Oehmen’s post was a sham: Posted on the site Genius Now was The Strange Case of Josef Oehmen.

It's somewhat disturbing how much traction this piece got, simply because this guy seemed to be an expert. "MIT research scientist" sounds impressive, so we're all tempted to take his word on the matter because he's probably smart. 

But the man knows absolutely nothing about nuclear power plants or nuclear reactors in general (he's trained in mechanical engineering), and even less about this plant in particular. He is privy to zero information about breaking news or events in Japan, and everything he writes is thus basically a hunch. It's irresponsible journalism at its best, and yet "real" journalists who should know better went about re-tweeting it and sending it along as though it was concrete news. Journalistic responsibility does not cease just because you're dealing in the land of Twitter--you need to check and re-check your sources, just as you would in any other journalistic setting.

Then, the very next day, Guenther Oettinger, the European Union's commissioner for energy, drove home the point of the dangers of misinformed "expert analysis".

U.S. stocks sank deeper into the red on Wednesday after the European Union's energy chief warned of "possible catastrophic events" at Japan's nuclear plants...

Stocks deepened modest losses on Wednesday after Guenther Oettinger, the European Union's commissioner for energy, told a European Parliament committee that a nuclear power plant in Japan is "effectively out of control," and that the situation could continue to deteriorate.

"In the coming hours there could be further catastrophic events which could pose a threat to the lives of people on the island," he said.

Traders said the remarks fanned anxieties simmering in the market.

"I think it's this word of a catastrophic nuclear event--we're still sniffing out," said Joseph Saluzzi at Themis Trading LLC. "In this type of market this news moves quickly--flash crash type stuff."

The market gradually pared its losses as traders digested the remarks as analysis, rather than breaking news.

Spokespeople for the commissioner quickly scrambled to clarify that he had no specific knowledge of any breaking news at the Japanese plant, and that he was essentially speaking of the cuff in generalities. It certainly didn't sound that way, and the damage to markets and psyches was already done.

There are really two lessons to be learned here. First, be very careful about jumping to conclusions and having knee-jerk reactions to what seems to be "expert" analysis. Experts often do not possess nearly as much information as they profess to have, and their reports and analysis must always be vetted for accuracy and thoroughness. Nothing, from anyone, no matter how much of an "expert" they are, can be taken at face value.

And as for all you "experts" out there, be careful. Know that people look to you for information about things that they do not understand during times of crisis. Understand that any off-hand remark could be misconstrued, blown out of proportion, or simply spread rapidly in ways you might not have expected. With great power comes great responsibility.

My best wishes go out to all those affected in Japan.

[The Big Picture]
[Wall Street Journal]