In his book A Random Walk Down Wall Street, economist Burton Malkiel made the following claim:
“A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by the experts.”
In an attempt to test the validity of his theory, the San Francisco Chronicle conducted an experiment where an orangutan, Jolyn, picked stocks by throwing darts at a board of symbols. Her portfolio’s performance was compared to that of 8 professional analysts over a year.
Jolyn’s performance was surprisingly successful, effectively tying or beating the analysts as often as they beat her. At the end of the year, Jolyn’s portfolio had outperformed that of all but one of the professional investors.
I could argue that Jolyn performed better for her clients since she was likely paid in bananas, while they were paid a percentage of the client’s entire portfolio, thereby requiring them to dramatically outperform Jolyn to make up for the fees they charge.
Similar experiments have been run over the years with similar results. The lesson? You can’t blindly trust the experts because they don’t always know.
What is an expert, and why do we seek their advice?
An expert should be someone with above-average knowledge, experience and (hopefully) wisdom about a particular topic—but to what end? We hope they will use that knowledge, experience and wisdom to guide us correctly and deliver the result we’re after.
But there are 2 problems with “expertise.”
#1: Experts sound just as convincing about their advice when they’re wrong as when they’re right.
#2: Expertise is NOT the same as competence.
Years ago, when I was first starting to run big events, I hired a consultant to assist me with hotel selection and contract negotiation. His entire professional career of 30 years had been dedicated to helping people like me navigate the twisty and often underhanded practices of hotel event sales teams who frequently lied, attempted to price gouge on food and beverages and load their contracts with gotcha clauses.
A verifiable expert.
I hired him and, at first, things were good. Until they weren’t. The relationship fell apart fast after we uncovered that he had overlooked a number of critical and financially crippling details in a couple of our contracts, not discovered until we held the event, nearly a year after he negotiated them on our behalf.
Was he incompetent? Unethical? Maybe both. What I do know is that he proved to be incompetent and cost us a significant amount of money and angst because he failed to do what he said he would do—help us successfully negotiate hotel contracts to avoid being taken advantage of.
Competence is the ability to consistently do something successfully. So, while we look for “expertise” in the consultants we hire, what we’re really trying to figure out is whether they DO what they say they can do. Are they competent?
Expertise isn’t the same as competence.
