Is It Safe to Rely On Experts All The Time?

Everyone knows the FIFA World Cup is here! Yes, everyone. Chances are your friends, spouse, partner, family, co-workers, and randoms have been talking about it for the past few days. I personally love to play soccer. Admittedly, I only catch the occasional game in between the World Cup and Europe Cup. Why? It’s the same reason NOBODY ever watches swimming unless it’s the Olympics.

I wanted to apply some of my World Cup observations to the fascinating world of personal finance (you know you’re cool when…). I don’t mean to rant, but recent arguments and debates have really got me thinking about this whole “expert” concept. For the next month every single spectator is going to become a soccer expert. Anyone that reads a dating book is a modern day Casanova. Anyone that reads a personal finance book is quick to judge others’ spending habits.

Everyone is an expert.

I was a soccer referee for three years. I absolutely do NOT understand all of the rules of the game. The best referees still make mistakes. Players begin playing the game as early as 3 years old and prepare their whole lives to be involved in such as major spectacle. Yet when the English goalie fumbles the ball, everyone is ready to castrate him.

Nobody plans to screw up. People don’t plan to get $40,000 into debt. Nobody plans to lose their job. We don’t plan to neglect our retirement planning. This stuff just happens. Instead of proclaiming to be an “expert” you should try to understand that every situation is different. You may be talented when it comes to landing a lucrative position, yet completely clueless with actually saving money. We all have areas in our lives where we need to improve.

I love the section in Ramit Sethi’s book I Will Teach You To Be Rich where he dispels the myth of the “expert.” On pages 143-3, Sethi cites a study where the following occurs:

A 2001 report Frederic Brochet of the University of Bordeaux, where 57 “wine experts” were invited to check out two different wines. What happened? You guessed it. All 57 supposed “experts” were unable to determine that they were drinking two identical wines.

Does anybody do any real research?

I wrote about money myths here the other day. Why are so many money myths prevalent? Because we all rely on experts and take information at face value. Buying is better than renting just because. Does anyone ever run the proper calculations prior to throwing this statement out? Probably not. We’re all guilty of this. It’s much easier to accept mainstream knowledge than it is to dig deeper.

It’s really easy to judge others.

When your buddy Vlad buys the newest iPhone that just came out,  it’s all too easy to say, “you already have an iPhone jackass.” Why would anyone spend a couple hundred dollars on yet another phone? Well maybe this person takes public transportation instead of buying a new car. It’s all too easy to look down at the financial mistakes that others make. How often do we take a realistic look at our own financial situation? We usually don’t because it’s much easier to look at the person that’s thousands of dollars in debt and feel good about ourselves for not being in debt.

Logic is thrown out the window.

Emotions trump logic when major decisions are made. This is what brings people to lose money. When choosing individual stocks, rookie investors will often take the advice of “financial experts” as gospel. Stocks are purchased based on the recommendations of supposedly trusted individuals. When the stock prices starts to drop, we don’t sell because we figure this is a temporary change. We let our emotions get in the way. We heed the advice of those that we view as experts. In the end we wished we followed logic (actually researched the stock) instead of solely relying on the help of others.

I hope you guys understand that I’m not a financial “expert” or “guru.” I will never try to come off as one. I’m just a regular dude learning about finance. Some of you are ahead of me and you come here to help out (I’m looking at you Budgeting in the Fun Stuff). Others are really interested in the newly entered world of personal finance and come here to check out my opinion on stuff that matters to them. Either way I like to treat Studenomics as a  super-helpful resource for everyone involved.