Guest post: The psychology of economic forecasting

Submitted by Edward Harrison of the site Credit Writedowns.

During the last generation, the economics profession has veered toward a ‘science’ model of economics and finance. The intellectual underpinnings for this development began with the Efficient Market Hypothesis (EMH) and has continued in no small measure due to what is often termed ‘University of Chicago School Economics.’ If you are looking for a good read on what is wrong with the EMH view of the world, you should get ready for Justin Fox’s “The Myth of the Rational Market” which is coming to a bookstore near you.

My own view is that many economists today are really frustrated scientists looking to ply their science and math craft in economics. In reality, economics is a social science with large influences from psychology and the scientific view ignores this. However, the fact that psychology plays a large role in economics is something that is increasingly appreciated, as the Nobel Prize received by Daniel Kahneman attests.

So, I am not going to discuss EMH or rational markets. Rather I want to delve into the psychology of economic forecasting and why economists act as they do. Late last month, I posted an article with an attached video in which Marc Faber made the very astute comment, “it’s very tough for a forecaster who was ultra-bearish to stay bearish, because if he’s wrong he has a reputational risk.” What I believe Faber was saying is this: an economist who is proved wrong is an economist who loses credibility. This statement is at the heart of economic forecasting.

What Faber is giving voice to is the very real concern that any economic forecaster feels in making a prediction. If one is proved right, then plaudits will follow. If one gets it wrong, the Bronx cheer is what you are likely to get. This is true for macroeconomists as much as for Wall Street analysts. I will give you two examples from Wall Street to illustrate my point.

Henry Blodget: Amazon to $400

In October of 1998, Blodget predicted that Amazon’s stock would soar to $400 a share. At the time, he was a little known analyst at Oppenheimer, the same company for which Meredith Whitney worked until recently. His Amazon prediction propelled Blodget to a much higher status and attracted the attention of Merrill Lynch, the bulge bracket firm to which he moved for a huge salary. Clearly, making a bold call that comes true is a boon to a market forecaster.

Arjun Murti: Oil to $100 and then $200

Back in 2007, Arjun Murti, an oil analyst at Goldman Sachs, made a bold call that oil could rise to $100 a barrel in a ‘super-spike.’ I stress the fact that he said could because he was not predicting $100 a barrel per se, but rather he was making an analysis about the factors which could create a spike in oil prices. When oil did in fact rise to $100, many were shocked and Murti looked to be a prophet. Then he penned a piece which said the super spike could take oil to $150-$200. When oil peaked at $147 a barrel and subsequently collapsed down to $33, Murti was widely vilified in the media.

In fact, if you look for his name in a search engine, you will find all manner of references to his $200 oil call as a wrong prediction that was the height of hubris. However, if you read the above linked Bloomberg article, you can see he never said oil would rise to $200 a barrel any more than he said oil will rise to $100 a barrel. In fact, he gave a range from $150-$200 which was arguably met when oil rose to $147 a barrel. Clearly, making a bold call that is ‘proved’ false is detrimental to the reputation of a market forecaster.

So, in retrospect, Marc Faber was making a statement about Nouriel Roubini, dubbed by the media as ‘Dr. Doom,’ that one can easily see has having relevance in the Arjun Murti case. The question is what impact these facts have on how forecasters act. I would argue that it constrains their forecasting more than is readily apparent, especially due to ‘personality factors’ in the forecasting community.


The first outcome of this asymmetric treatment of bold calls gone wrong and ones proved right is what is known as herding. This is a phenomenon known to be at work in bubbles and was popularised in a 19th century book called “The Madness of Crowds” by Charles Mackay. More recently, herding has been seen amongst fund managers judged according to an index benchmark and relative fund performance. But, it is also evident in how forecasters make predictions as well. No one wants to go out on a limb with a bold call only to see this prediction proved wrong. If one fails, it is better to fail conventionally. The necessary corollary of that statement is this: market forecasters and analysts play it safe by making sure their forecasts are not often far from the consensus forecast. Think of the consensus forecast as an anchor which restricts the outlook of any individual forecaster afraid of failing unconventionally.

In Roubini’s case – and this logic also applies to media darlings like Meredith Whitney – it does NOT pay to up the ante. What Faber is saying is that they have already benefitted from the bold and unconventional contrarian market call they initially made. There is little payoff and much risk from continuing on that path. A bearish analyst who misses the turn gets the stick. Just ask the original Dr. Doom, Henry Kaufman.

Personality Factors: think Mr. Spock

There is another overlooked part of forecasting which contributes to the herding of analysts. I would call this personality factor, the ‘Mr. Spock Syndrome.’ Let me explain.

In the early 1990s when I entered the Foreign Service, we were all given a personality test called the Myers-Briggs Type Indicator (you can take the test here). This test is designed to give individuals a general sense of their own particular personality proclivities and modus operandi. While the test has generated some criticism for not having enough real world statistical validation, it has been adopted by a wide range of human resource departments worldwide.

Now, when I took this test, I had no idea what the MBTI was. So, I found it quite interesting to hear what it was designed to achieve. What was more interesting was how unevenly distributed different personality types are across the population. Of the four types, two make up as much as 80-85 percent of the population, whereas the other two make up as little as 15-20 percent.

When we were asked to raise our hands and self-identify after we received the test results, two thirds of the classroom identified themselves as NTs – otherwise known as rationals (I am an NT as well). Mr. Spock, the character from Star Trek, best exemplifies the exaggerated two-dimensional version of an hyper-rational.

Given the fact that rationals make up 5-10 percent of the population, it is very unlikely that two-thirds of my thirty-odd Foreign Service colleagues were NTs by random chance. More likely is that we self-selected based on the fit between our personality and the job and based on self-selection (i.e. NT Diplomats unconsciously picking other NTs).

In economic analysis much the same dynamic is at play – rationals are a natural fit for the role of stock analyst or economic forecaster. I guarantee you that you would see an equally disproportionate number of rationals in those positions were you to administer a global poll of economic forecasters (which makes me wonder if the whole ‘rational economic agent’ meme in economics is just a projection onto the broader population?).

Mr Spock doesn’t like being wrong

So, what are the personality characteristics of an NT? Opinionated and arrogant are two things that come to mind. But, that’s being negative. There are many positive ones like pragmatic, even-tempered, inventive. One interesting characteristic is that rationals do not like to be wrong. It is like a blow to a rational’s sense of self to proved wrong. So, more than other personality types, rationals take episodes to heart like the one I described with Arjun Murti. While this might tend to make one more meticulous and precise, I believe it also makes one more cautious. Take a look at this post and you will see that I, as an NT, have unconsciously filled my article with qualifiers like “might’ and ‘could’ or ‘tend to.’ I didn’t realize this until I read the last sentence. But, clearly I am doing the same thing I am accusing other forecasters of doing: qualifying my statements in order to make it easier to weasel out of a bad call.

The easiest way to weasel out of a bad call, however, is to vote with the consensus, otherwise known as herding. Outliers are punished if they are wrong. Now I know rationals tend to be very independent minded and are, therefore, more prone to be contrarian, but I also think that the rewards and incentives in forecasting are skewed toward consensus. In my opinion, this is another reason why momentum is such a force in markets – no one is willing to stick out his neck.

I hope you find this post entertaining. I look forward to your comments – positive or negative.

Print Friendly, PDF & Email
This entry was posted in Investment outlook, The dismal science on by .

About Edward Harrison

I am a banking and finance specialist at the economic consultancy Global Macro Advisors. Previously, I worked at Deutsche Bank, Bain, the Corporate Executive Board and Yahoo. I have a BA in Economics from Dartmouth College and an MBA in Finance from Columbia University. As to ideology, I would call myself a libertarian realist - believer in the primacy of markets over a statist approach. However, I am no ideologue who believes that markets can solve all problems. Having lived in a lot of different places, I tend to take a global approach to economics and politics. I started my career as a diplomat in the foreign service and speak German, Dutch, Swedish, Spanish and French as well as English and can read a number of other European languages. I enjoy a good debate on these issues and I hope you enjoy my blogs. Please do sign up for the Email and RSS feeds on my blog pages. Cheers. Edward


  1. Lone Entrepreneur

    I think this article misses the point. The whole concept of free market commodities trading was that in open and fair trading environments supply/demand would ultimately be the determinate of price discovery. Very few people would disagree that the market currently is being distorted by speculative activities, and this only feeds into the public's distrust of these types of markets.

  2. Edward Harrison

    Sorry, this article has nothing to do with commodities trading or free markets.

  3. Eric

    "Given the fact that rationals make up 5-10 percent of the population, it is very unlikely that two-thirds of my thirty-odd Foreign Service colleagues were NTs."

    That's like saying, "given the fact that people who score in the 98th+ percentile on IQ tests are less than 2% of the population, it is very unlikely that most Mensans are actually in the 98th percentile."

  4. Thomas

    I've worked for a long time with a personality assessing system related to the MBTI called the Enneagram. I haven't studied all the forecasters in depth but several of the Doctor Dooms share the same style. Roubini, Schiff and Celente are all what the Enneagram calls "Sixes". (The system describes a total of nine basic styles and just calls them by numbers.) Sixes specialize in negative forecasting, not just professionally but in daily life. They are finely attuned to what can go wrong. It is one of their central talents (as well as their occasional downfall.)
    I can't figure out how to attach a pdf to this comment but there is a good description of the styles that can be downloaded:
    "The Enneagram's
    Nine Styles"

    BTW: Greenspan, Bernake and Geithner are all rather typical Fives.

  5. Edward Harrison


    good catch: I added "by random chance" which is what I meant.

    Thomas, thanks for the link.

  6. cydmab

    Your "herding" and general sensitivity to reputation effects are NOT necessarily psychological explanations of forecaster behavior; those two explanations are bog-standard rational-choice explanations. There's an extensive game theoretical literature on those topics.

  7. Edward Harrison

    cydmab, I never said the "herding" and general sensitivity to reputation effects WERE psychological explanations. Re-read the part of the post under the heading "Herding" and you will see this is so.

    The post is called the psychology of economic forecasting, but the herding behavior seen in fund managers is indeed a well-studied phenomenon of rational behavior explained by game theory.

  8. Tiago

    Here is a completely different view at The New Scientist. Even includes a picture of Jim Cramer to make a point.

    The 2 viewpoints are not incompatible. But I am inclined to suggest that the NS suggestion is reasonable: people will follow confident, certain people, even if they say BS and even if the scenario is uncertain and requires doubt.

  9. Edward Harrison

    Tiago, that was in today's links that I posted! But, the two views are not mutually exclusive. You can put weasly qualifiers in and still act like you are cock-sure

  10. VG Chicago

    Mr. Spock is discredited. The Myers-Briggs is little more than a personality classification system that I, as a psychiatrist, do not put much value into. Both fall within the real of pop psychology. There are more reliable psychological tests available, and I would not drop Mr. Spock’s name in any of my professional circles, unless I am speaking about the brilliant Mr. Spock of starship Enterprise.

    Regarding the comparison between economics and psychology. To begin with, psychology and economics do not have much in common. Applied psychology has already moved well into the area of providing systematic diagnosis and practical solutions, while economics seems to still be stuck in the area of philosophical or religious dogmatism.

    The article mentions psychology is not a true science. Of course it’s not. Especially if we think of “true sciences” to be those heavily constructed on mathematics. Psychology remains a humanity, and applied (clinical) psychology remains an art. Additionally, just like economics, psychology is not a theoretically-unified field. But this does not prevent it from being useful.

    However, unlike economy, clinical psychology (and all of medicine) has built a structured diagnosing systems by which people like me can easily spot problems with a patient, and take remedial steps (treatment). In my own clinical work I rely on a book called DSM, which is a mechanistic system free of theoretical frameworks. But it helps me classify my patients’ signs and symptoms, build a hypothesis about their problem, and then quickly move into the treatment phase. I begin helping the individual immediately, and sometimes even prevent disasters from happening (i.e., suicide). And this simply because our professional associations have gotten together, looked at the psychological problems that afflict people across a large section of the population, and put together a nice and simple system to diagnose and treat the problems.

    However, economics seems to be stuck in the area of theoretical bickering, often about philosophical differences and search for absolute truth. I’m not sure I should classify this attitude as arrogance or stupidity or both.

    Since economics has not yet moved toward systematic identification of signs and symptoms of economical problems, true prevention and treatment of economic crisis is impossible.

    What is necessary in economics is for the leading minds in the field to get together, study the signs and symptoms of all these crises we’ve had, and set up a straightforward diagnosis criteria, as well as recommended treatment. But this needs to be done outside of a specific theoretical framework. We can use statistics and past observations, but leave the theories behind.

    Because I am still seeing a lot finger pointing to the US as a “cause” for the current crisis, mainly coming from an increasingly ignorant and egocentric Western Europe, I must educate this audience about the true relationship between “cause” and “effect” when it comes to human behavior areas such as economics or psychology: There is no DIRECT relationship there. Got that? Is that simple enough for you to grasp? In other words, we are clueless about the etiology of these problems. Just pick up a medicine and look at the Etiology sections, and you’ll be amazed how most disorders have “unknown” at etiology. So why then do we expect more from Bernanke or Geithner. So, to our European readers: please stop dancing to Angela Merkel and Sarcozy’s same old tune called: “Insidious Anti-Americanism, Born out of Envy and a Complex of Inferiority”?

    In a nutshell: psychology has already moved into the area of trans-theoretical applied art-science that can actually be useful to people. Economics is still stuck in the area of religious dogmatism.

    Vinny GOLD

  11. Anon1

    As someone who actually works in a real science (biology/molec biology/biochem) it drives me crazy to hear or read economists describe their area as a "science".

    Right. It is "science" the same way the "creationism" is science.

    As for, "an economist who is proved wrong is an economist who loses credibility", there IS no such thing as a wrong economist. They ALWAYS come back with caveats, in the face of outright, blatant error, like "but the market is being interfered with. If not for that, I would be proven right" or "If not for distortion from x, I would be proven right".

    It is quite obvious, from the outside, that economics is nothing more than psychology, poorly applied, mixed with personal politics. The particular economist writing or talking presents a "theory" based almost ENTIRELY upon his/her personal politics, which distorts the psychology they apply. Seriously. The entire basis of economics is the pre-accepted fundamentalist religion of "free market". Anything evidence that the "free market" is horrific or total bullcrap is automatically denied as heresy (literally, and in the religious sense).

    Psychology, sociology, and personal politics is what is at the heart of economics. Nothing more. There is no such thing as the "science" of economics.

    Game theory is a nice try, but, again, it is always clouded by personal politics (whether the economist is liberal or reichwing in their personal orientation).


  12. John Michelau

    The article is good, and I appreciate it.

    To the psychiatrist: You are correct in stating that psychiatry and economics are not the same. This is precisely why your methodology won't work in the field of economics. The "economy" is not the same thing as a person. It is, in fact, made up of the singular decisions, wants, needs, etc of billions of people. By contrast, a person is a singular entity. It is infinitely simpler to isolate and objectively determine the mental health of a person, compared to doing the same for the economy. In addition, you are making the assumption that there is a "common goal" of the economy, which is comparable to the goals that an individual person has. This error becomes somewhat obvious when you try to define "the economy" the same way that you can define an individual person. Performing some type of systematic diagnosis on "the economy" would be about the same as asking you to ascertain the mental health of every living person on this earth at the same time, and prescribe a treatment that would be beneficial to all of them simultaneously.

  13. VG Chicago

    John Michelau:

    It is not true that psychology does not deal with large groups of people. In fact, a branch of psychology called Systems Theory explains exactly the behavior of large groups of people such as organizations, families, even nations. It is well researched, and makes a lot of sense. It is also very useful in predicting the behavior of these “systems” of people, and also offers well researched and proven solutions (“therapy”) to problems. In fact, Systems Theory is quite interdisciplinary, so many other fields use it. Check this out for more info:

    As far as an individual representing a single goal and decision, that’s not true either. Most individuals hold numerous competing (and often conflicting) beliefs, goals, ideals, etc. Human beings are very, very complex things.

    The diagnosis approach used in psychology as well as ALL branches of medicine simply looks at the signs and symptoms and applies statistically supported methods of treatment. While obviously not an exact science, it’s quite effective, and nobody can argue that it's worse than no intervention at all. It can work in economical problems as well.

    Anon 1 (the molecular biologist):

    Prior to becoming a psychiatrist, I spent many years as a computer scientist, which is a “hard science.” But I would not be so quick to discredit fields such as psychology, medicine, and others just because we don’t have Newtonian-style formulas to describe the processes we observe. Human behavior (individual as well as in groups) is far, far, far, far, far, more complex than the most complex molecule you were ever able to model. The mathematics we have today (and possibly forever) is simply just too incomplete to describe human (or economic) behavior. In fact, anybody who has studied the human mind will testify to just how limited we really are.

    As far as the “real sciences” go, can you please tell me about a unified theory of physics that makes sense? Something that would explain what the world around us is (and that includes molecules) ina credible fashion and without beginning to sound like mysticism? I am sorry, but I am afraid even “real science” is entering postmodernism, when 1 + 1 is not 2 but “anything you wish, baby!” If you have trouble with that concept, please review Quantum Mechanics… :)

    Vinny GOLD

  14. DownSouth


    I don't think your "rationalists" are very rational at all. It sounds like their rationality has been trumped by other considerations–ego, reputation, self-interest, etc.

    Doesn't all this lead us right back to the theologian Reinhold Niebuhr's criticism of idealistic rationalism?

    The order and inner coherence of reason is regarded (in idealistic rationalism) a safe retreat from the chaos of natural impulse; and the power of reason is considered sufficient to master and coerce natural vitality ("avarice, ambition, vanity and all passions," in the words of Hume) and transmute it into a higher realm of coherence… In other words it (idealistic rationalism) repeats the errors of Greek classicism. Consequently it finds a premature security for the freedom of man in the inner coherence of reason and does not see to what degree man may, in his freedom, violate, corrupt and prostitute the cannons of reason in his own interest.
    –Reinhold Niebuhr, The Nature and Destiny of Man

    I notice several commenters are beating up on the discipline of economics. A year ago I probably would have done the same thing. But since then I've come to the conclusion that other disciplines are also far from being rational. For instance, take a look at how thoroughly the medical journals have been corrupted by Big Pharm:

    And what about global warming? That's almost an entirely physical science, yet something has gone terribly wrong there also:

    And if you really want to see the evil that can be justified in the name of science, take a look at this exhibition, "Deadly Medicine: Creating the Master Race," from the Holocaust Museum:

    or read this article from the FASEB Journal:

    The Nazi’s cornerstone precept of “racial hygiene” gave birth to their policy of “racial cleansing” that led to the murders of millions. It was developed by German physicians and scientists in the late 19th century and is rooted in the period’s Social Darwinism that placed blacks at the bottom of the racial ladder.

    Which brings us full circle back to Niebuhr:

    One of the instructive and pathetic aspects of contemporary history is that the same modern man who hoped for emancipation from tyranny and fanaticism by the destruction of historic religion, should in this latter day of modernity be drawn to the worship of Hitlers and Stalins and a whole variety of new priest-kings who manage to assert their ridiculous pretensions without the benefit of clergy.

  15. John Michelau

    I don't think we disagree as much as we agree. I am also (surprise), a computer scientist. If anything, it increases my appreciation for the social sciences. I think that at some level, the social sciences are the same as the hard sciences, except that the amount of knowledge required to exert the same amount of control over an economy or person, that is exerted over a computer system, is so astronomical as to render it impossible. Attempting to treat an economy or person like a computer will yield some less-than-desirable results.

    My primary objection to treating economics the same way as one treats psychiatry, is one of consent. A person (typically), has to consent to being treated. In the case where the person doesn't consent, it's forced upon that person only as a result of that person's particular behavior, which is deemed directly and immediately harmful to others or themself. The economy involves everybody, and some of us are not doing anything directly and immediately harmful to others, and don't consent to being part of somebody's experiment.

    The best method I've seen that avoids this problem of consent, and of calculation, is the pricing system in an economy that is free of coercive interference. Pricing reflects the wants and needs of the entire body of people that make up the economy, and is a fantastic source of information that is constantly updating in realtime. No economists, models, or methodologies are going to be able to match it. This is all theoretical, because such as system has never existed in a pure form. People seem to think that the US has this, but it's not even close.

    If economists stick to forecasting and theorizing, I have no problem with them. When they attempt to coercively interfere in the economy, then I have a problem with them.

  16. Hugh

    I'm not really sure that making bad predictions in economics is a reputation killer. Look at Summers, Rubin, Bernanke, and Geithner. They have made very successful careers in economics despite being almost always wrong. All the trickle down economists of the Reagan era flourished despite Reagonomics never performing as promised.

    Even an economist I rather like Krugman was wrong about free trade, his initial support for the TARP, silence over Bernanke, and failure to catch speculation in oil markets. His prediction about an end to the recession this summer is so hedged that I'm not sure you could call it a prediction at all.

    So I am sure that some forecasters lose cred sometimes, but many go on as if nothing happened.

  17. Edward Harrison

    Great point, Hugh. Call it economist rehabilitation. In fact, Summers' rehabilitation could take him all the way to the Fed.

  18. VG Chicago

    Great points DownSouth. Our worst enemy is our very brains, which have a lot more in common with more primitive animals, like reptiles, than we would like to admit. It’ll be a long time before we get over this predisposition to worshiping people like Hitler or Stalin.

    John Michelau: Indeed, we agree on a lot of points. It’s a very complex and interconnected world, impossible to control or predict, that's why statistics is the best we can do to have a guess at that "may" occur next. Yet, that is its biggest flaw, but perhaps it also holds its greatest potential and beauty as well.

    Edward Harrison: regarding this economist rehabilitation, may I volunteer my services? I have professional experience rehabilitating drug addicts and criminals of all sorts, in and outside of prisons. I am more than willing to rehabilitate Mr. Summers at no charge, whether he prefers it to take place in or outside of prison…lol


  19. juan


    Would you feel comfortable defining economics-as-it-should-be [and as it might have been] to be the study of a social system's REproduction of itself — from which we might leave behind the circularity of neoclassic economic's foundational assumptions and, maybe, uncover the actual dynamism and associated laws of motion, which is also to say why particular dominant social relations of production arise, reach absolute limits and transform. [So, systemic attempts to survive via change of form, recognizing that such transforms are not identical to transitional epochs.]

    Certainly this entails much more than normally taken as economics and almost as certainly it is to appreciate the history of economic thought and a slice of classical political economy. But more.


    Let's recall some 'golden oldies':

    ‘by means of appropriately reinforcing monetary and fiscal policies, our mixed-enterprise system can avoid the excesses of boom and slump and look forward to healthy progressive growth’.
    [Paul Samuelson, Economics, New York 1958] (Which happened to be a recession year)

    ‘full employment should now be regarded as an institutional feature of the British economy’.
    [Roy Harrod, Money, London 1969]

    ‘It has often been said that a crisis such as the Great Depression could no longer take place today, given the progress made in techniques of state countercyclical intervention. These claims, presumptuous as they may seem, are not without foundation.’
    [L. Stoleru, L’équilibre et la croissance économique, Paris 1970]

    What is common to these? Belief in the ability to control an irrationally rational system and a belief not shared by, e.g, the economists of The Fourth International who, in July 1969, wrote:

    'This […] analysis reached three conclusions: first, that the essential motor forces of this long-term expansion would progressively exhaust themselves, in this way setting off a more and more marked intensification of interimperialist competition; secondly, that the deliberate application of Keynesian antirecessionary techniques would step up the worldwide inflation and constant erosion of the buying power of currencies, finally producing a very grave crisis in the international monetary system; thirdly, that these two factors in conjunction wuld give rise to increasing limited recessions, inclining the course of economic development toward a general recession of the imperialist economy. This general recession would certainly differ from the great depression of 1929-32 both in extent and duration. Nonetheless, it would strike all the imperialist countries and considerably exceed the recessions of the last twenty years. Two of these predictions have come true. The third promises to do so in the seventies.'


  20. VG Chicago

    Juan wrote: “Would you feel comfortable defining economics-as-it-should-be [and as it might have been] to be the study of a social system's REproduction of itself — from which we might leave behind the circularity of neoclassic economic's foundational assumptions and, maybe, uncover the actual dynamism and associated laws of motion, which is also to say why particular dominant social relations of production arise, reach absolute limits and transform. [So, systemic attempts to survive via change of form, recognizing that such transforms are not identical to transitional epochs.]”

    Yep, definitely. That’s also why we need to treat economy (and economists in particular) via methods currently employed by psychiatry…:)


  21. Yves Smith

    I have to differ with Vinny on this one. Myers Briggs is useful in certain contexts. For instance, I once had a client that was driving me nuts. He seemed to be doing everything to make it harder for me to do my work (saddling me with a mid-level internal team that was not senior enough to influence decisions and not given enough time to work on the project to produce end product). And his butt was on the line here, he was newly hired and was already in hot water with the board for being late to deliver his strategy.

    I took the Myers Briggs as if I were him, then looked up the leadership style of his type. It turns out that they value having a democratic process more than quality of results. And that also fit other actions he had taken So at least I understood where he was coming from.

    By contrast, I have not found the Enneagram very useful.

  22. Edward Harrison


    that is my experience too: Myers-Briggs useful, enneagram not as useful.

    I'll leave it to psychologists to gauge whether it is pop psychology. But in practice, I have found it very useful.

    I hope you're having a good time on vacation.


  23. attempter

    I took the Myers Briggs as if I were him, then looked up the leadership style of his type. It turns out that they value having a democratic process more than quality of results. And that also fit other actions he had taken So at least I understood where he was coming from.

    Sounds like a certain president of my acquaintance. Especially if "democratic" means "bipartisan", no matter what the silly voters said.

  24. Dan Duncan

    The problem with most personality tests is that they aren't comprehensive enough….

    That's why, in my household, we never let our subscription to Cosmo expire!

    Cosmo treats its personality tests as "quizzes". And these quizzes are not exclusively for women, either. Just last month, I took advantage of Cosmo's own "Birth Order Compatibility Tool". This invaluable insight, coupled with the results of both "Are You Still in Love with Your Ex" and the vital "Who's You're Ideal Soulmate" led me to re-examine our relationship.

    The results: She has NOT been validating my feelings! I couldn't believe I had been so blind for so long…..

    As to the psychology of economic forecasting: There are way too many factors to consider before drawing any conclusions from Myers-Briggs, etc. Sure, Rationalists may be predisposed to be an economic forecaster. But are they a natural fit for promoting those predictions? [It's this promotion that gets closer to the problem.

    I wonder what the psychological profile is of people who don't care about the accuracy of the predictions, yet promote them anyway….

    Additionally, I wonder about the psych profile of Believers…who seem less interested in accuracy, and more interested in the affirmation of an impulse.

    The interplay of the Prediction Promoters and the Prediction Believers reminds of that scene in "Little Shop of Horrors", where Steve Martin is the sadistic dentist and Bill Murray is his Masochistic patient.

    Neither sadist, nor masochist could get enough of the other…. It's damn funny in the movie.

    And damn sad in real life.

  25. Thomas

    Something like the Enneagram is mainly good for appraising individuals, identifying someone's personality style and attendant world view, their self image, primary motivations and biases. How they get in their own way and how to get out of it.
    Knowing about personality styles has a certain broader value in business consulting as businesses have cultures and cultures have personality styles. An organization, like a person, develops basic beliefs and values – both conscious and unconscious – that support its collective worldview and drives its behavior.
    In most organizations a specific personality style will unconsciously predominate; usually it is the personality style of the founder or owner. Marc Andreessen, founder of Netscape, captured it: “Companies are like organisms. It’s as if you took a DNA sample from the chief executive and blew it up to monstrous size. The founder and the company all share the same strengths and the same weaknesses.”

    It is harder to use personality styles to characterize something as multi-faceted and unwieldy as a market. Vinny's approach seems about right: Look for the unconscious grip of an ideology or quasi theology.

    On the other hand, understanding personality styles is a good approach to evaluating forecasters and individual policy makers. It reminds me of Ralph Emerson's comment: "People don't seem to understand that their opinion of the world is a confession of character."

    Got an article here that makes the case for the Enneagram in business:

Comments are closed.