I have learnt a helluva lot from Prof Bakshi, and for free 
I viewed through this talk and there is something striking about this, not only from an investment learning perspective but also on how various propositions are made. It often occurs to me that there are many ways one gets convinced about various propositions or arguments.
There are of course deductive arguments which if sound and valid are true beyond doubt. The field of mathematics works only on deductive arguments with some starting axioms.
Then there are inductive arguments where the conclusion does not always follow from the premises but is by and large true. Inductive arguments are risky because while they do a job of making a lot of sense, acting on inductive validated arguments can fail at times, under certain circumstances and in fact fail even randomly. For instance when a grocer runs a firesale of yesterday’s oranges, you pick an orange or two from the heap and then decide whether it is worth buying at the price or not. If you decide either to buy or to discard the heap your conclusion may or may not be true. And you know that.
Most of life including investing (even including physical sciences) is driven by inductive based judgements, if you will. The art therefore is to know which to believe and which to discard. For instance if I always get-up before sun rise I can claim the sun rises only because I get up. You know it is absurd but then unless you can set-up an experiment to falsify it you will have to accept what I say because you cannot disprove it. (BTW charlatans work that way)
So can we learn the art, so we may know what to believe and what not to? The answer is an ‘inductive’ yes Broadly the inductive arguments can be strong or weak; based on valid evidence, generalization, application, from analogy, an inference to the best explanation and so forth. There are also fallacies or common flaws that weaken an inductive argument. Some of them include what are called ad-hominem arguments – attack the person instead of the argument, and what is relevant here – which is “appeals to authority” . An ‘appeals to authority’ argument makes the case that a so-and-so has said it, so the argument must be valid.
Now, coming to the point, what I found striking about the talk was that nearly all the propositions were based on ‘appeals to authority’. Either Charlie or Buffett or an author or Ben G etc have said it so it must be valid.
Warm regards,
Sources on arguments:
- Coursera.org course on: Think again: How to reason and argue.
- Probability and inductive logic by Ian Hacking
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