In Homer's epic poem, The Odyssey, Odysseus must sail past the land of the Sirens. Warned that their song would lure him and his crew to their watery grave, he ordered his sailors to plug their ears with beeswax. But Odysseus, ever the curious traveler, longed to hear the song of the Sirens. He ordered his crew to tie him tightly to the mast and not let him free, no matter how much he begged.
Tempted by the sirens' beautiful song, he commanded his men to untie him. Fortunately, they heeded their previous orders and bound him tighter. Despite his precognition, even the strong-willed Odysseus would have fallen victim to the sirens' seductive calls.
In the treacherous world of investing, the sirens' cry assumes many forms. Unlike Odysseus and his crew, however, we do not have foreknowledge of exactly how or when they will try to lure us to our demise. All we know is that it will happen.
Last week, I warned of the dangers of blindly following the data-backed recommendations of today's financial advisors and pundits. That article concluded with this thought:
Challenging the comfort of the traditional investment paradigm can be depressing and stressful, but it can also put you on a path of lifelong prosperity - come what may.
It can be upsetting to see how quickly we forget this reality: trends change and history is made. It has been fascinating to study times in history when decades, centuries, and even millennia of convincing data have supported hypotheses that turned out to be absolutely incorrect. With that theme in mind, I created this infographic including some of the most interesting and compelling examples from the history of the world.
Mark Twain popularized the phrase, “There are three kinds of lies: lies, damn lies, and statistics.”
Assertions supported by compelling statistics derived from historically exact numbers often appear infallible.
Sometimes, a statistical hypothesis - even one backed by decades or centuries of cogent data - proves dead wrong. Often, in such scenarios, people previously comforted by its sound logic are astonished and devastated.