In the last two newsletters I put forward a list of the many common logical fallacies that are used to present bullshit as truth and gave you a set of tools that will allow you to better discover the truth. In this newsletter I intend to expand on the toolset and give it a more practical grounding that you can use in your daily life.

In the domain of a hard science, developing and testing theories to explain things is a fairly straight forward process. In those fields it is much simpler to isolate variables and to conduct experiments to confirm or refute your theories. Outside of the domain of hard science the systematic application of the scientific method is difficult if not impossible to accomplish. Isolating variables in a complex system, like say, the price of a certain stock, simply cannot be done. And in most cases you aren't able to run simulations over and over to get a good idea of how things work. The universe doesn't have a replay button, so you have to deal with it as it comes at you. To make matters more difficult, our world is in constant flux, and what worked one way yesterday will not always work the same way tomorrow. As a result you need to make decisions with much less than 100% certainty.

There is a theory called determinism, which supposes that all the complex interplays between matter and energy in the universe follow a basic set of rules and that if we know the rules and the initial state of the system, all future states of that system can be predicted. This is observable in hard science fields where the systems being studied are relatively simple. For complicated systems it is difficult to know them entirely, and performing all the calculations necessary to make exact predictions can often exceed the capacity of any computer. But theoretically, if we could build such a computer, and input the current state of the universe and all the rules it follows, determinism states that we could use it to predict everything that is going to happen until the end of time. Of course, this theory is something that is probably impossible to ever test.

Whether determinism is correct or not, we are still left with the problem that we cannot predict a great number of things which are important to us with certainty, but that doesn't mean we can't approach complex systems in an analytical way to help us make decisions. In this regard we need to make assumptions, we need to accept what others believe to be the truth, and we need to trust our gut feelings, for the powerful pattern recognition portions of our brain do not to us speak in words. But when we make assumptions, accept the beliefs of others, and trust our feelings, we need to remember that these things are not completely reliable, and we need to account for that unreliability when making our decisions. Once again, the approach that I am suggesting is not easy, nor popular, nor is something that can be summed up in a handy slogan. What most people desire is to be convinced absolutely of something, make their decisions based on that one line of thought, and stick with those decisions until they are proven right or wrong. There are many obvious examples of how that approach can lead you into certain doom and so I advise an alternate, but more difficult, method.

As much as we would like to think of ourselves as self made, we all stand on the shoulders of others. What that means is that most of our knowledge does not come from direct personal experience. We may know the basic facts about places or things and have a general idea about how things work, but most of us have never lived on a farm, worked in a post office, flown an airplane, or fought in a war, and so we don't have first hand knowledge of those things. Furthermore, even the people who have done those things have but a small piece of the total knowledge about any of those subjects. Considering the vast amount of knowledge in the world one wonders how anyone can understand more than a sliver of the whole, but if we can understand the basic facts about something, we can often make good predictions about it without the benefit of having lived through the experiences necessary to make us experts. Many things can be simplified, analyzed, and understood without needing to bother with a myriad of details. Using what others know can help us make better decisions.

Working with second hand knowledge is something that we must all do. Even those in the field of hard science use assumptions made and theories proven by other researchers. So as much as we might favor direct experience, we should learn to work with second hand knowledge and use it to make better decisions.

The basic approach to decision making this way is as follows:

1. Research - accumulating different perspectives
2. Constructing a likely scenario
3. Constructing plausible scenarios
4. Risk assessment

The first three steps are all part of the scientific method which I described in the last newsletter and play an important role in establishing a theory to test. The fourth step is new since, for practical applications, you will need to make your decisions before the experiment, a real event, occurs.

1. Research - accumulating different perspectives

Research is extremely important. You are more likely to succeed in doing something if you know what you're doing. That is not always the case, but in general, more knowledge leads to more success. This seems to be quite obvious on the surface but when I see 'experts' talk about things on television or radio, or read what they write in the paper or on the internet, it seems that most people have forgotten this fundamental principal. Giving a few interesting facts appears to make someone knowledgeable, but being able to fully explain one's perspective, using all and not just some of the facts, is the sign of a true expert. A good way to tell the difference between an expert and a mouthpiece is to ask yourself if you understand something better when they are done talking about it. And a good way to tell if you understand something is to try to explain that thing to someone who asks a lot of questions.

The library is the best place to do research. Kept in libraries is a vast amount of human knowledge. The trouble is that it isn't organized in a way that gives you quick access to exactly what you need to know. But if you learn how to use the system you can home in on the things that can help you to understand something. The internet is a helpful tool as well and search engines let you home in on what you want very rapidly. It also includes vast amounts of useful information that will never see print, like "The Burning Blade" for instance which can give you a broader perspective. There is also much talk of putting everything ever written on line so that it can be accessed by anyone from anywhere. This would be simply fantastic as I prefer pointing and clicking to roaming through stacks of books and trying to find parking spaces on college campuses.

The most important thing to remember when doing research is to make sure that you read more than one source of information. We would all like to find a single definitive source that is the gold standard for a subject, but it is rare to find such a tome. History isn't written in stone, even in Egypt, and historians are just as prejudiced and fallible as other people. So the best way to prevent yourself from adopting a skewed view of a certain subject is to read about it from multiple sources, and make sure that those multiple sources aren't in turn referencing the same source. Yes, multiple sources will differ. Yes, it is a pain in the ass when they do. But rather than deciding which text is right and which are wrong on the spot, it is best to note the differences as you go and decide which is more likely to be true when all the research is done.

As an example of research, let's use the stock price of a fictitious company: Swindler and Associates. You want to know whether to buy stock in S&A. So you go to the library and look up the history of their company, the history of their stock, and find past releases of their yearly reports to stockholders. You also expand your search to look into how the stock prices of other similar companies have done as well as research the history of the stock market in general. It's a lot of work, but when you are done you have a good understanding of what kind of company S&A is and how the stock market works.

2. Constructing a likely scenario

Once you gain a deeper understanding of something you are able to make predictions about it. The easiest thing to do is to construct the most likely scenario. The straight-forward approach is to simply extend the trend lines on any data you dig up and see where they are headed. For instance, if S&A's stock has always gone up between 5% and 10% every year, you can assume that it will go up around 7.5% next year.

A more complicated approach is to look at other companies in the same field that S&A is in and see if they can provide any deeper insight as to what will happen to S&A. You might find that the stock price of all S&A's competitors increase an average of about 6% each year, making the 7.5% gain assumption seem optimistic but likely. You might instead find that after making gains for three to five years, all similar companies experience a sharp drop in their stock price. If S&A is four years old, the 7.5% yearly gain trend line might very well be wishful thinking. They may be headed for a fall.

Even more complicated is to look at the entire stock market in general. Looking at the trend line for the history of the market you might find that the average value increases by about 6% per year. You might also find that over the last fifteen years the average value of the stock market is far above that trend line, possibly indicating that it will fall below the line in the near future. A crash may be on the horizon.

Thus there are a number of conflicting trends. To get a likely scenario you can simply average all the numbers together. For the example, a 6% stock price gain appears to be a good estimate since many indicators point to that number as being typical of stocks on the whole.

3. Constructing plausible scenarios

You can make a well informed decision at this point, but it is more advisable to make a decision based on risk assessment. For that you will need to construct a number of possible scenarios and determine how likely each one is. This is where doing a lot of research pays off since it will give you a larger understanding of the things, both good and bad, that can occur outside of the likely scenario. You should determine the best case scenario, the worst case scenario, and as many possibilities in between as are relevant to your decision.

The best case and worse case scenarios have to be within the realm of possibility to be useful. S&A's stock price could double or drop to half over the course of a year, but you note that either case would be highly unusual when you look at your research. Thus, for the best case scenario you go with the highest gain for the S&A stock, which is 10%, perhaps adding in a few more percentage points assuming that the stock market in general may have a good year. For the worst case scenario you try to predict what possible corrections could occur. You note that a bad year for a company like S&A would result in a 5% drop in the stock price, and that a bad year for the stock market in general would result in a 10% drop. You combine these two you get a worse case drop of 15%.

Then you walk through other scenarios, such as a good year in the market at the same time as a bad year for S&A and vice- versa. For each scenario you will want to make some kind of estimate of how likely the scenario will come to pass. That can be more art than science though, and usually is.

4. Risk assessment

Risk assessment is determining how each scenario will affect you directly and weighing the probable outcomes against what you can afford or need to have happen. This approach is more prudent than banking on a single scenario coming true, even the most likely one, and far better than banking on a long shot. If the worst case is too devastating, or the likely scenario is insufficient, then the risk is not worth taking. On the other hand, if the worst case can be absorbed easily and the best case opens up a new opportunity, then the risk is minimal. The difficult decisions fall somewhere in between.

For instance, let's assume that you are saving up to put a child through college and calculate that you need an 8% return on your money for five years to send her to the college of her choice. Looking at your analysis you determine that it would take at least three years of the best case scenario stock price returns plus two years of likely scenario returns to save enough money. That's unlikely. So it is very likely that you will end up short. In addition, you calculate that a few bad years, or one worst case scenario year, mixed in with a few average years would leave you without enough money to send your daughter to the local community college. So you struggle with the risks and discover that if you put enough money in a five-year CD at a lower but fixed rate of return, and put the rest into S&A, the worst case scenario still puts her into the community college and a best case scenario would send her to her first choice of schools. Using risk assessment you have eliminated the potential disaster while still leaving open the possibility of total success.

And of course, you advise your daughter not to drink Zima and Tequila on the same night when she goes off to college.

You can also use this approach to evaluate the decisions that others make. Take for instance the invasion of Iraq. There were a number of things that had to be considered:

1. Finding a large cache of Weapons of Mass Destruction
2. Finding connections to terrorists
3. International support
4. Domestic support
5. Support of the Iraqis: Sunni, Shiite, and Kurd
6. Amount of resistance and the required number of troops

The first two items play into the next three, meaning that support would be undermined if the first two were not achieved. Support internationally, domestically, and from Iraqis, is a major factor in the sixth item, since a lack of support means more and more troops are required to do the job. In such a cascade it is important to keep your plan close to a likely scenario and plan out an exit strategy in case the first few items go awry.

The Bush administration was told by its generals that a full 250,000 troops would be needed to pacify Iraq. In retrospect that is a remarkably accurate number. By going in with half of the necessary troops, the Bush administration was counting on a lot of international, domestic, and local support. It is clear that they were relying almost exclusively on a best case scenario. What follows is what they needed to have had happen:

1. The amount of initial resistance would be low enough given the number of troops sent.

(+) In reality it was a cakewalk. There were fears of a Stalingrad type stand in Baghdad, but they were never realized. By avoiding high casualties, the number of troops required would be less than the initial estimate, but not by much as estimated casualties taken on in the face of sustained Iraqi resistance were not very high.

2. The missing WMDs would be found.

(-) A pre-1991 Sarin gas shell is the current extent of recovered weapons. It appears that an Iraqi exile group has gamed the intelligence systems of the world to make it appear as though Iraq had active WMD programs and encouraged the US to invade on false pretexts. Though many sources suggested that Iraq had WMDs, most of those sources were referencing the same exile group who were providing misleading intelligence. Other sources contradicted the belief that WMDs existed including professional weapons inspectors on the ground in Iraq. A loss of US credibility has resulted in a loss of support on all fronts.

3. Connections to terrorists would be discovered.

(-) There are terrorists in Iraq, but no link has ever been established between Al Qaeda and Hussein. Only cherry-picked intelligence reports show any connection at all and the CIA itself did not support any purported link between the two. Cherry-picking is the same as the half-truths fallacy and making decisions based on half-truths can lead to major mistakes. Once more, US credibility and support were lost. With the failure of two critical elements in the sequence of events to come through, reverting to a fallback position or exit strategy would have been a wonderful idea.

4. The international community would be behind the invasion.

(-) Only the UK sent a significant number of troops to Iraq and even for them their numbers were low. A lack of international cooperation was known from the outset of the invasion and so no prediction was necessary when determining the decision to invade. Furthermore, as the scenario playing out worsens and need for more troops escalates, the lack of international support grows more painful.

5. The US population would be behind the invasion.

(+) Despite very vocal opposition from about half the US population, the Bush administration has gotten just about everything it has asked for from congress.

6. The Iraqi people would support the invasion.

(+/-) On one hand, there is not much resistance, especially in the Shiite regions. On the other hand, few Iraqis marched alongside the US troops into Baghdad and few want to be part of a new Iraqi army. A good question to ask is, "If the Iraqis want democracy so much, why aren't they fighting for it?" The answer to that question is that they did fight for it after the first Gulf War, but the US did not want the majority Shiites to take over the country, so the US allowed Saddam to squash the rebellion. The fact is that the US wants a subservient government in Iraq and all the Iraqis know it. They don't want to fight for US interests and so most are indifferent.

7. That enough support would be accumulated to make up for a severe lack of soldiers.

(-) So far, the US is losing support in every sector. It appears that the international community is torn between helping out their ally and letting it learn a harsh lesson.

A likely case scenario, few allies, moderate resistance, the presence of WMDs but not in dangerous amounts, shows that the invasion of Iraq would probably not be successful. The worst case scenario, no support, heavy resistance, a Vietnam type quagmire, would have been a disaster, and the US might end up close to that scenario in the coming years. The current criticism about the Bush Administration is that they failed to plan the invasion. There was a plan, but the problem was that it only accounted for a best case scenario and no contingency plans were drawn up if things did not go so well. Day by day it becomes painfully clear that risk assessment never happened. No one bothered to answer the question, "What if…?". The results are there for all to see.