If you've got lucky, it's easy to convince people you're a sage

"Expert" predictions only need a few lucky guesses, then everyone believes them.

LSE's Nattavudh Powdthavee and Nanyang University's Yohanes E. Riyanto presented a paper last month titled Why Do People Pay for Useless Advice? (pdf) The authors demonstrate that people are prepared to pay for investment advice which they know cannot possibly be based on any real evidence – provided the advisor has got things right in the past.

Participants in the experiment were told to bet on five consecutive rounds of coin flips (they could pick the stake, provided it was higher than a minimum level and wouldn't make them lose all their money before the last round). Since they were using a fair coin, the chance of heads or tails coming up each time was 50-50, and the chance of someone calling the correct flips in all five rounds is one in thirty two. More importantly, no amount of expertise can help one predict the outcome of a sequence of coin tosses.

So when the participants were offered the chance to buy "predictions", you would expect them to ignore them. And most of them did, at least for round one (although even then, around 15 per cent of them did pay). But after the first round of tosses, everyone got to see their predictions, even those who hadn't paid. And for half the participants, those predictions were correct. Still, it's obviously just chance, right?

Apparently not so obvious. Those who got a correct "prediction" in round one were three times more likely to pay for one in round two than those who'd got an incorrect one. And by the time a subset of the group had got four correct predictions in a row, the possibility that they would buy a prediction for the fifth round had risen from 15 to 40 per cent.

In other words, just a few lucky guesses are all it takes to get people to pay for what the authors call "transparently useless advice". As they conclude:

Our experiment accurately describes how the real "false" experts typically operate in the information market, and the findings of this paper help to highlight how easy it is for an average person to form a belief in an expert when none may actually exist. 

Something worth bearing in mind next time you are looking at horse tips, stock pickers, or hedge funds, maybe.

George Bush tosses a coin. Is he an expert? Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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What Donald Trump could learn from Ronald Reagan

Reagan’s candidacy was built on more than his celebrity. Trump not only lacks experience as an elected official, he isn’t part of any organised political movement.

“No one remembers who came in second.” That wisdom, frequently dispensed by the US presidential candidate Donald Trump, came back to haunt him this week. Trump’s loss in the Iowa Republican caucuses to the Texas senator Ted Cruz, barely beating Senator Marco Rubio of Florida for second place, was the first crack in a campaign that has defied all expectations.

It has been a campaign built on Trump’s celebrity. Over the past eight months, his broad name recognition, larger-than-life personality and media savvy have produced a theatrical candidacy that has transfixed even those he repels. The question now is whether that celebrity will be enough – whether a man so obsessed with being “Number One” can bounce back from defeat.

Iowa isn’t everything, after all. It didn’t back the eventual Republican nominee in 2008 or 2012. Nor, for that matter, in 1980, when another “celebrity” candidate was in the mix. That was the year Iowa picked George H W Bush over Ronald Reagan – the former actor whom seasoned journalists dismissed as much for his right-wing views as for his “B-movie” repertoire. But Reagan regrouped, romped to victory in the New Hampshire primary and rode a wave of popular support all the way to the White House.

Trump might hope to replicate that success and has made a point of pushing the Reagan analogy more generally. Yet it is a comparison that exposes Trump’s weaknesses and his strengths.

Both men were once Democrats who came later in life to the Republican Party, projecting toughness, certainty and unabashed patriotism. Trump has even adopted Reagan’s 1980 campaign promise to “make America great again”. Like Reagan, he has shown he can appeal to evangelicals despite question marks over his religious conviction and divorces. In his ability to deflect criticism, too, Trump has shown himself as adept as Reagan – if by defiance rather than by charm – and redefined what it means to be “Teflon” in the age of Twitter.

That defiance, however, points to a huge difference in tone between Reagan’s candidacy and Trump’s. Reagan’s vision was a positive, optimistic one, even as he castigated “big government” and the perceived decline of US power. Reagan’s America was meant to be “a city upon a hill” offering a shining example of liberty to the world – in rhetoric at least. Trump’s vision is of an America closed off from the world. His rhetoric invokes fear as often as it does freedom.

On a personal level, Reagan avoided the vituperative attacks that have been the hallmark of Trump’s campaign, even as he took on the then“establishment” of the Republican Party – a moderate, urban, east coast elite. In his first run for the nomination, in 1976, Reagan even challenged an incumbent Republican president, Gerald Ford, and came close to defeating him. But he mounted the challenge on policy grounds, advocating the so-called “Eleventh Commandment”: “Thou shalt not speak ill of any fellow Republican.” Trump, as the TV debates between the Republican presidential candidates made clear, does not subscribe to the same precept.

More importantly, Reagan in 1976 and 1980 was the leader of a resurgent conservative movement, with deep wells of political experience. He had been president of the Screen Actors Guild in the late 1940s, waging a campaign to root out communist infiltrators. He had gone on to work for General Electric in the 1950s as a TV pitchman and after-dinner speaker, honing a business message that resonated beyond the “rubber chicken circuit”.

In 1964 he grabbed headlines with a televised speech on behalf of the Republican presidential candidate, Barry Goldwater – a bright spot in Goldwater’s otherwise ignominious campaign. Two years later he was elected governor of California – serving for eight years as chief executive of the nation’s most populous state. He built a conservative record on welfare reform, law and order, and business regulation that he pushed on to the federal agenda when he ran for president.

All this is to say that Reagan’s candidacy was built on more than his celebrity. By contrast, Trump not only lacks experience as an elected official, he isn’t part of any organised political movement – which enhanced his “outsider” status, perhaps, but not his ground game. So far, he has run on opportunism, tapping in to popular frustration, channelled through a media megaphone.

In Iowa, this wasn’t enough. To win the nomination he will have to do much more to build his organisation. He will be hoping that in the primaries to come, voters do remember who came in second. 

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war