Questioning Common Knowledge—Part II

More and more, we base our investment decisions on our reading of the global political and economic scene.  Due to the varied and ever changing landscape, we can easily depend on common wisdom to help sort through the mess.  Unfortunately, these shortcuts can be incorrect and lead to mistaken responses.

For example, the link between poverty and terrorism appears reasonable—poor, uneducated people, with little hope of economic advancement, seem more likely to commit such acts than their more fortunate brethren.  Yet, as an article in The Economist points out, this is not necessarily the case. 

A number of studies indicate that there is "little evidence that the typical terrorist is unusually poor or badly schooled."  Instead, terrorists prove to be "better educated and less likely to be from poor families than the general population."

Nor are poor people around the world necessarily more sympathetic to terrorism.  One study found that "the poorest countries, those with low literacy, or those whose economies were relatively stagnant, did not produce more terrorists."  Moreover, "citizens of the poorest countries were the least likely to commit a terrorist attack."

The Economist concluded that the "research on terrorists' national origins suggested that countries which give their citizens fewer civil and political rights tend to produce more terrorists.  Politics, not economics, is likely to be a more fruitful weapon in the fight against terror."

The various aspects of investing are equally complex.  Relying on the "apparently obvious" may not get you very far.  In the next installment, we will question the accepted view that manufacturing in the United States is in a sorry state.

Words of Wisdom

I once wanted to save the world.  Now I just want to leave the room with some dignity.
-- Lotus Weinstock [bio]