Keeper’s Blog Error Date February 27th 2014

Why does the world need a Library of Mistakes? It needs A Library of Mistakes because smart people keep doing stupid things. There are of course very good reasons why they do stupid things. Making any plan for the future involves taking risks. Anyone trying to plan for the future will face both the known unknowns and also the unknown unknowns upon which Donald Rumsfeld once so eloquently opined. It is because all human planning faces these twin unknowns that mistakes are inevitable. At the Library of Mistakes we can see the beauty in mistakes. Mistakes can sometimes be serendipitous, but even when they are not, their study still has value as human progress is based upon learning from mistakes. The more we know about why smart people do stupid things, the fewer stupid things we might do. The Library of Mistakes provides a resource for the study of such mistakes as we seek to fulfil our moto- Mundum mutatu errore singillatim (Changing The World One Mistake At A Time)

The Library of Mistakes focuses primarily on the mistakes made in the sphere of business and finance, where all attempts to secure future returns involve battling with Rumsfeld’s twin unknowns. But it is not just in the field of finance where these foes are encountered. If Von Moltke was right when he said ‘no battle plan survives contact with the enemy’, then the mistakes are also inevitable in the military sphere. Indeed what more eloquent exposition of the inevitability of mistakes is there than that provided by Mike Tyson- ‘everyone has a plan until they get punched in the mouth.’ So he who plans errs. However at the Library of Mistakes we wonder whether he who plans should always err in the same way? Surely the generation that can invent the ipad is capable of inventing its own mistakes? So while we cannot hope or want to eradicate mistakes, we can hope to usher some mistakes down the path towards extinction.

The definition of madness, according to Einstein, was to ‘do the same thing over and over again and expect different results’. While scientists quickly change their experiments in search of different results, investors it seems are prepared to repeat the same experiments and expect different results. At The Library of Mistakes, readers can study the financial experiments of the past which ended in loss and disaster. Indeed the Library has a broad collection of books on financial and business history, and readers can study success as well as failure. While we like to refer to ourselves at the Library as a small ‘errorist cell,’ the truth is we study financial history to understand success and failure alike. For without studying and understanding how things have worked, how can we ever hope to understand how they will work?

In recent decades the mathematicians have offered us some seeming certainties about the known unknowns and the unknown unknowns..Such seeming certainties have been misused to justify higher levels of risk-taking, which have often been little more than repeating the same old mistakes. At The Library of Mistakes we are seeking to redress the balance in financial understanding away from such seeming certainties. Our focus is not on how things might work in a world of efficiency, but of the recorded uncertainty of how things work in the real world. Uncertainty is just more untidy than mathematical explanations allow, and it is time to accept the subjective nature of the pursuit, but to study untidiness anyway.

When Daniel Kahneman won the Riksbank Prize in Economic Sciences in 2002 the citation read as follows-

‘For having integrated insights from psychological research into economic science especially concerning human judgement and decision making under uncertainty.’

A study of financial history is a study of ‘human judgement and decision making under uncertainty.’ The Library of Mistakes opened on February 27th 2014. If you would like to join our errorist cell, please register above, and help in ‘Changing The World One Mistake At A Time.’