The Case of the Puzzled Baboons

America has collectively awakened to a crisis. Fear and a bunker mentality have choked consumer spending. It seems bad news makes people act even more conservatively, which makes things worse, which makes for more bad news. Most of what is written about this phenomenon seems to rest on intangible reasons like consumer sentiment or retail pullback. So we thought we could offer a concrete, albeit strange, example by looking to the world of primates. Don’t sigh just yet - wisdom is often found in simple things. If the last 18 months have taught us anything, economics is not a science, it is a social science. Just ask all the guys who lost billions for themselves and many, many others. They have plenty of complicated answers if you really want to listen to them.

Go to the jungle and record a bunch of baboon calls. Try to figure out what each of the calls mean. This is one says ‘I am scared’ that one says ‘Where are you’ and so on. That is what husband and wife team Dorothy Cheney and Robert Seyfarth did for a year in Botswana. They wrote a book called Baboon Metaphysics.

I read it at the same time I was reading an economics book, and something jumped out. One of the discoveries of the researchers is that baboons ignore a lot of what goes on in the world as long as it sounds ‘normal’. When it sounds out of place, they really take notice. It is a disruptive moment that puts the whole group on edge. It is what I will call The Case of the Puzzled Baboons.

For example, they recorded a sequence of calls wherein a high ranking female grunts at a low ranking female, then the low ranking female screams. Now, if they played that back on speakers to the same bunch of baboons a few days later, none of them would take notice. They would simply go about their business. However, if they reversed the order of the sounds, first the scream of a low ranking female, then the grunt of the high ranking female, they all looked up. They all became disturbed, disoriented. Clearly, that was not supposed to happen…and so they took notice for the very first time.

Think about it this way; for the last 15 years, all of the economic news pouring out from news sources has never really mattered to most of us. It became white noise. Fell into the background. We heard that oil went up, oil went down. Jobs were lost, jobs were added. We heard in 2001 there was a recession but then we had a jobless recovery and everything was fine. All if the news - ALL of it - simply never mattered to us. It came to us in sequence. It sounded so normal we forgot to listen. Our lives were truly never any different one way or the other. We became accustomed to news of all sorts. W were addicted to the feeling that no matter what we heard, it really did not matter

Then in happened. The noise came to us out of sequence. This is hurting me! We know people out of work! We know of store closings, foreclosures, people in real economic hard times. Like the baboons, we looked up. Something was amiss. Consumers heard things out of order. Companies heard things out of order. The market did not behave the way the money managers wanted it to behave.

All the lectures and books about market risk? They are failing. Are the computer models? They are failing. The point is, things are not happening in the right sequence. The normal order is disturbed greatly, and we all feel off balance. The geniuses on Wall Street? Most of them are young, never saw a bad deal or a bad time. They all became numb to the news. Things were simply too big and too stable to worry too much about them. They sat in their trees and picked bugs off of each other listening to the screams and grunts around them - satisfied that it all sounded pretty normal to their ears. They are taking notice now.

The more we hear normal things, the more we think things are normal. We forget to plan, to notice things in the marginalia. But we have perked up now. Consumers are behaving differently this time around, because this time around is truly different. In this at least, we are no different than baboons. Perhaps a few other ways too…

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