Posted By BillHeise on September 11, 2010

This post is my take on Jim Cramer’s encounter with Jon Stewart on the Daily Show last year. I’ve had this floating around unfinished for a long time, and I thought I’d never publish it. But after taking the summer off, I wanted to get back in the swing of things and found this.

If you haven’t seen Stewart’s attack on Cramer, watch it here (Sorry, I couldn’t find it on YouTube).

Stewart’s Attack

Stewart thinks that there is “a gap between what CNBC advertises itself as and what it is” (0:10). He then attacks Cramer more personally, showing an ad for his show and then making a distinction between “real news,” which Cramer’s show purports to be, and “entertainment,” which Stewart’s show is. He labels “entertainment news” as selling “snake oil,” and asks Cramer whether to consider his promo as selling snake oil under the guise of “real news.”

Cramer answers with an Enlightenment response: “There are two kinds of people. There are people who give you both sides, and then there are people who tell you that they only make good calls, and they’re liars” (1:00). He wants to position himself as on the right side of the argument, so he positions himself as one of the people who willingly make their bad calls plain.

I actually agree with Cramer as far as his premise goes. He does go back over his wins and losses more consistently than any other stock information broker on television. But Stewart isn’t buying his argument. He proposes another Enlightenment (two kinds of people in the world) argument. “The argument is not ‘good call-bad call.’ The argument is ‘real market versus unreal market’” (1:15). He then runs a clip in which Cramer confesses to running a game on the market in order to profit personally.

Cramer tries (and fails) to defend himself. He lies as he does so; and Stewart, armed with the indignation of a public who has lost billions (if not trillions) because the people on CNBC were not watching out for them, continues his attack.

I paraphrase the sound bite, which starts at 3:00: “CNBC could be a powerful tool for people who’ve been told put your money in your 401K and leave it there. Then there’s this other market operating in a back room.”

The Press Takes Sides

The press piled on. Here, for instance, was the New York Times liberal view of what happened:

Last week Jon Stewart whipped up a well-earned frenzy with an eight-minute “Daily Show” takedown of the stars of CNBC, the business network that venerated our financial gods, plugged their stocks and hyped the bubble’s reckless delusions. (Just as it had in the dot-com bubble.) Stewart’s horrifying clip reel featured Jim Cramer reassuring viewers that Bear Stearns was “not in trouble” just six days before its March 2008 collapse; Charlie Gasparino lip-syncing A.I.G.’s claim that its subprime losses were “very manageable” in December 2007; and Larry Kudlow declaring last April that “the worst of this subprime business is over.” The coup de grâce was a CNBC interviewer fawning over the lordly Robert Allen Stanford. Stewart spoke for many when he concluded, “Between the two of them I can’t decide which one of those guys I’d rather see in jail.”

Of course there are always two sides to every story. Here is a defense of Cramer from Fox News:

“A politician stumbles over himself….Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response. And you know what? It’s really easy to be a comedian and take those cheap shots.”

I don’t believe that for a second. Stewart caught Cramer off guard. Cramer had said those things, and he was denying that he said them.

The Fox News story continues:

The feud between Jon Stewart and CNBC’s Jim Cramer has been good for laughs—and ratings—but has also raised the serious question of whether the experts at TV’s No. 1 financial news network should have seen the meltdown coming and warned the public.

This leaves the status quo in place. Liberals, who distrust financial institutions in general, side with Stewart, while conservatives, who distrust the liberal media bias more than financial institutions, are tempted to side with Kramer. No one changes their opinion in such an environment. They continue to blame “the other side” for problems, while retaining moral authority for themselves, and raising question that their moral conclusions have not yet answered.

So in the end, both sides in the debate take the stance that Stewart is worth listening to, despite the fact that he’s a comedian, but not Cramer, who knows more about the financial markets than Stewart ever will.

What’s going on here?

The Enlightenment Trap

Cramer starts to get in trouble when he announces (0:50) that “there are two kinds of people in the world.” Let’s forget for a moment what he says the two kinds of people are (liars and truth-tellers) and concentrate instead on the structure of the argument. The debate quickly becomes one of conflicting views of the two kinds of people in regard to the ‘truth,’ as Jon Stewart proposes another rubric under which people can be classified (‘real market’ people and ‘back room’ dealers), and in doing so he has positioned himself as the defender of the ‘real market,’ as opposed to the ‘unreal market’ policies of Jim Cramer. In other words, he has positioned himself as being on the side of the ‘truth,’ whereas he has positioned Cramer on the side of deceivers and ‘snake oil salesmen.’ Cramer, who doesn’t yet realize he’s under attack, allows Stewart to continue in his ‘world-turned-upside-down’ attack.

Both people in this debate agree on the premise, derived from the Enlightenment, that reason may be used in this way. They certainly didn’t believe this in the Middle Ages, where they had faith to sop up the dipping sauce that that overflowed from the application of reason to the sandwich of life. But scholasticism had been killed as an errant use of reason and a more sure-fire use of reason took its place in the thought of René Descartes. By the 17th century, people thought that they could use reason alone to divide the world into two parts, and when they did it that nothing will be left out. By the end of the 18th century, Kant was putting all knowledge in the perspective of the reason without regard to faith, something no medieval thinker would have dared to do.

Well that idea didn’t last too long. By the end of the 18th-century, at exactly the time that Kant was writing his grand Critiques of Pure and Practical Reasons, Herder was talking about things like ‘whole men’ and ‘whole language’ and deriving them from the ‘whole culture.’ Reason, in Herder’s mind, had failed once again in its attempt to build up a metaphysical framework out of nothing more than rational thought.

So Herder got together with Goethe and they founded the Sturm und Drang Movement and they got under way with the problem of foregoing reasoning altogether for a more immediate value system derived from ‘emotion’ and ‘sentiment.’ And this is where we are today. People don’t trust reason, which takes time to learn and still doesn’t fulfill the promise of human life, but they do trust their immediate emotions to connect them to the larger universe. This is why people use their emotions to guide them through their lives, while forgoing reason.

But this process of using reason to re-create the metaphysical boundaries of our universe did not come to an end when thinkers like Kant had to face their limitations in a world that was (or soon would be) filled with Herders. Reasoning was put on one side of the equation, and on the other side was emotion. Between the two of them, all things in the universe could be described.

The Romantics

The Enlightenment state of mind continued through the Romantic period, which in all other respects was a wholesale rejection of use of reason to climb the material world to an otherworldly metaphysics. Percy Shelley’s Defense of Poetry starts out with imagination and reason (two forms of thought):

According to one mode of regarding those two classes of mental action, which are called reason and imagination, the former may be considered as mind contemplating the relations borne by one thought to another, however produced, and the latter, as mind acting upon those thoughts so as to color them with its own light, and composing from them, as from elements, other thoughts, each containing within itself the principle of its own integrity.

In Shelley’s work, reason considers the relations of ideas to one another, while imagination considers ‘elemental’ ideas containing within themselves the principles of their own integrity. Reason is metaphysically incomplete and operates on external relationships between the ideas that form the core of our thought. Imagination can look at the things themselves. From this premise, Shelley avers that poets are people who look at things in the purity of their imagination, and from this imaginative perspective, they can project the future from their apprehension of the present.

Shelley ends by declaring:

Poets are the hierophants of an unapprehended inspiration; the mirrors of the gigantic shadows which futurity casts upon the present; the words which express what they understand not; the trumpets which sing to battle, and feel not what they inspire; the influence which is moved not, but moves. Poets are the unacknowledged legislators of the world.

This makes his view acceptable over the ‘little people’ who are still stuck within the world of reason and (more important in my mind) capitalism, which was then a brand new phenomenon.

Shelley’s optimism that through the forms of the world a special sort of man—a poet—could see farther than ordinary men has not been dampened. We are all poets now. Or at least the ‘right sort of people’—Rush has taken to calling them ‘the new elite’—are all poets. Only their faith in reason (as well as faith) has been dampened by the confrontation with the limits of reason. Intellectuals have learned not to count their rational blessing before they’re hatched, and have so become cautious about taking any position but the position of skepticism about reason. From that position, the only true position in the universe, they look down on the little people who have faith in themselves and in the reason of the universe that they describe with such reckless alacrity.

No one ever asks whether or not the immediacy of emotion can be interfered with in the way that reason, which was never supposed to have immediacy to the mind or the heart, has been questioned.

Back to Jim and Jon

So what we have now is two people who (foolishly, in the opinion of the intellectual) believe in the prospect of reason to be able to sort out all things in the world. And it doesn’t really matter what one person says the rational configuration of the world is—whether its ‘liars and truth tellers,’ as Cramer would have it, or whether it’s Stewart’s ‘real market’ and ‘fake market.’ Both sides agree on the premise that truth can be divided from falsehood on the basis of such enlightenment constructions and that nothing will be left out of the universe thus configured.

But I ask my readers to ask themselves whether they really think this is true. After all, both sides think they get the upper hand through argument, and yet only Stewart is able to bring truth on his side.

Stewart’s victory brings up questions that need to be answered. Remember, this is how Shelley defended his position: he took one position (of many available) and he declared that his position on imagination and reason was the true one. Such philosophical positions may be difficult to follow and to work out for oneself, but they still underlie the thought of every thinker (even thinkers like Paris Hilton).

Where both Cramer and Stewart agree on the Enlightenment idea of sufficient reason, they are soon arguing over who is right in their configuration. In the academic community, where many of us are trained to think, scholars tend to think (following Shelley) that rhetoric has creative power derived from its concentration on the thing itself, while reason is subject to external, non-intrinsic factors. This leads academics to question whether or not reason is sufficient. When they decide that it is not, they turn away from reason to more immediate emotions. It is not that they do not use reason. It is that their reasoning comes from ‘the heart,’ which concentrates on the immediate object itself, and not (like their opponents’ reasoning) from misconfigured heads.

Both sides can argue that they are on the right side of truth, while their opponent is on the wrong side of truth as long as they believe in their heart that they are right.

Cramer’s Embarrassment

But the fact that Cramer is flustered and embarrassed, while Stewart and the truth march on, gives us some indication that Shelley’s configuration (and that of his academic followers) is wrong. One side wins this argument because one side has some truth with them (not the whole truth, I would argue), while the other side lies to cover up his participation in the secret back room markets.

This deals a blow to those who want to argue that the world is filled with rhetorical positions and that choosing among them that we are exercising our free will. This is true in a sense. Some cultures believe in science, while other cultures believe in the Great River God George. In such an equally balanced worldview as exists in academia, an individual cannot say that one position is better than the other without descending into the world of power relations. The academic position, then, has been to withhold judgment based on something as fragile as Western scientific reason (which Shelley told us does not climb to the level of sufficiency) in order to allow all sides to flourish.

Science Not Optional

Scientific truth is not optional in the universe. We do not live in an infinite universe of free choice, as the academics tell us. In my class, I present my students a choice of world views and ask them to choose between them. River God George (a full and complete view of the universe in which River God George is responsible for the motions of the universe) or a scientific view of the universe (imperfectly understood forces gather underground to create unpredictable volcanoes).

When I ask my students to decide whether the bad science of George should be outlawed, they say no. When I ask them to choose between the two alternatives because their mother or father (girlfriend or boyfriend) is about to be tossed into the volcano to appease the River God George, my students always choose to argue against the River-God-worshipping folk, because they know that their beliefs, though truly held, will result, if effected, in a pointless waste of human life.

The fact of the matter is that academics live in such a constricted environment. They position themselves as better people because they have taken a ‘higher’ perspective on human life. They are the people who seek balance in an unbalanced world. But in the ‘real world,’ thing exist in a different balance than is found in the academic environment, which exists behind ivy walls and within a protected tower. The real world exists in a Pareto balance, which is to say that some gain a lot for trying, while others (who also try) gain very little.

Now I am not defending my position as a better position. What I’m saying is that my position on Pareto being the natural state of affairs in the world is true, and that those who are positioning themselves within the ivory tower are people who are fighting for something that we as humans believe in but which is unnatural.

And in my opinion we need such unnatural thoughts, for some of the Pareto instabilities can tear a society apart. When people are arguing for tax breaks for the wealthy, because they alone have the power to spend, while the vast majority of Americans who pay no taxes have been robbed of their consuming power, then instabilities will increase. That is a real problem.

But, once again, identifying a problem is not the same as solving the problem. The whole structure of society will be tipped towards the majority of non-taxpayers, who will feed off of the taxpayers, until the whole society will fade into oblivion. And in a world of competition, where China has gotten the upper hand, the instability will accelerate the decline of American society.

Pareto and the Press

Pareto’s natural economy is a challenge for America today. The press, however—and not just the press, mind you—has taken the academic position, which is that Republicans are focused too much on insufficient reason and not enough on the principle ‘caring’—I use the term as Heidegger uses it in the explanation of the second intuition of his philosophy here—while the Democrats are focused on ‘caring’ for the poor.

While this may be satisfying to those educated enough to follow Heidegger, common sense should tell us that it is nonsense that caring and emotion wholeness are good substitutes for a rational (albeit wildly imperfect) consideration of the terms of argument.

The press doesn’t know the bottom of the arguments they are making. The press is following others, who they believe know. And in this case, the others who know are people who only know that they don’t know. There is no bottom to knowledge! When they realize this, they are confirmed in the believability of their superiority. The press follows the academic, who reacts to people who actually belief things as the yokel simpletons that they know them to be.

Skepticism in America

This is only the case if the academics are correct, and in my opinion they are not correct. The press is following others who only know that they don’t know. This is the position taken by skeptics. The problem with skepticism is that it prioritizes mind over matter. We have immediate knowledge of ourselves, but we can’t always found our immediate knowledge in the world outside ourselves. This leads to people building up things within their mind that they cannot necessarily guarantee by reference to nature.

This is in fact an old problem. After Plato had made his arguments about the ultimate lack of truth in this universe—he thought that it was a matter of referring to ultimately unknowable truths that we could still approached through the medium of fiction (hence his use of the entirely made up Atlantis)—Aristotle came along and posed what we now see is a better solution to the problem of knowledge. He invented science.

Although he thought he was trying to pose a better system than Plato had for understanding the world, Aristotelian science was not a sound metaphysical system. Hence, while Plato got handed around from school to school in the years following his death, Aristotle (supposedly, although they evidence is not without contradiction) was relegated to a basement for 200 years.

To rescue arguments from an infinite regress, Aristotle’s science put a floor under knowledge. Terms of arguments are agreed upon as axioms: things that cannot be questioned. The fact of the matter is that you can question axioms, but this is a separate matter from questioning the knowledge that you build upon your agreed-upon axioms.

No one after Plato really agreed that Plato had had the last word on logic. But neither did they know how to incorporate Aristotle’s relativistic science into their metaphysical worldview. There have been several attempts to place relative science into a metaphysical worldview, none of them successful. Despite the fact that Shelley was able to configure his universe one way, and despite the fact that many men follow a Shelley-like configuration of the universe of mind, Shelley’s worldview fails the tests that common sense can bring to bear upon it. How do we know that our imaginations are closer to us than reason? The answer, if we are being perfectly consistent with our reason, is that we do not know.

The Case for the Priority of Science

The fact, as I see it, is that the mind is weak and has no business, even from the towering figures like Jim Cramer and Jon Stewart, in believing that their opinion is a perfect substitute for the facts of the universe.

In fact, Cramer is right, if not about what he is claiming after he reaizes that his interview with the usually affable Stewart is not going as he had planned, about the fact that he has been trying for years to make himself accountable in the business world which has several charlatans vying with honest men for control of a share of your mind (which they call mindshare). Kramer warns in each of his books about the fact that the science of economics is an imperfect science and that you should do your own homework before investing. And even then, you will often fail!

The problem is not with the fact that there are crooks in the world. (although there are crooks in the world). The problem is that the world looking forward is not wholly predictable. Hindsight, which Jon Stewart has a load of, is 20/20. He positions himself outside of the specialized world of finance and relies on people he now regards as hucksters to ‘put your money in your 401K and leave it there.’

Well, Jon Stewart is an idiot if that’s what he’s doing with his money. That may have been okay in the 1950s (and even then I don’t think it was okay), when there were very few stock investors; but in the early 21st century, Cramer’s right. You need to do a lot of research before you invest.

Sure, Cramer was wrong in his clip in which he said a week before the collapse of Bear Stearns that Bear Sterns was a solid company, and I’m not defending him on this. But if Stewart was actually watching CNBC—and I find this doubtable—he would have been aware that there were (and always have been) more than one opinion about the future direction of the stock market. Granted, during the run up, there were too many people hawking infinite progress and not enough people warning against ‘irrational exuberance’ (except for the Chairman of the Federal Reserve Board, but who listens to him?). But they were there.

I find the ignorance of people like Jon Stewart lamentable. They have not bothered to do their research before entering the stock market. They’ve been told by others that it is safe to invest in stocks. Hopefully, they’ve also been warned by their broker—who is obliged by law to announce that investments in stocks could go up or down—that their investments could go up or down. It seems to me that he’s being lazy and that he is laying the blame on specialists for his own lack of education.

In October of 2007, even I managed to get out of the stock market before the crash by following a system that I thought worked (the IBD system). It turned out that my system actually worked. Other people, following other systems, found that their systems did not work as well. But the fact of matter is that no system works perfectly. [Buy How to Make Money in Stocks: A Winning System in Good Times and Bad, Fourth Edition and follow the directions carefully if you want to duplicate my success].

The reason for this is simple. The human mind is trying to crunch a world larger than itself into imperfect models in order to predict the future. There is no possibility of accurately representing that universe. All models will have some distortion in them. But here’s the key (and this is what’s lost on the academic who’s searching for natural balance in an out-of-balance world): some models are better than others.

Academics and the press believe that their mission is not to stop with a series of axioms, but that their mission is to dive to the bottom of the assumption pile and come up with ‘the truth.’ The problem here is that truth is inaccessible in itself, though Shelley says otherwise. The best we can do is to hope that our scientific model gets us closer to the truth than, say, the primitive model, which relies on pushing mothers and virgins into exploding volcanoes to appease imaginary river gods named George.

For Stewart, with no other insight into the future than his prescient hindsight, someone in the world should know what he does not. And if someone knows and doesn’t does not warn us, then there must be some sort of conspiracy. That’s just bad thought.

Categories: Economics, Philosophy
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