Set forth below is the text of a comment that I put to the discussion thread at the Out of Your Rut blog re my recent column titled “The Bogle Revolution, Take Two.”
My words were put forward in response to a comment by Spokane Al, who said: “I always enjoy reading your stuff but do believe that you made a bit of a leap with your comment, “Bogle will need to face the music re the mistakes he made in his initial version of the Buy-and-Hold strategy, mistakes that were the primary cause of the economic crisis . . .” To blame Bogle for the current economic crisis with no facts nor arguments to back that assertion up is purely slinging mud, for slinging’s sake.”
Here are my words:
Thanks for sharing your thought re this one, Spokane Al.
Please don’t think that I say something like this lightly. Bogle is one of my heroes. So it pains me to say this. The reality, though, is that if Shiller is right that valuations affect long-term returns, then Buy-and-Hold is not just a flawed strategy, it is the most dangerous strategy ever developed by the human mind. I do NOT believe that Bogle sat down one day with the intent of coming up with the most dangerous strategy ever developed by the human mind. He went by what we knew about stock investing at the time, which was not too much, and therefore made some mistakes which have become more and more and more costly as time has gone by.
I don’t blame Bogle (or any of the other Buy-and-Holders) even a tiny bit for the mistake he made. We all make mistakes. That’s all just part of the wonderful game. What I blame him for is his stubborn refusal to ACKNOWLEDGE the mistake or even to acknowledge the POSSIBILITY that he made a mistake. It is because the Buy-and-Holders cannot even acknowledge the possibility of their having made a mistake that things keep getting worse and worse and worse and worse. At some point this madness has to stop, and I think it is fair to say that it is not ever going to stop until those of us who know about the mistake start speaking up more clearly and more boldly and more plainly than we have in the past.
Say that you made a big mistake in the work you do, Al. Would you want your best friend to tell you about it? I would want that from my best friend. I have written a lot of articles about investing. I worry that I may have made mistakes in some of them and that those mistakes may hurt the people I am trying to help. One of the things that I like about the internet is that, if I make a mistake, there are people who will see it and perhaps be kind enough to send me an e-mail or post a comment at my blog. Then I can correct the mistake and set things right and all is well again.
That’s the way that I believe that things should happen with Bogle (and all Buy-and-Holders — I certainly do not mean to suggest that he is the only one who made this mistake, he just happens to have the biggest name). I would like to be working with Bogle to fix his mistake and to set things right. I have been saying for several years now that we need to have a national debate on all the things that we have learned about investing from the academic research over the past 30 years but that we have not been able to talk about because the Buy-and-Holders have not been able to acknowledge the possibility of their having made a mistake.
As part of that debate, I would like to see a series of cover stories in Money magazine with the title “I Was Wrong” in which a different leader in the field would write an article each month saying what he got wrong and how he learned that he got it wrong and what we all can learn from the experience. One month would feature Bogle, and the next Bernstein, and then Buffett and then Scott Burns and on and on. I would be happy to participate. I have made mistakes. I think it would be helpful if one of those articles focused on mistakes that Rob Bennett has made and what can be learned from them. I think Shiller has made mistakes. We could learn by hearing about those.
The Bogle mistake is in the process of causing the collapse of our economic system. We know the rough cost of the mistake. It is in excess of $12 trillion. Millions of people have lost their jobs. Tens of thousands of businesses have failed. We are seeing strains in our political system; people are losing confidence in their leaders as they see the effects of this mistake spread and spread. We have to come to terms with this matter. We have a serious problem on our hands and we need to make an effort to deal with it as serious people.
The point here is NOT to make Bogle or any other Buy-and-Holder feel bad. The point is to let them off the hook. The best thing to do when you have made a mistake is to acknowledge it. Why? Because that puts it behind you. It’s like magic. You say the words “I” and “Was” and “Wrong” and all the bad stuff is behind you and now you are positioned to move forward learning all sorts of new and wonderful things.
I ask Bogle to acknowledge his mistake not to hurt his feelings. I do it because I respect him and admire him and I want to see him making constructive and positive and helpful contributions again. I ask Bogle to acknowledge his mistake because I think of him as a friend and because that is what I would want my friend John Bogle doing for me if the tables were turned.
Here is a link to an article at my site titled “The True Cause of the Current Financial Crisis Is Buy-and-Hold Investing” that gives background on Bogle’s mistake, how it caused the crisis, and why we need to launch a national debate on the realities of stock investing if we are to restore confidence in our economic and political systems:
I am grateful for the frankness of your comment, Al. I hope that we can persuade many others to be equally frank. There are no different sides re this one. We all live in the same economic and political system. We are want to see them succeed. We all are on the same side. We all should be working together in a spirit of mutual respect and affection. The tricky part is getting from where we are today to where we all want to be in the future and I believe that your willingness to put forward a frank expression of your take helps us do so.