Set forth below is the text of a comment that I recently put to another blog entry at this site:
What a quandary for you, Rob. You are shooting holes in their credibility.
So, I guess you won’t be referring to Shiller or to Wade Pfau anymore since they are not reliable sources based on your comments.
Unless…………………..we put them on different “levels”…….hhhhmmmmmm………..maybe that will work. Of course, Rob, you will be the new leader and then the other people are on levels below you. It just comes down to what level you put them.
Help us out with that Rob.
You’re raising a legitimate and interesting and important point, Pink.
You are right that Shiller and Pfau and Bogle hurt their credibility when they say things that conflict with other things they have said. I agree 100 percent.
I am of course going to continue to cite them. I rank Shiller as the most important investing analyst of all time, I rank Bogle second and I say that Wade has done work worthy of a Nobel Prize. I can’t very well talk about stock investing and not make reference to the giants.
Do you know the root cause of my “quandry”? Shiller and Bogle and Pfau are friggin’ HUMANS! WhaChaGonDo, you know?
They are humans and they make mistakes. That’s pretty much what it all comes down to.
The Buy-and-Hold Pioneers are heroes of mine. They are the Big Mistake Makers and yet they are my heroes. Why would that be?
Because it is easy to sit on your duff and just nod your head at the conventional wisdom and get rich doing it while it takes some fortitude to put on your Big Boy Pants and get out there in the world and mix it up and take a chance that you might get something wrong and that someone out there in the Big Bad World might notice and tell all your friends and you will look like a fool. The Buy-and-Hold Pioneers went to places no one had ever gone before and helped us all out in a big way by doing so. There wouldn’t be any Valuation-Informed Indexing today if they hadn’t done so. So, yes, they are heroes. That can never change. That’s already written up in the book. They will always be heroes for the many legitimate and powerful insights that they developed and advanced.
The difference between you and me is that you start with a premise that being found to have made an error is a horrible thing. I do not see it that way even a tiny bit. There can of course be circumstances where someone would make a mistake because he is dumb or lazy or whatever. In those circumstances, it might be fair to say that discovery of the mistake reflects poorly on the person who made the mistake.
But there are lots of circumstances in which just the opposite is so, circumstances in which the mistake is made because the person who made it was sticking his neck out for the benefit of all of us. In those sorts of circumstances, we should celebrate the discovery of mistakes. When we discover a mistake and then fix it, all sorts of new possibilities open up. It is by making mistakes that we make huge advances.
We humans start out not knowing everything. We often make mistakes because we have to choose one of two roads and we have no means of being sure which road is the right one. We try one road and, when it fails us, we go back and take the other road. And taking that other road takes us to the place where we wanted to go all along. The mistake lead us to the right place through a circuitous route. Had we remained frozen in our tracks afraid to choose one road or the other because we viewed making a mistake as the worst thing that could ever happen to a person we never would have made our way around to choosing the right road. Mistakes are good stuff when they are part of a sincere and brave effort to learn the truth!
I am 99 percent sure that Bogle has made mistakes and I love him all the same. I love him because of the many wonderful things he has taught me. I am 99 percent sure that Pfau has made mistakes and I love him all the same. I love him because of the many wonderful things he has taught me. I am 99 percent sure that Shiller has made mistakes and I love him all the same. I love him because of the many wonderful things he has taught me.
There ARE such things as bad mistakes, mistakes that make the world a worse place rather than a better place.
Death threats are bad mistakes. Demands for unjustified board bannings are bad mistakes. Advances of tens of thousands of acts of defamation are bad mistakes. Threats to get academic researcher fired from their jobs are bad mistakes.
It’s part of my job to point out those sorts of mistakes as well. I don’t enjoy that part of the job so much. But it is work that very much must be done. If I and others fail to point out those sorts of mistakes, we see more of those sorts of mistakes. That means that more people are found liable in civil proceedings. And more people go to prison. And those going to prison earn longer sentences. Not good. Not good. Not good.
The mistakes on matters of substance I will point out in 10 seconds. I try to be sure before pointing out a mistake made by a Shiller or a Bogle or a Pfau because I view these people as giants and I want to do all I can to avoid making mistakes myself and I think it makes sense to presume that the giants know what they are talking about and to indicate that they have made mistakes only when there is a great amount of evidence showing that this is truly so. But when the evidence shows that it is so, I feel comfortable pointing out these sorts of mistakes without too much fuss and bother. Pointing out these sorts of mistakes helps us all (including the person making the mistake) that it is a wonderful thing to be able to do that when there is strong evidence showing that a mistake was indeed made.
It naturally causes me a great deal more anguish to point out the other kind of mistake. It has to be done. But it hurts to do it. Pointing out those sorts of mistakes when they are made by my friends causes me to eat more cookies to dull out the pain. I don’t need to be eating more cookies! I point out these sorts of mistakes because I must. But I do it as a last resort. It’s a downer. A necessary downer if we are ever to advance in our understanding of how stock investing works. But a serious downer all the same.
So you will see me being very careful when it comes to saying that my friends Jack or Robert or Wade have committed that sort of mistake. Wade has certainly done so. He was telling a lie when he said that he thought Greaney was the hero of our discussions. Jack has certainly gone there. He behaved irresponsibly when he learned what Lindauer has done to compromise the integrity of a board with his name on it and failed to take prompt action. I am not aware of cases in which Robert has traveled that dark road. The worst I can say about Robert given the evidence that has appeared before my eyes is that he pulls his punches because he is a naturally genial person and doesn’t want to hurt people’s feelings. I think he needs to be tougher given the circumstances that prevail. But that’s the worst that I can say about Robert given what I have seen through today.
We are humans, Pink. We are going to make mistakes from time to time. If that is too horrible a reality for you to contemplate, you had better just climb back under the covers and give it up, this investing analysis business is not for you. Mistakes are part of the game we are playing and it is not a part that any of us (Rob Bennett most certainly included!) can avoid.
We are all going to make mistakes. It’s what we do when we learn about the mistakes we make that makes the difference.
There is a strange element to this particular story. The usual rule is that mistakes are discovered and then corrected in an amount of time far, far less than 33 years. The thing that is different in this particular case is that the mistake that Shiller discovered way back in 1981 has gone uncelebrated (mistakes should be celebrated because their discovery leads to huge learning experiences!) for 33 years now. What’s up with that?
It’s not because this mistake doesn’t matter much that it has gone uncelebrated and uncorrected for so long. The reality is just the opposite. This mistake has gone uncorrected because it is such a biggie. This mistake affects whether we get to retire at age 65 or not! This mistake affects whether we can avoid all future economic crises or whether our entire economic system fails. Discovery of this mistake means that we need to correct every textbook in the field. And on and on.
You’ve heard of The Company That Is Too Big to Fail? This is The Mistake That Is Too Big to Correct!
Except it must be corrected!
As a society we cannot bear the thought of acknowledging and thereby correcting this mistake. Yet as a society we cannot bear the thought of correcting the mistake either! It’s a mess!
We need to proceed with love.
That’s all I can say about the situation in which we find ourselves.
To proceed with love is to be sure always to show respect and affection and gratitude to the people who made the mistake for the great good they did us all in being brave enough to have ventured to a place where making mistakes came with the territory. And to proceed with love is to be sure not to let our friends get involved in the bad sorts of mistakes that destroy them and lots of others. We need to be as honest as we possibly can be without crossing the line and becoming uncharitable while also being as charitable as we possibly can be without crossing the line and becoming dishonest.
All you do when you point out to me that even giants like Robert Shiller have made mistakes re this matter is to impress on me once again how important it is that we all work together to make it to the other side of The Big Black Mountain. If freakin’ Robert Shiller is making mistakes re this stuff, what chance does the ordinary middle-class investor have of getting it all right? The fact that Shiller is still making mistakes is yet another sign of the huge OPPORTUNITY that presents itself to us here. This is one big mistake. It follows that the gains we are all going to enjoy as a result of correcting this mistake are going to be amazing.
The credibility thing is not a concern to me. Yes, Shiller had made mistakes. That shows that he is human. People should have known that all along. If they don’t, they need to know it now. Shiller is one of the darn humans and we had all better keep that in mind when considering any words he puts forward or we are likely going to get ourselves and our friend Robert in a great deal of trouble somewhere down the line.
Shiller makes mistakes. If that means he lacks credibility in your eyes, then he lacks credibility in your eyes. Just please be fair and accept that that means that all the other humans lack credibility in your eyes as well.
I make mistake too, Pink. I am one of the darn humans too. I should lack credibility in your eyes as well.
And of course you make mistakes. So you should lack credibility in your eyes as well.
That pretty much covers it.
I will continue to cite the humans who make mistakes because they are the best we’ve got and I am grateful for their wonderful contributions and I want to share them with all my friends. I will also continue to point out their mistakes in an effort to help them find their way to a better place.
What a quandary I face!
I wish you all good things in this beautiful New Year.