Set forth below is the text of a comment that I recently put to another blog entry at this site:
Specifically, who are the goons? What makes them goons? Who are the leaders of the goons? Who are the goons that are most responsible for what you see as the problems? Are we talking about a handful of goons or just a small select group? How do I spot a goon?
A Goon is someone who is too filled with hate and fear to have a constructive discussion.
We ALL have goonishness within us. That includes me. That includes Shiller.
You could just use the word “emotionalism” if you wanted. “Goon” is a smidgen more colorful.
We are living through a time of fundamental change in the investing advice field.
In the old days, the idea was to be intelligent. The more so, the better.
Indexing pretty much takes intelligence off the table as a factor. All the things that people used to study are priced in. You don’t need to be intelligent to obtain great investing results today.
But you need to rein in your emotions. You can ruin the indexing thing by getting too emotional.
So the future is about reining in your emotions. That’s 80 percent of the investing job from this point forward.
You guys make the point all the time that most of the Big Shots in this field don’t talk about Goons and about death threats and about prison sentences and about board bannings. They should be talking about all that stuff. That is the stuff that matters in the Age of Indexing.
Why? Because that is the stuff that tells you that emotion is the driver. Emotion is risk in index investing. Rein in your negative emotions and you can’t lose no matter what else you do. Fail to rein in your emotions and you can’t win no matter what else you do.
We all suffer from goonishness. The people I refer to as “Goons” (that’s you, Anonymous!) make it their whole life. They give in 100 percent to the negative emotions. They don’t make even a feeble effort to rein anything in.
By learning what drives the Goons, we can learn how to reduce risk. The Goons would like to obtain good results . Why don’t they? What causes them to make such bad choices?
Coming up with the answers to those questions is the future of investing analysis.