Set forth below is the text of a comment that I recently posted to another blog entry at this site:
They can speak their minds on internet forums and post here anonymously anytime, with no fears of anything. But they don’t. What does that tell you?
That’s a 100 percent fair and 100 percent important question, Anonymous. It is the question around which everything turns. I have spent time thinking about that question on every day of the past 12 years.
I have some answers and I have posted about them in hundreds of posts and articles and RobCasts already on the site. As I discover new answers, I write those up too. That’s pretty much all I can do.
If I was asked to give one short response to your question, I would say: “It’s because it is all so big.” People don’t want to take on the responsibility of saying something that requires that all the textbooks be rewritten. So even when they understand the arguments, they tell themselves “Let some others say this and then, when it is a commonly voiced view, I will agree that it makes sense.” We are not all independent thinkers. We are social creatures. We don’t like to tell our friends and neighbors and co-workers that they are wrong about something important. And this stuff is SO important. Most of us just cannot work up the courage to do it.
I sometimes report on my wife’s reactions here. I do that because I am trying to be fair. I call you guys “Goons” and thereby plant the suggestion that you say what you do because you are biased against me. My wife is obviously not biased against me. She has every reason to agree with me on every point. But she does not. I think that the fair thing to do given that reality is to report it so that anyone trying to make sense of this have that information available to them.
My wife doesn’t support the Goon tactics. But she doesn’t understand Valuation-Informed Indexing on a deep level. It’s not because of a lack of intelligence. She is more than intelligent enough to get all this. We sometimes go on walks and I try to bring the subject up. She will listen for a bit but her patience is limited. The other day I made another plea for her to go through the entire thing with me step by step. She said that it would be painful for her to do that.
I have had similar experiences with MANY good and smart people.
John Walter Russel was my right-hand man. There is no one on the planet who showed more support for me. John and I had a knock-down, drag-out fight in the days before we released the Retirement Risk Evaluator. His research showed that the SWR at the top of the bubble was 1.6 percent. He didn’t feel comfortable saying that because it is such an extreme change from the old findings. So he wanted to report the withdrawal rate that is most likely (the one for which there is a 50 percent chance that the real-world result will be higher and a 50-percent chance that the real-world result will be lower) as the “safe” rate. I told him that I could not put my name to that. A day or two later, he came around. But this was my freakin’ partner, the guy who had done all the research! There never should have been any disagreement.
I had similar experiences with both of my brothers.
Richard and I had a discussion about it one Thanksgiving over the dinner table. He asked me about my income situation and I explained that I felt that I was in “The Perfect Trap.” I said that the work I was doing was so important that I couldn’t possibly give it up. Then I added that the work that I was doing was so important that people on the other side felt that they could not possibly recognize it and so I couldn’t make a dime from it. He asked me to explain the investing ideas. He never crossed the line into being hostile but I would describe every comment he made as being highly skeptical. We didn’t want to get into an argument so we both dropped it. But my brother Steven told me that Richard spoke to him later and told him that he thought that the explanations that I put forward were impressive. Why couldn’t he say that to ME?
My brother Steven had a lump sum to invest sometime back before the 2008 crash,. He knew that I had a calculator on the internet so, without telling me, he checked it out before deciding how much to put in stocks. Then, after the crash, he told me that he wished he had paid more attention to my ideas. He looked at the calculator. It said that the most likely 10-year return on stocks was something in the neighborhood of 3 percent real. The return on super-safe investments was less than that, so he went with stocks. That’s NOT what the calculator was trying to tell him! The rule that I use is that you should get an extra return of 2 percent real for taking on the risk of stocks. The super-safe investment classes were offering a better value proposition at the time (they were paying something slightly in excess of 2 percent real, I believe). But he felt funny not going with the conventional advice. So he rationalized a belief that the Return Predictor SUPPORTED the conventional advice.
My boy Timothy has the best understanding of VII of people who are close to me. We talked about it all late into the night one night and he asked the kind of penetrating questions that tell me that someone gets it. This past Thanksgiving we were at my brother’s house and there was a NASA engineer there to whom I was telling the story. On the ride home I asked Timothy to describe the guy’s reaction to what I said. “Blank face,” he said without missing a beat. That’s exactly it! Goon reactions are rare outside the internet. But Blank Face is common. It’s not that people are not capable of understanding. It’s that people don’t WANT to understand.
Go through all of the reports of the e-mails that I exchanged with Wade Pfau and you will come to understand better what is going on. Wade was obviously intrigued or he would not have contacted me. But at the start he had serious reservations about foundational points. We talked those out. The ice started to melt a bit. And then one day he was writing to me with huge enthusiasm about how this was going to change the world. It clicked! Wade changed his stock allocation because of what he learned. That’s not just talk, that’s action. He never got it 100 percent. But something important clicked for him. That’s the process that people need to go through. But it doesn’t happen with one exposure. You have to be exposed to the new ideas on multiple occasions and hear answers to lots of questions before your mind can take it all in. It’s a paradigm shift. It takes time.
I could go on and on.
None of the people on the other side are bad people. They sincerely believe what they say. They follow Buy-and-Hold themselves. They are trying to help others by sharing what they know with them.
But there is another level of consciousness in which they have doubts. That makes them defensive. That makes it painful for them to hear about the new ideas.
All of that is fine. We NEED to be skeptical of new ideas. This stuff affects people’s lives in serious ways and the responsible thing is to respond to new ideas with a great deal of skepticism. I have no problem with any of it up to that point.
But there have to be lines that you don’t cross. Most people are not willing to put enough time and energy into learning about investing to study these things for themselves. Most people look to two things in forming their opinions: (1) the credentials of the people putting forward the ideas; and (2) the number of times that they hear the ideas endorsed. Buy-and-Hold has a HUGE edge in both departments because it has been around so long. Valuation-Informed Indexing cannot rise unless it can be freely discussed and people can gradually come to see merit in it and hear lots of different people endorsing it at lots of different places.
We are in a Catch-22. People don’t believe in Valuation-Informed Indexing because they don’t hear about it enough. And people don’t hear about it enough because most people don’t believe in it and will never come to believe in it enough until they feel safe talking publicly about their doubts re Buy-and-Hold.
The only way to change that is to open every board and blog on the internet to discussion of the implications of Shiller’s ideas. If people felt safe talking about these ideas, they would do so. We have seen that is so at every board and blog at which discussion has been permitted for a time. People LOVE the discussions so long as the ugliness is kept to a minimum. Every board and blog permits discussion of ideas put forward by Nobel prize winners. And the laws of the United States prohibit the tactics that have been employed to block discussions of these ideas. So we are as close as close can be to having some amazingly good stuff happen.
The problem is the defensiveness of the Buy-and-Holders. It is not possible just to tell people what works without criticizing Buy-and-Hold because what works is price discipline and price discipline is long-term timing and the key idea in the Buy-and-Hold Model is that timing never works. When you tell people that the path to effective long-term stock investing is to always, always, always practice long-term timing, the Buy-and-Holders go nuts.
That’s the problem. There is a Social Taboo on saying that timing is required. The Buy-and-Holders have said so many times that timing doesn’t work that people feel that saying timing is required is like saying the earth is flat. People are social animals and they don’t feel comfortable going against such a widely held belief.
But the reality is that there is zero support in the peer-reviewed literature for this belief. Wade Pfau checked that and he has a Ph.D. in Economics. Buy-and-Hold was built on a false premise.
We need to get the word out. Once we do, we will all be on the same page. We all want the same things.
But how do we do that?
The Buy-and-Holders want absolute proof that Valuation-Informed Indexing is perfect in every possible way before they will permit open discussion at even a single site. And we cannot persuade enough people that Valuation-Informed Indexing is perfect in every possible way to overcome the abusive tactics of the Buy-and-Holders without first having open discussions. We are as a society stuck in a very bad place.
We need Jack Bogle to stand up on a stage and make a speech. Then we need that speech reported on on the front page of the New York Times. That will make everyone who has doubts about Buy-and-Hold feel comfortable about expressing those doubts publicly. And that will make the Buy-and-Holders understand that they need to take the abusive stuff down about 6,000 notches.
The reason why people don’t participate is not that they are so confident in Buy-and-Hold, Anonymous. People don’t participate because the Buy-and-Holders are so defensive that they engage in behavior that scares people into not participating. The Buy-and-Holders should be INVITING challenges to their ideas as a learning experience. When they start doing that, I guaranty you that we will have zero problem getting a national debate launched. We have been seeing since the morning of May 13, 2002, how much interest there is in having a national debate in which all feel safe saying what they truly believe.
I hope that helps a bit.
My best and warmest wishes to you and yours.