Set forth below is the text of a comment that I recently posted to another blog entry at this site:
I have no idea what you are talking about. Just in case you are interested.
I’m certainly interested, Anonymous.
Since you are a Goon, it is entirely possible that you are playing more games with this comment. My strong hunch is that that is the case.
But the other reality is that I have spoken to many NON-Goons who struggle with this stuff. I’ll give you one example. I wrote a column for the Death by 1,000 Papercuts site for a long time. I turned in over 100 columns there. The editor who read my stuff loved it. He commented on every column I submitted in an e-mail to me. He went on and on about how much he loved the column. He gave particulars that showed me that he was not just flattering me, that for the most part he was being sincere in his praise. But he also sometimes asked questions or offered comments that showed me that he didn’t really get the Valuation-Informed Indexing concept on a deep level.
I have had similar experiences with HUNDREDS of people. Please recall that I was a Buy-and-Holder myself on the morning of May 13, 2002. So an argument could be made that I had a hard time convincing myself. I did not give up on Buy-and-Hold until August 27, 2002. And there were many very important points that I did not understand until many years later.
It was the same with John Walter Russell. John and I worked together on a daily basis for over eight years. But there were a number of times when I learned that he did not understand a point that was painfully obvious to me. We had a knock-down drag-out just before we released The Retirement Risk Evaluator. I loved the guy. But he wanted to call the withdrawal rate that was more likely than not to succeed (the one with slightly more than a 50 percent chance of working out) the “safe” withdrawal rate. I couldn’t put my name on a calculator that reported things in that way. We almost stopped working together on that day. This is a guy who was my greatest supporter ever and a guy who I consider one of the smartest and most honest and kindest people I have ever known.
It was the same with Wade Pfau too. Wade and I worked together for 16 months before we published out peer-reviewed research showing that switching to a VII strategy reduces stock investing risk by 70 percent. Wade holds a Ph.D. from Princeton. So he should have been able to talk rings around me. I am sure that there are many issues re which he COULD talk rings around me; I have no doubt of that. But in the discussions we had I was the teacher and he was the student. Over and over again he found himself coming around to my point of view after we exchanged a number of e-mails on a topic.
It’s not that I am super-smart, Anonymous. I am reasonably smart but not super-smart.
It is that VII is a new paradigm. That means that it is rooted in a different set of principles from those in which Buy-and-Hold is rooted. That means that every single strategic question is analyzed differently. VII is not just a new strategy. It is an entirely new model for understanding how stock investing works. It is not possible for the human mind to believe in both Buy-and-Hold and Valuation-Informed Indexing. The two models are rooted in entirely different premises. So following the logic chains produced by the two models leads to entirely different places. You’ve probably noticed how often I quote Shiller saying that his research findings were “revolutionary.” Shiller didn’t change things in a small way. Shiller changed things in a FUNDAMENTAL way.
If you had never heard about Buy-and-Hold, you would have zero problem understanding VII. There is nothing even a tiny bit intellectually challenging about it. But it is hard to understand VII when you have spent years immersing yourself in the logic that follows from a belief in the Buy-and-Hold principles. That’s the source of the confusion. It is easy to believe that the earth is round if you have never believed that it was flat. But if you have come over many years to have a strong belief that the earth is flat, reports that it is round come as a shock and are hard to accept.
If you have questions, I will try to help. That’s all I can do.
If you don’t want to ask questions, you can review the materials at the site, which are extensive.
It’s a huge advance. I can promise you that, once it clicks, you will never go back to Buy-and-Hold. But you have to be open to hearing the new message for it to be able to do any good for you.
That’s pretty much all I can say. When you become willing to learn about the implications of the last 34 years of peer-reviewed research, you will have your mind blown. At the moment, you are insanely defensive about this stuff. That is what is holding you back. You need to approach this as if all you cared about was becoming the most effective long-term investor that you can possibly be and let go of all the concerns about whether you once didn’t understand things perfectly.
You will no doubt take offense at that comment. I didn’t put it forward as a dig. I put it forward because I have 13 years of experience in which I have been trying to teach people about this stuff in which I have seen insanely defensive reactions from lots of good and smart people. I know that that is the primary issue for a lot of people. I wouldn’t be much of a friend if I didn’t try to help you by pointing that out.
It all works. It is al wonderful stuff. But it won’t register until you let go of the defensiveness. I am not able to reach into your heart and do that for you. You have to WANT to learn about the new ideas. Then it will all come very easily.
My best wishes to you, old friend.