Set forth below is the text of a comment that I recently posted to another blog entry at this site:
What do you think the ratio of crazy people is to people like Rosa Parks? I believe the ratio is quite high.
I agree that most people who question conventional wisdom are wrong and that some are outright crazy. So if all you knew about a case that someone was making is that that person was questioning conventional wisdom and you had to take a bet one way or the other, your best bet would be that that person was wrong. Things don’t become conventional wisdom for no good reason. An idea that has become conventional wisdom has earned a measure of our respect.
But there are times when conventional wisdom must be questioned and eventually overcome. I strongly believe that this is one such case. To understand all the reasons why I believe that, a person would need to become familiar with all the materials at this site. But I can offer a simple illustration of why I believe that the conventional wisdom should be questioned in this case that doesn’t require the person looking at this to review the wealth of material that has been produced over the past 13 years.
A little over a year ago, Eugene Fama and Robert Shiller were both awarded the Nobel Prize in Economics. All of the reports of this award noted that Fama’s ideas about how the stock market works and Shiller’s ideas about how the stock market works cannot be reconciled. It is a logical impossibility that both Fama and Shiller are right. Many of the reports commented how odd it is that the committee that awarded the highest honor in the field gave the award to one person who put forward ideas re an important subject that they knew were completely and totally wrong and therefore dangerous. The committee doesn’t know which of the two researchers is wrong. But they know with certainty that one of the two men who received the Nobel prize on that day is wrong. And they awarded him the highest honor in the field anyway. Huh?
That’s not how it should work, Laugh. I understand why the members of the Nobel Prize Committee did what they did and I don’t fault them for it. These two men have both made huge contributions and they wanted to recognize those contributions. I obviously think that Fama got it wrong. But I also certainly acknowledge that he has made a huge contribution. So I don’t fault them for giving him the award. But I do fault them (and lots and lots of others) for not stating clearly how important it is that the question of whether Shiller is right or Fama is right be settled through a national debate in which advocates of both positions state their case in clear and strong and firm and honest language.
The debate is over an academic matter — Is the market efficient, as Fama says, or do valuations affect long-term returns, as Shiller says? But this particular academic dispute has HUGE practical implications. If Shiller is right and Fama is wrong, as I strongly believe, then it was the continued promotion of Buy-and-Hold combined with the Ban on Honest Posting on the implications of the past 34 years of peer-reviewed research in this field that caused the economic crisis that began in 2008. Millions have lost their jobs as a result of that economic crisis. Millions will be seeing their retirements fail in days to come. There are grave public policy implications here. We need to have a national debate. This is 100 percent imperative.
Conventional wisdom is usually true. I don’t think you are right with your “tens-of-millions-to-one” odds. But I would go along with 100 to 1 odds. So, if I were betting without any knowledge of the cases being made both for conventional wisdom and against it in a particular case, I would vote for conventional wisdom if forced to vote without having knowledge of the arguments. But our system of government does not require that we take positions without informing ourselves of the cases being made. Under our system, both sides are permitted to state their cases and then people decide the matter on the merits. I favor that way of proceeding.
Why? Because in that one case out of 100 in which conventional wisdom is wrong, the gains achieved by us all learning that it is wrong are so great that it makes up 10,000 times over for having to hear out both sides in the 99 cases in which the conventional wisdom is right. Every advance ever achieved in the history of humankind was achieved because someone believed that we could do better than we had done before. If the person who invented the wheel had been blocked from sharing his idea because the conventional wisdom of the time was that there is no such thing as a wheel, we all would be the poorer for it today. I support the idea of progress. Achieving progress requires being willing to listen to arguments that what we think we know today might be lacking in some way.
Did Rosa Parks run around screaming ‘prison time for whitey’ or ‘they threatened to kill my family.
Rosa Parks’ message was: “I have as much right to choose my seat on the bus as a person with white skin.” My message is: “I have as much right to post my beliefs about stock investing on every discussion board and blog on the internet as the Buy-and-Holders.” Parks changed the world by refusing to be bullied. I am 100 percent confident that I will be seen to have done the same before this saga in entirely played out.
I love all of my Buy-and-Hold friends. I wish none of them any ill whatsoever. But I believe that we all need to hear both sides of the story. For that dream to become a reality for all of us, someone needs to show the same courage that Parks showed when she refused to walk to the back of that bus. I don’t like it that I was chosen to be the Rosa Parks of Personal Finance. But I accept the job. I love my country. So I have no choice.
Think hard of your ‘great struggle’, its actual end game, and what it has accomplished in terms of real change and of the cost to you of your sanity.
I have been thinking hard about it every day of my life for 13 years now, Laugh. I am the co-author of the most important piece of peer-reviewed research published in this field in over 30 years. If you had told me on the morning of May 13, 2002, that sometime over the next 13 years I would become the co-author of the most important piece of peer-reviewed research published in this field in over 30 years, I would have said that you were out of your mind. Re that one, I would have gone along with your tens-of-millions-to-one odds. Yet here we are.
This is how it had to be done. I wish it weren’t so. But things had reached a point by the morning of May 13, 2002, that this was the only way that this good work could be done. I am very, very, very proud of the role that I have played. I love my Buy-and-Hold friends and I will always remain willing to do whatever is in my power to get things on a better track, a track that causes my Buy-and-Hold friends to suffer less and profit (in all senses of the word) more. I need cooperation from my Buy-and-Hold friends to make that little dream come true.
I strongly believe that I will get it. I no longer think that the odds favor me seeing that dream come true before the onset of the next price crash. But I do believe it will come true and that the world of investing analysis will be changed in a profound and positive way. If it happens prior to the crash, all the better. That’s obviously the best outcome for every single person involved in even a small way, which is every single one of us alive on this planet today.
We are going to need healing following the next price crash. The materials at this site are healing materials. You won’t see me using the materials at this site to make my Buy-and-Hold friends look bad. I’ll tell the truth. No healing can come without complete honesty. But the full truth here is that the Buy-and-Holders have offered huge contributions that merit our nation’s respect and admiration. I will be mixing honesty with charity when I tell this story on a national stage.
No healing can come without complete honesty. But no healing can come without complete charity as well. It is my job to combine the two in the perfect mix. I take my responsibilities here very seriously. I will either achieve that perfect mix or die trying. You have my pledge re that one, Laugh.
I naturally wish you all the best that this life has to offer a person.