I’ve posted Entry #272 for my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Bernstein’s Revolution in the Treatment of Diabetes Mirrors Shiller’s Revolution in Our Understanding of How Stock Investing Works.
Juicy Excerpt: In 1970, the medical community believed that the consumption of fats was dangerous. The consumption of carbohydrates was encouraged as a means of keeping fats consumption low. The reality proved by Richard Bernstein in the years since is that it is carbohydrates that are the real killer in the American diet and that fats are harmless in comparison. The Bernstein revolution (an approach to the treatment of diabetes in which a super-low carbohydrate diet is encouraged) was slowed because the “experts” in the field had fallen in love with an idea (that carbohydrates were okay and that fats were bad) that at one time was given some support in the literature but that had never been sufficiently proven to justify its status as dogma.
The parallel is that, prior to 1981, the investing advice community believed that market timing was always a bad idea. The reality proved by Shiller is that, while short-term timing never works, long-term timing always works and is always required for investors seeking to keep their risk profiles roughly constant. Again, the experts have had a hard time acknowledging the error. Experts don’t like to acknowledge their human fallibility. So they have an inclination to go into denial when new research is done showing that their too-hasty conclusions re the meaning of earlier research need to be reconsidered.