Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
If everyone keeps blaming other issues (oil, China, etc), how will they ever come to your conclusion and be “educated” as you state?
Look at how we all become educated re every other subject under the sun, Anonymous.
We talk about stuff. We learn new things and we share what we have learned with each other. That’s how it works with everything other than stock investing. That’s the only way it can work. We will all learn everything that we need to learn about stock investing when we treat stock investing like every other subject.
Why don’t we treat stock investing like every other subject? That’s the $600,000 question.
Ironically, it’s because investing is so darn important.
You would think that we would want to learn about subjects that are super-important even more than we want to learn about subjects that are of just average importance. But the reality is that it works out just the other way. When something is as important as how we go about investing for retirement, we cannot bear the pain of coming to realize that we have for a long time been getting it very, very wrong. Incorporating new knowledge requires an acknowledgment that for a time we did not possess perfect knowledge. It is relatively easy for us to acknowledge that re subjects of ordinary importance. It is brutally hard to acknowledge that re subjects of great importance.
Have you ever had a friend who became an alcoholic? It’s hard to convince alcoholics that they need to make changes in how they live their lives. Many alcoholics are smart people. Their friends see that they are destroying their lives. They want to help. The things that they are telling the alcoholics are perfectly obvious. Why can’t the alcoholics see that? Why can they understand lots of things and yet not understand this perfectly obvious and terribly important thing?
They cannot bear to see how much they have hurt themselves and others with their alcoholism.
To say “I am an alcoholic” means accepting that you have done great harm to yourself and to your loved ones for many years. The alcoholic gets this intellectually. He cannot act on the knowledge because he cannot bear to accept what his mind tells him. He lives in denial of obvious realities.
So it is with Buy-and-Holders. You understand that Shiller’s 1981 finding that valuations affect long-term returns truly was a “revolutionary” (Shiller’s word) finding, that nothing in our understanding of how stock investing works will ever be the same again. You get it that, if Shiller is right, Bogle’s investing advice is insanely dangerous and is in the process of destroying millions of lives. But you cannot bear to let this knowledge into a part of your consciousness where you could act on it any more than an alcoholic could accept that his drinking has caused him to lose his health and his family and his career and his self-respect.
There’s a saying about alcoholics that they need to hit bottom before they can begin rebuilding their lives. When someone lands in the gutter, he loses his pride enough not to care anymore about the pain associated with acknowledging mistakes. At that point, he becomes so desperate that he will do anything to overcome his problem.
So it will be with Buy-and-Holders. If stocks continue to perform in the future anything at all as they have always performed in the past, the continued promotion of the smelly Buy-and-Hold garbage will put us in the Second Great Depression. That’s a lot of pain for millions of people. We will all want to end that pain. We won’t be so worried anymore about the loss of pride associated with having made a mistake. We will just want the mistake to be fixed. We will see that we are all in this together and we will all pull together to get the word out about what the last 35 years of peer-reviewed research tells us. We will all be on the same side at that point. There will be no more friction.
We will achieve 35 years of insights overnight. It will be amazing.
I wish that we could have done this properly back on the morning of May 13, 2002, or, even better, back in 1981, when we first gained the one big piece of the puzzle that had been missing since the day Buy-and-Hold was born back in 1965. But of course the alcoholic wishes that he had never lost his health or his family or his career or his self-respect. Things are what they are. Looking backwards doesn’t serve any constructive purpose.
We need to look forward. We all benefit from learning about Shiller’s findings. We are the luckiest generation of investors ever to walk Planet Earth.
But some of us are not today able to accept our good fortune. Doing so requires saying the words “I Was Wrong” or at the bare minimum “I’m Not Sure.” When things get dark enough, I believe that my good friend Jack Bogle will say those words. Then it all flips. Then the long national nightmare comes to an end. Lots of people want to make reputations for themselves and become multi-millionaires helping people learn how stock investing works in the real world. They don’t want to see their careers destroyed in the process of doing it. Once Bogle acknowledges his mistake, people will not be afraid anymore and the long-delayed national debate we all need to see take place will begin.