Set forth below is the text of an e-mail that I sent on April 12, 2004, to Ken Evoy, owner of the SiteSell.com web hosting company:
Ken:
Thanks much for all the work you have put into the investing project.
I am responding here to your suggestion that I forward product ideas directly to you. I posted a comment at the Active thread putting forward some general, philosophical ideas re the types of business opportunities that I believe exist here. My aim with this e-mail is to supply some specifics.
The need and opportunity that I see is for something that helps people understand the realities of stock investing on an ONGOING basis. You’ve made the comparison between the internet business issue and
the investing issue. I think that that comparison is apt. One of the most important things that SiteSell offers is the discussion boards. It’s not enough for people to learn what works and then implement on their own what they learn. They need ONGOING FEEDBACK.
That’s how we all learn. We come up with some idea as to what works, perhaps through reading. But we
don’t really have confidence in what we have learned until we test it in the real world. And there are always confusing experiences that turn up. We need to run those past other people to gain a deeper confidence in what we are doing. I believe that there is a great need for people to have some sort of mechanism for ongoing feedback and support re their implementation of the Permanent Portfolio concept.
One way to provide this would be to set up a section of the SiteSell forum for investing discussions. The forum could offer help with five sorts of matters:
1) A place for people following the unconventional investing ideas to bat around ideas with others of like mind;
2) A place to alert others to developments of interest to people following these ideas. For example, new research could be noted. Or people could report problems they experienced and others could offer suggestions for dealing with them. Or people could ask about the practical details of purchasing the right ETFs and so on;
3) People could seek help in setting up their own sites dealing with different issues in this field. I believe that we are living through a revolution in our understanding of how investing works. The subtitle of
Shiller’s book even describes his findings as “revolutionary.” Yet the investing advice offered today is precisely what it was before Shiller published his research. The revolutionary advances have so far not been reflected in the practical world. We need to rewrite all the rules. There could be hundreds of successful web sites doing this on an ongoing basis (there are thousands now in place that advocate the discredited, conventional advice);
4) Products could be developed. For example, there could be lots of ebooks addressing lots of particular questions in great depth. CD sets could be produced. Consulting could be offered. The possibilities are pretty much unlimited. There are HUGE amounts of money at stake here. And the ideas we are talking about have rock-solid support in the data and in the research. There are millions of people who need this
material. And it is almost impossible to find it today. That’s a powerful combination of realities!
5) A place for people to explore the Active side of this. I am not so excited about the Active side. But others are. And it could be that those exploring Active ideas will come up with good stuff. A discussion board would provide a place to capture and examine good ideas.
Anyway, those are my thoughts. I am grateful for your willingness to give them a listen.
Take care.
Rob
Anonymous says
Did Ken pass upon this opportunity to make millions of dollars or are we about to see a new business launch on the horizon?
Rob says
I no longer host my site there.. So I do not have access to the discussion board where these discussions were held and cannot say if there have been further developments re the business idea that have been publicly discussed there.
Ken has not written me personally. That much I can say.
Rob
Anonymous says
I guess Ken missed out on the millions.
Rob says
We’re all missing out, Anonymous. Every last one of us.
You are being sarcastic. You are suggesting that no one has ever missed out on anything before. The reality is that it happens all the time.
Had Steve Jobs not dropped out of college to pursue his vision, do you think that we all would have missed out on stuff? I do.
Had Martin Luther King not put his life on the line to pursue his vision, do you think that we all would have missed out on stuff? I do.
Had the Beatles quit the music business when the work product of their first recording session was rejected, do you think that we all would have missed out on stuff? I do.
The last 35 years of peer-reviewed research is the most important 35 years of peer-reviewed research in the history of investing analysis. We are all missing out big time by not permitting ourselves to learn about it. Allowing human knowledge of how the stock market works to advance is a win/win/win/win/win.
It is the proverbial free lunch. There aren’t that many of them around. But they do exist. Learning experiences are a true free lunch. No one loses from learning experiences. Everyone wins. Shiller’s “revolutionary” (his word) findings promised to bring on a HUGE learning experience. So we are all missing out on a lot.
That’s my sincere take re these terribly important matters in any event.
I naturally wish you the best of luck in all your future life endeavors.
Rob
Anonymous says
If I hadn’t followed my buy, hold and rebalance strategy, I would be broke, instead of having my $3 million investment account.
Rob says
If you had confidence in your Buy-and-Hold strategy, it would not upset you to see people discussing the implications of the last 35 years of peer-reviewed research in this field.
You cross a line when you deny others the opportunity to decide for themselves what they think is best. Those others have every right in the world to hold you accountable when they suffer losses as a result.
You stand to be on the hook for a lot more than $3 million, Anonymous. You are in way your head here.
Rob
Anonymous says
People are free to decide. I made my decision. You and everyone else can decide for themselves.
Rob says
That’s what we all are going to do, Anonymous.
We have already put laws in place making your behavior a crime, insuring that those who engage in such behavior over an extended period of time are put in prison cells, where they belong
When the consequences of the behavior become clear to us all following the next crash, we will enforce the laws that are already on the books. Then we will all be feee to, as you say, decide for ourselves.
Then it’s over. From the moment that your prison sentence is announced, it’s good stuff piled on top of good stuff piled on top of good stuff. The rational human mind is not even capable of imagining how anything negative could happen from our decision to open every investing discussion board and blog on the internet to honest posting re the last 35 years of peer-reviewed research in this field. Buy-and-Hold will be replaced by Valuation-Informed Indexing as word spreads and spreads and spreads.
And that’s of course a very good thing for every single person involved, including my good friend Jack Bogle and all my Buy-and-Hold friends. Neither Bogle nor any of my other Buy-and-Hold friends ever intended to cause an economic crisis with their smelly Buy-and-Hold garbage. Their intent was to help people. For a time there was a good bit of evidence that that was indeed what they had done and to an extraordinary degree.
Then, when Shiller showed in 1981 that that was in fact not the case, that in fact they had made an important error in their crafting of the first-draft version of their research-based model, they suffered the common human impediment of cognitive dissonance, which made it hard for Bogle to walk up to the front of a stage and say the words “I” and “Was” and “Wrong” as he of course understood on one level of consciousness he very much needed to do. He put off that important piece of business, thinking that he would figure out what this “revolutionary” (Shiller’s word but Bogle of course knew too much about the research done in this field not to appreciate that Shiller was clearly right to use that word) research he has heard about really signified.
There’s a song by Creedance Clearwater Revivial pointing out that “Someday Never Comes.” That’s the great truth that worked its effect on Bogle as he tried to “find time” to make his grand apology. He of course continued promoting the purest and most dangerous Get Rich Quick scheme in the history of Planet Earth while he was thinking over how to respond to Shiller’s intellectual challenge. The relentless promotion of the pure GRQ approach worked its “magic” of creating more cotton-candy nothingness that investors have ever before in the history of Planet Earth “enjoyed.”
By the time we reached the top of the Buy-and-Hold Bubble, there was $12 trillion of the nasty stuff floating around, making it impossible for even the smartest and most responsible person to have any idea whatsoever how much money he really had in his stock portfolio or to make any reasonable calculations whatsoever relating to where he stood re his efforts to meet his retirement goals or indeed to make any effective financial planning decisions (all decision-making in this field requires knowledge of the accurate numbers that apply).
The more that retirement accounts got pumped up by the Get Rich Quick/Buy-and-Hold Lies, the more the popularity of the “experts” pushing these lies increased. Bogle had found it too embarrassing in 1981 to come clean about the big but entirely understandable mistake that was lurking at the core of the Buy-and-Hold Model and that the future Nobel Prize Winner Robert Shiller had uncovered in his peer-reviewed research. Now it was 10 times worse! Now the lives of millions were riding on the accuracy of those obviously gravely flawed but also obviously HIGHLY profitable Buy-and-Hold calculations.
Was the safe withdrawal rate really always 4 percent. Everyone who had been in the field for more than six months knew that that was flat-out impossible according to every sliver of peer-reviewed research ever published in the field. Shiller was the first to test whether price discipline (long-term timing) is always required and he amazing discovery that in fact the same rule that applies in ever market ever known to man (price discipline is BY FAR the most important factor in any buying decision) OF COURSE also applied in the stock market (the OPPOSITE of the insanely irresponsible [we now know!) Buy-and-Hold claim that there might be some magical, mystical alternate solar system somewhere where it is okay to fail to exercise price discipline when buying stocks). What to do? What to do?
The decision was made to punt. We just wouldn’t talk about it. There would be an industry-wide Social Taboo re exploring the implication of Shiller’s amazing finding. People would praise Shiller, he was entitled to that much. But no one would explore the implications of his huge advance, no one would tell investors what to do with their money, the very thing that investors turn to “experts” to learn. Or, if there were a few who felt that they could make money pushing a non-GRQ approach, they could do so quietly, being careful not to say that Buy-and-Hold is in fact dangerous as all get-out. That way, the Buy-and-Holders could at least continue to turn a buck and everyone would be happy.
So long as there wasn’t an economic crisis.
It wasn’t absolutely certain that relentless promotion of this GRQ garbage would cause an economic crisis, was it?
Well, actually, it was. The promotion of Buy-and-Hold strategies ALWAYS causes an economic crisis. There is not one exception in the historical record. It is not even possible for the human mind to imagine how there ever could be one. It is price discipline that makes markets work. Take away price discipline (which the Buy-and-Holders INSIST must be done — it is the Get Rich Quick element of the “strategy” that makes it so popular and that by pure coincidence makes the Wall Street Con Men who push it so wealthy) from a market and the market collapses. As my good friend Jack Bogle might put it, that’s an “Iron Law.”
So it became clear to all (on one level of consciousness) that remaining on the course on which we found ourselves would put us in an economic crisis, perhaps the worst one we have seen in our nation’s history (the preposterous claim that there was peer-reviewed research supporting the pure GRQ approach had caused prices to rise to levels far in excess of the price levels that caused the Great Depression). What to do?
More cognitive dissonance comes to the rescue!
There doesn’t have to be an economic crisis. Not if we all close our eyes and click our heels three times and say aloud “there really is research somewhere supporting the pure Get Rich Quick approach, there really is!” Yeah, sure there is. Keep telling yourself that, honey, and maybe someday it will all come true for you.
It never came true, no matter how much we all clicked out heels. But we did scare those darn honest posters away! Buy-and-Hold never works and anyone with a sliver of a brain can easily see why but you don’t see anyone working in the investing field foolish enough to say so out loud and in public and in easily understandable language.
Until —
Al Gore invents that darn internet!
Wha?
What did he have to go and do that for?
Now the gravy train comes to an end! Now we all get sued! Now we all go to prison! Bad Al Gore! Bad internet! Bad common sense!
It’s time for an invention every bit as powerful as the internet thing except in the opposite direction. The internet is the greatest tool for spreading human knowledge ever known? Well, we’ll fix that. We bring you — the Internet Goon Squad! Led by Mel Linduaer and John Greaney, they will employ the most vile and smelly tactics to CONTAIN and even REDUCE human knowledge, bringing about results sufficiently negative as to make everyone concerned wish that they had never head the word “internet’ much less the term “peer-reviewed research.” You thought that Shiller’s Nobel-Prize-Winning research would save the day? Think again, buster! The LIndauerheads and the Greaney Goons (that means you, Anonymous!) would give it back again!
And here we are.
I am on the side of the people of the United States, Anonymous. You do your thing. I will do the United States thing. You are oh so powerful with your death threats and your demands for unjustified board bannings and your tens of thousands of acts of defamation and your threats to get academic researchers fired from their jobs. The people of the United States have powers of their own. We have courtrooms. We have prison cells. We have policemen and policewoman who carry guns in their holsters when they arrive at the houses of Goons like yourself and take them away where they can do no further harm to those of us trying to learn what we need to learn to finance our old-age retirements according to what the last 35 years of peer-reviewed research really says about the subject.
Somehow I like my odds of prevailing over you Goons on the last page of this exciting little drama.
But we’ll see, you know. Those patient enough to let time tell its tale will see it all revealed before their eyes with the passage of not too much more sand through the hourglass.
I’ll be rooting for you in a way. I of course am never going to root against the people of the United States, those friends of mine who widely made financial fraud a felony long before I arrived on the scene. But I do care about you too. So, to the extent that I am able in good conscience, I am going to make the case that you did not do this on your own, that the corruption was in place long before you came on the scene and did your dirty work and that your dirty work never would have had the awful effect that it has had had the entire field of investing advice not become corrupted as a result of the mistake that was made in the first-draft version and that remained uncorrected because of the pervasive influence of cognitive dissonance on the thinking powers of all of us poor humans.
I think that those efforts of mine might get your prison sentence reduced a bit. I am not sure. But I think it’s possible. I certainly think it’s worth giving it my best shot. So that much I will do. Because, believe it or not, I think of you as one of the poor deluded humans (like myself! — people forget that I was once a proud Buy-and-Hold myself!) who got caught up in something a lot bigger than he bargained for when the enormity of his pride cancelled out the effect of his large enough but not quite so enormous brain.
I’ll give it my best shot, man. No promises. But I will be in there pitching for you.
And that’s our story!
Forward! Courage!
Everyone gets to decide for themselves! Even the Goons now agree! That makes it unanimous!
Just as the published rules of the Motley Fool site guaranty!
What a wonderful, wonderful, wonderful world…
…This could be.
Take good care, my old friend.
Rob