Set forth below is the text of a comment that I recently posted to the discussion thread for one of my columns at the Value Walk site:
Don’t run away Rob.
Think about it. For your story to tie together, the mass conspiracy against you would have had to have been in place before you stopped working. That is where your story falls apart.
There’s no mass conspiracy against me in particular, Sammy.
Until 1981, we humans did not have all the pieces in place to know how stock investing worked. In 1981, the last piece of the intellectual puzzle snapped into place. Now we had available to us everything we needed to for the first time in history offer effective investing advice, investing advice that would help us avoid bull markets and the bear markets that follow from them and the economic crises that follow from bear markets.
Had there been no model for understanding how stock investing works in place at that time, we all would have signed up as Valuation-Informed Indexers in 1981 and lived happily ever after. But there was a model already in place, one developed at a time when index funds were not available and when it was thus not possible to test whether long-term timing (price discipline) works and is required. So the old model got it all wrong. It was a numbers-based model and it did not include the numbers needed to reflect the effect of valuations, so it got every number wrong and therefore offered a bad take on every possible strategic question. It got asset allocation wrong. It got retirement planning wrong. It got risk management wrong. It got the cause of daily price changes wrong. it got the cause of economic crises wrong. And on and on.
There were many thousands of good and smart people who worked in the field and who had built careers promoting the now discredited model. They experienced cognitive dissonance when they learned about the last piece of the puzzle. They ignored this “revolutionary” (Shiller’s word) development. They rationalized their behavior. They told themselves that stock prices were so low (the P/E10 value was at 8 at the time) that it was not possible to imagine it ever again moving to greater than fair-value levels (15). So what possible harm could be done by pretending that valuations don’t matter, that Shiller’s research does not exist?
The idea that it is not necessary to exercise price discipline was heavily promoted. All humans possess a Get Rich Quick urge and so we all loved being told that we could vote ourselves raises just by pushing stock prices up to insanely dangerous levels. And we had experts telling us that it was okay to defy what our common sense told us must be so, that there was no penalty ever to be paid for pushing prices up so high, that there was no price level at which it was a bad idea to push stock prices even higher. We bought and bought and bought, we bought so much that we pushed prices up far beyond even the levels that caused the Great Depression. We were all very happy and very deep in cognitive dissonance.
Did any one us want to cause a Second Great Depression? Not one of us did. We started out in ignorance, as we do re every subject to which the humans ever address themselves. The difference in this case is that we couldn’t fix our mistake when it was discovered on that most fortunate day in 1981. We couldn’t fix it because it is so critically important to get things right in the stock investing field. If the mistake had been made in some other field, we would have followed the usual procedure, fixed the mistake and moved on. But this mistake was clearly going to destroy the lives of millions of good people. So we covered it up. We adopted a Social Stigma against talking about the implications of Shiller’s revolutionary findings. We awarded the man a Nobel prize because we knew he had earned one. But we never, ever told the millions of people who needed and wanted to know how stock investing works what now was common knowledge to those who follow the peer-reviewed research — the need to always, always, always practice price discipline when buying stocks.
And here we are. We all want the same thing. We all want to invest effectively. We all want to bring this economic crisis to an end. We all want to reduce the political frictions that have developed on both the left and the right as a result of the huge amount of human misery that has been suffered in the early years of the Buy-and-Hold Crisis. And we all act as if we are paralyzed, as if we cannot imagine doing the most natural thing in the world, helping to get the word out about the hundreds of amazing insights that have been developed over the past 36 years as the result of our good fortune to finally snap that last piece of the investing puzzle into place back in 1981.
Because we cannot bear at this stage of the game to acknowledge a mistake that we learned about 36 years ago and ignored, hoping that somehow, someway it would go way by itself and we would never have to face up to the consequences of our cover-up. Is that a conspiracy? If it is, it’s not a conspiracy against me in particular. It is a conspiracy against the entire human race. John Bogle started out wanting to help people with his investing work. He comes off as one of the great heroes of human history when we all come clean re this one. So this is a conspiracy against Jack Bogle as much as it is a conspiracy against Rob Bennett.
Jack Bogle is one of m favorite humans. So I don’t like the idea of participating in a conspiracy against the man. So I am not going to do it. I am going to try to help the man out by EXPOSING the conspiracy, to bringing it to a full and complete stop so that we can all start talking sense about this most important subject,
And you know what else? I am 100 percent confident that Jack will be working alongside me following the next price crash. Because Jack cares about the humans as much as I do and because he is going to want to do what he can to relieve the misery that will be obvious to all in the days following the next price crash.
This is a conspiracy of the humans against the humans. it is a conspiracy of ignorance. Overcoming ignorance is one of the true free lunches out there. There is no end to the good that can be done when ignorance re an important matter is overcome. Giving ourselves permission to speak sensibly about stock investing for the first time in history will be one of the greatest advances in human history that most of us have ever seen. It will be like the harnessing of electricity or finding of a cure for smallpox or the introduction of the Beatles on the Ed Sullivan show. None of us are ever going to forget the day when we pulled together to bring this conspiracy against ourselves to an end, when we elected to stop slamming our heads against walls and start developing the ideas that the peer-reviewed research in this field put before our collective eyes over three decades ago.
It is my job to bring this conspiracy to an end, Sammy. I am going to give it my best shot. I can do no more and I can do no less. I do it for me. I also do it for you. I also do it for Robert Shiller. I also do it for Jack Bogle. I also do it for all the people who lost their jobs in 2008 and who would like to become productive members of the human race again. I also do it for all the people who have become concerned about the level of vitriol that we have seen in political discussions held in our nation in recent years. And I do it for all the university professors who want to make their courses better. And I do it for all the academic researchers who want to do exciting research. And I do it for all the investing analysts who want to show their clients how to invest in stocks without taking on nearly the amount of risk that it was once thought stock investors need to take on. And I do it for all the people planning early retirements who want to get the numbers right.
Humans did not know all there is to know about stock investing in the days before I left my corporate employment. You are right re that one. But, if someone had come along before me and insisted on his or her right to post honestly re these matters at every discussion board and blog on the internet, I would have been spared your fifteen years of harassment. That would have been a good thing, no? I don’t want to see the next guy or gal exposed to 15 years of harassment and I don’t want to see the next Goon placed in circumstances in which he feels compelled to dish out 15 years of harassment. I want to bring the Conspiracy of Ignorance that has hurt us all so terribly for such a long time now to a full and complete stop by the close of business today.
It would do my heart good if you could wish me the best of luck with the project, my long-time good friend.
I wish you all the best that this life has to offer a person in any event.