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:
As for another example of how Rob lies, here is an article that discusses Rob’s post from May 2002.
First, Wade does a great job pointing out Rob’s mistake. Secondly, if you read the thread that is linked in Wade’s post (the actual thread from 2002), you will see how Rob is given an education and then admits he was wrong at the very end of the thread. Rob has been embarrassed by this since 2002, so he tries to cover it up with his stories about John Greaney. Further, you will see that his thread is not really “famous”, as Rob puts it. Instead, it was the beginning of Rob’s humiliation.
I did apologize at the end of the thread. I think we all could learn a lot about why our deeper understanding of how stock investing works has been delayed for so many years by thinking through what caused me to apologize.
I loved the Retire Early community; I had made lots of friends there and enjoyed talking things over with the people who congregated there and learning about both saving and investing by trading ideas. My post of the morning of May 13, 2002 (it is VERY famous in the Retire Early and Indexing communities — I had many people come up to me at Financial Blogger Conferences and say “Oh, so YOU are that guy!”) pointed out that the Buy-and-Hold retirement studies lack an adjustment for the valuation level that applies on the day the retirement begins and thus get the numbers wildly wrong. Shiller showed in 1981 that valuations affect long-term returns, so it is obviously not possible that any study not showing the effect of valuations could get the numbers even close to right at times of insanely high valuations.
The reaction to the post was mixed. There were a large number of community members who loved, loved, loved it. Dozen of people were calling the discussion that followed the best discussion that was ever held at that board community. I of course was gratified by that reaction and didn’t want to let those people down. But there was another, larger group that desperately wanted to stop the discussion and made clear that it would engage in any form of abusiveness needed to crush any community member who offered constructive comments. I did not understand the issues nearly as well then as I do now. But I was strongly committed to sticking with the discussion and encouraging others to do so with the aim of helping us all to enjoy a solid learning experience.
On the night that I made that apology, there was a fellow (I believe that it was “Prometheus”) who made a point that I believed at the time I might have been wrong about. I was not sure and I believe today that I was not wrong. But I felt that the friction might cause lasting damage to the board community and that was the last thing in the world that I wanted to see. So I felt that, if there was even a chance that I was wrong, I should apologize. I also felt that I should not offer a niggling apology. If I was going to apologize, I wanted to say clearly that I was just wrong and not limit the apology by saying that I was wrong only about a few aspects of the question. So I wrote it that way.
Following the apology, the Goons became even MORE abusive. I then realized that they were not willing to try to work things out in any reasonable way, they intended to use intimidation tactics to silence any community members who offered thoughts not in accord with their own. So I re-entered the debate. The rest of course is history.
I did not think that I was 100 percent wrong at the time I made the apology. I said that I did think that. But I do not think that I was being dishonest. I stated things in the best way that I could given the circumstances that applied. My reasoning mind told me one thing (that it is not possible to calculate the safe withdrawal rate without considering valuations if valuations affect the result) and my emotional mind told me something different (that people whom I respect and like believe that a valuations adjustment is not required). For a day or so, my emotional/social brain had the upper hand and I disassociated myself from what my reasoning brain told me was true. Then I returned to making my rational brain the primary one.
This is what we are all going through. Jack Bogle is as smart as smart can be. And I believe that he is a good man — the last thing in the world that he would want to do is to cause millions of failed retirements. But Bogle has let his emotional/social brain achieve primacy over his reasoning brain. His reasoning brain of course understands that it is not possible to calculate the safe withdrawal rate accurately without taking valuations into account (Bogle has said that “Reversion to the Mean is an Iron Law of stock investing ” — it was this statement of Bogle’s that convinced me that the numbers in the Buy-and-Hold studies must be wrong).
But Bogle has invested decades of work into developing the Buy-and-Hold strategy and to acknowledge that valuation adjustments are required in all calculations is to acknowledge that the Buy-and-Holders have been getting important questions terribly wrong for many years now. It’s too much for him to accept, just as it was too much for me to accept that my post might cause the Retire Early community to self-destruct. Bogle is suffering from cognitive dissonance. He “knows” that Buy-and-Hold is gravely flawed and yet he also “knows” that that is impossible.
So he rationalizes. He tells himself that things will work out somehow even if the investing community does not explore these issues. That’s like somebody who suspects he has cancer telling himself that there is no need to see a doctor because he probably is just fine. No! If there is even a tiny chance that the Buy-and-Hold retirement studies got the numbers even a tiny bit wrong, we should be discussing that possibility at every discussion board and blog on the internet. If we see millions of failed retirements in days to come because we failed to grant the wishes of the thousands of community members (including some of the biggest-name experts in the field) that a debate be permitted, we will all live through one of the worst social catastrophes in our nation’s history.
I think we need to permit the debate to go forward. That is in everyone’s best interest. There is not one person who will not benefit from such a debate. In the event that the Valuation-Informed Indexers are right, we of course need to learn that and to get the word out to everyone. In the event that the Buy-and-Holders are right, we need to learn that and, in the event that they are right, the result of the debate will be to show that to be the case.
I was wrong to apologize. I am a little embarrassed by it. How could I get something so simple so wrong?
The explanation is that I am one of those darn humans. We humans are influenced by social pressures and the social pressures to believe that Buy-and-Hold is at least largely on the right track are INTENSE. If Buy-and-Hold is wrong in the way that Shiller’s research shows it to be wrong, it was the promotion of Buy-and-Hold strategies that was the primary cause of our economic crisis (Shiller actually predicted the crisis years in advance in his book –How did he do that if he is such a fool?). This is no small matter. This is a big deal.
In our nation, we talk over big-deal matters. That’s how over time we bring them to successful resolutions. In an ideal world, this debate would have started in 1981, when Shiller first published his “revolutionary” (his word) research. That didn’t happen. I am 100 percent certain that Bogle would play if differently if he could travel in a time machine back to 1981. But of course Bogle does not have access to a time machine and none of us can provide him one. The only thing that we can do at this point in the proceedings is to launch the debate TODAY and do the best we can with what we learn as a result of holding it.
These are my sincere thoughts re this terribly important matter in any event.
I naturally wish you the best of luck in all your future life endeavors, Sammy. Please take good care, my old friend.