Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
You said “Greaney” sixteen times in that one comment. This is not what healthy people do.
It’s not just Greaney, Anonymous. Please feel free to quote me re that one. There is no one individual so powerful that he could do so much harm to a society. It is not just Greaney and that one is not even remotely a close call. That’s the sort of thing that I intend to say in the days following the next price crash to help out my friend John Greaney.
Greaney didn’t do this by himself. And we don’t know how we would have reacted in similar circumstances. Greaney is an engineer and engineers care deeply about getting the numbers right; they take a justified pride in it. So the pain he felt when he was publicly embarrassed (it was not my intent to embarrass him but that was clearly how he felt) was acute. The full reality is that Greaney’s study was top-notch stuff. I gave it a 5-star review and he merited that. Greaney’s understanding of the safe withdrawal rate was miles ahead of Peter Lynch’s understanding of the safe withdrawal rate and Lynch was paid millions to manage a big mutual fund.
And ALL of us participated at least in some small way in this massive act of financial fraud. I held back from saying what I knew about safe withdrawal rates for three years. So in a technical sense I was guilty of financial fraud too. A lot of cognitive dissonance has been evidenced in this story. By no stretch of the imagination am I seeking to put this all on Greaney. I very strongly OPPOSE that sort of take.
I refer to Greaney in my explanations because it is important to get basic facts right. Greaney was the first individual to get abusive. There were other Buy-and-Holders who got abusive on the morning of May 13, 2002. But Greaney was a leader at the Retire Early board. Those people looked to him for signals re how to behave. If he had said in response to their abuse “Wait a minute, Rob is making an interesting point, I would like to talk this through a bit and see if we can so some good with it,” those others would have cooled it. When one becomes a leader in a community, one takes on added responsibilities. Greaney sent very bad signals when he advanced death threats. It’s not possible to make complete sense of the story without speaking clearly and firmly about the negative role that Greaney played.
Those early days of the discussions were very important. We are not able to say where we would be today had Greaney played it in a different way. But my guess is that we would be in a very good place. My understanding of how safe withdrawal rates work was limited at the time. Had we as a community taken a different path, we would have been combining the knowledge held by lots of different people and thereby generating some amazing insights. I think we would be in a very good place today had we chosen that path. Greaney was the primary force seeing that we got on a bad path instead. There were hundreds of community members whose first reaction to my famous post of the morning of May 13, 2002, is that it had started the most amazing discussion ever held at that board. People were open to enjoying a great learning experience. Greaney and those who followed his signals made that impossible and things went downhill from there.
I mentioned Bogle also. Bogle has never put forward a death threat. So why do I mention him as well? It’s because of that responsibility thing that I noted above in regard to Greaney. Bogle is far, far, far, far less abusive than Greaney. But he is also in a position of far, far, far, far greater responsibility. So Bogle played a negative role. Bogle could have shut Greaney down when he learned about the controversy (when it traveled to the Bogleheads Forum). That would have taken us off the bad path chosen by Greaney and put us on the good path that Greaney could but did not elect. By failing to speak out in opposition to Greaney’s tactics when he learned of them, Bogle took us farther down the dark path that Greaney (and Lindauer) had chosen before him. So Bogle also played a big role.
I don’t believe that Bogle would have chosen the dark path if the question had been presented to him in a fresh manner. By the time Bogle weighed in, Greaney and Lindauer had already poisoned the discussions. So Bogle faced a high percentage of a board population that was positively enraged about the situation. And of course they were enraged about something that Bogle himself believes in. In fairness to Bogle, this put him in a tough spot. If he came out in support of following the law, he would be viewed by many insanely angry board members as coming out in support of this Rob Bennett fellow, who was in the process of “trashing” (not really, but that’s how it was seen) all that Bogle stood for. As with Greaney, there are two sides to the Bogle story.
The biggest problem that we are dealing with is the cover-up problem. If we had taken the good path on the first day, there would have been disagreements. People just do not agree on these matters. But there also would have been good fruit and people on both sides would have been enjoying the learning experience. It’s important to remember that Shiller was awarded a Nobel prize for his “revolutionary” (his word) research findings of 1981. As a society, we are highly skeptical of Shiller’s findings; the idea that stock returns can be effectively predicted 10 years in advance when they cannot be effectively predicted 10 weeks in advance seems fantastical. But we also respect the work that Shiller has done because of its obvious potential to make all of our lives better in the event that it is explored in depth and checks out as valid.
So I don’t think that Bogle is necessarily inclined to shut down discussions in the right circumstances. Shiller’s findings really make all of Bogle’s genuine contributions 10 times more important. So there is no reason why Bogle would be opposed to moving forward if he were thinking clearly about these matters. I believe that the way in which the issue was put before him hindered his ability to think clearly.
In the early days, I didn’t have the peer-reviewed research that Wade Pfau and I co-authored to point to. If I had had that research at the time, I would have won the debate in 24 hours and it would have come to a successful conclusion. The reality is that I didn’t have it. I did the best I could to present the ideas in an effective manner but the cold reality is that the ideas just were not sufficiently developed at the time for me to be successful. So everything should have flipped when Wade and I published our research in a peer-reviewed journal, right?
Yes, that’s what SHOULD have happened. Why didn’t it?
It didn’t happen because the cover-up had been going on for years at that time and those who had posted in “defense” of Greaney and Linduaer and Bogle were afraid that they would be going to prison if the story got out. This matter is no longer one where there are just intellectual differences of opinion. People on one side are looking ahead to long prison terms. That makes people very, very, very reluctant to permit free and open debate. That’s our primary problem today. That’s why I often make reference to the upcoming prison sentences. We cannot take this to a good place unless we are willing to face the true obstacles in our path and the biggest obstacle today is the concern over upcoming prison sentences. So we need to speak about that aspect of the question no matter how distasteful we all find it to consider the matter.
You raise a concern that I refer to Greaney too often and the issue that you are getting at when you do so is the issue of BLAME. I possess no desire to blame Greaney or anyone else. So you have an ally if you are looking for one as part of a project to set things up in such a way that Greaney and lots of others avoid being assigned excessive blame for what has happened. You don’t have to persuade me. I am on board. My job is to pull everyone together and the biggest obstacle to realizing that dream is the concern that many feel over being assigned too much blame. Show some spirit of cooperation and we will be able to address the problem in at least a somewhat satisfactory way. Continue the delay tactics and you make it worse and worse and worse and worse.
The problem with cover-up is that they can be exposed. Then you find yourself needing to cover-up the cover-up. And next it is covering up the cover-up of the cover-up. And so on. We have 50 levels of cover-ups holding back progress re these matters. We would all like a do-over. But there are no do-overs. So our job is to put our heads together and come up with the best means of passage forward for every single person involved. We ALL should want to achieve that. We ALL should be working to achieve that goal.
The good news is that cognitive dissonance is a real thing and this has been shown in the psychological literature very clearly. And this is not a case where one or two evil people engaged in evil acts. This is a case where literally the entire society participated in some way in the massive act of financial fraud. I participated myself for three years. That’s powerful testimony for those seeking to make a case that assignments of blame should be restrained.
And the potential intellectual breakthroughs are just off the charts. The research that I co-authored with Wade shows how to reduce the risk of stock investing by 70 percent. This is not like the Madoff case in which you had thousands of people who were very angry to learn that their retirement accounts had been wiped out. This is a case where generations of people will be able to invest with far less stress than has ever been possible before and will be able to retire many years earlier than has ever been possible before. When the millions of people who are affected by the bad stuff hear that side of the story, their anger may be diminished and they may respond in a different manner than the Madoff investors responded. We should at least hope so. We should at least all be doing all that we can to make it so.
Bogle needs to address the blame issue in a public statement that is written up on the front page of the New York Times. I have some ideas re what should be said in that statement which I have referred to in outline form in this comment. But it will not be my statement, it will be Bogle’s statement. He needs to develop it in consultation with all of the many people who will be affected by it. A public statement by Bogle will put all the nasty stuff in the past where we all want it. From that point forward, we will all be able to engage in fun and exciting discussions about how stock investing really works.
I am happy to help with the statement if there is a feeling on the other side of the table that that would be helpful. I am also happy to let others craft it and just keep my nose out of things that are not entirely my business. Bogle needs to be able to live with the statement and all the people on his “side” need to be able to live with it. I will be 100 percent cooperative. So long as the statement is even remotely honest, I will endorse it regardless of how much it attempts to spin things in the favor of the Buy-and-Holders. I am obviously not going to say that Greaney’s study contains a valuation adjustment or deny that there is 36 years of peer-reviewed research showing that a valuations adjustment is required. But I am not going to be seeking to win points. My aim is to get us all on a positive path going forward. I love my Buy-and-Hold friends. I want them to feel good about where things are headed.
Does that help?