Yesterday’s blog entry reported on an e-mail that I sent to Academic Researcher Wade Pfau on January 1, 2012. I sent a follow-up e-mail later the same day. The text is set forth below.
Wade:
I’ve now had a chance to look at the paper.
I am certainly glad to see his positive comments re your work. He is advancing the ball by pointing people to a new way of thinking about retirement planning.
I do not think he goes nearly far enough in warning people of the dangers of the Old School SWR studies. My view is that many just do not seem to get it yet that VII and Buy-and-Hold are OPPOSITE models. People are trying to work out the differences between them. Buy-and-Hold and VII are a fork in the road. You take one path or the other. The two choices take you to very different places.
My sense is that people who have gained “expertise” (I put the word in quote marks because there can be no true expertise in this field until our understanding of how stock investing works advances to something less primitive than what it is today) under the old model find it painful to acknowledge that most of what they have learned and taught was discredited by Shiller’s findings.
I wish that people could respond to the things we have learned in more positive ways. It’s not even a little bit true that the time spent learning about the Buy-and-Hold stuff was wasted. There were important insights mined in those days and people who understand them well have a head start in learning about the new model. Also, those who get involved in developing the new model obviously will be miles ahead of those who jump aboard the train years later. Many people see
only threats to their status. I see huge (and I do mean huge) opportunities.
That’s my take, for good or for ill. I greatly appreciate you thinking of me. As I noted in an earlier e-mail, it makes me feel less lonely in my never-ending struggle when someone like you does that. It means a lot to me.
Please take care.
Rob
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