Set forth below is the text of a comment that I recently posted to another blog entry at this site:
I have no idea what you are talking about. Just in case you are interested.
I’m certainly interested, Anonymous.
Since you are a Goon, it is entirely possible that you are playing more games with this comment. My strong hunch is that that is the case.
But the other reality is that I have spoken to many NON-Goons who struggle with this stuff. I’ll give you one example. I wrote a column for the Death by 1,000 Papercuts site for a long time. I turned in over 100 columns there. The editor who read my stuff loved it. He commented on every column I submitted in an e-mail to me. He went on and on about how much he loved the column. He gave particulars that showed me that he was not just flattering me, that for the most part he was being sincere in his praise. But he also sometimes asked questions or offered comments that showed me that he didn’t really get the Valuation-Informed Indexing concept on a deep level.
I have had similar experiences with HUNDREDS of people. Please recall that I was a Buy-and-Holder myself on the morning of May 13, 2002. So an argument could be made that I had a hard time convincing myself. I did not give up on Buy-and-Hold until August 27, 2002. And there were many very important points that I did not understand until many years later.
It was the same with John Walter Russell. John and I worked together on a daily basis for over eight years. But there were a number of times when I learned that he did not understand a point that was painfully obvious to me. We had a knock-down drag-out just before we released The Retirement Risk Evaluator. I loved the guy. But he wanted to call the withdrawal rate that was more likely than not to succeed (the one with slightly more than a 50 percent chance of working out) the “safe” withdrawal rate. I couldn’t put my name on a calculator that reported things in that way. We almost stopped working together on that day. This is a guy who was my greatest supporter ever and a guy who I consider one of the smartest and most honest and kindest people I have ever known.
It was the same with Wade Pfau too. Wade and I worked together for 16 months before we published out peer-reviewed research showing that switching to a VII strategy reduces stock investing risk by 70 percent. Wade holds a Ph.D. from Princeton. So he should have been able to talk rings around me. I am sure that there are many issues re which he COULD talk rings around me; I have no doubt of that. But in the discussions we had I was the teacher and he was the student. Over and over again he found himself coming around to my point of view after we exchanged a number of e-mails on a topic.
It’s not that I am super-smart, Anonymous. I am reasonably smart but not super-smart.
It is that VII is a new paradigm. That means that it is rooted in a different set of principles from those in which Buy-and-Hold is rooted. That means that every single strategic question is analyzed differently. VII is not just a new strategy. It is an entirely new model for understanding how stock investing works. It is not possible for the human mind to believe in both Buy-and-Hold and Valuation-Informed Indexing. The two models are rooted in entirely different premises. So following the logic chains produced by the two models leads to entirely different places. You’ve probably noticed how often I quote Shiller saying that his research findings were “revolutionary.” Shiller didn’t change things in a small way. Shiller changed things in a FUNDAMENTAL way.
If you had never heard about Buy-and-Hold, you would have zero problem understanding VII. There is nothing even a tiny bit intellectually challenging about it. But it is hard to understand VII when you have spent years immersing yourself in the logic that follows from a belief in the Buy-and-Hold principles. That’s the source of the confusion. It is easy to believe that the earth is round if you have never believed that it was flat. But if you have come over many years to have a strong belief that the earth is flat, reports that it is round come as a shock and are hard to accept.
If you have questions, I will try to help. That’s all I can do.
If you don’t want to ask questions, you can review the materials at the site, which are extensive.
It’s a huge advance. I can promise you that, once it clicks, you will never go back to Buy-and-Hold. But you have to be open to hearing the new message for it to be able to do any good for you.
That’s pretty much all I can say. When you become willing to learn about the implications of the last 34 years of peer-reviewed research, you will have your mind blown. At the moment, you are insanely defensive about this stuff. That is what is holding you back. You need to approach this as if all you cared about was becoming the most effective long-term investor that you can possibly be and let go of all the concerns about whether you once didn’t understand things perfectly.
You will no doubt take offense at that comment. I didn’t put it forward as a dig. I put it forward because I have 13 years of experience in which I have been trying to teach people about this stuff in which I have seen insanely defensive reactions from lots of good and smart people. I know that that is the primary issue for a lot of people. I wouldn’t be much of a friend if I didn’t try to help you by pointing that out.
It all works. It is al wonderful stuff. But it won’t register until you let go of the defensiveness. I am not able to reach into your heart and do that for you. You have to WANT to learn about the new ideas. Then it will all come very easily.
My best wishes to you, old friend.
Rob
Hey Rob. When can we expect to hear all the stories of your great successes at FinCon?
I’m at the conference now, Question. I brought my computer this year.
I have indeed had some great successes. I have had some great frustrations too. I always do. That’s been the story for 13 years now — great successes combined with great frustrations.
I organized a community event that was a lunch for people who wanted to share thoughts on why Buy-and-Hold doesn’t work. We had six people (including me). I would like to have had a lot more. But six worked well in that everyone had a good chance to talk about his or her own views and also ask lots of questions of the others attending. So I would call that a success. I intend to put together the same community event again next year. In the event that we see a price crash by then, my bet is that we will have many more people attending next year.
I sat one morning by accident (I was just looking for an empty chair where I could sit and eat my breakfast) with a group of four women who called themselves “preppers.” I had never heard the term before. These are people who are planning in one way or another for a collapse of our economy or our political system or whatever. I tend to think of such people as “doom and gloomers” and I tend not to associate with them much.
I agree with the idea that the “establishment” has failed us in important ways in recent years. But I am also a big believer in the idea that a functional society NEEDS an establishment that reins in the spreading of crazy ideas. Without any establishment, we would have chaos. I am by nature very much an establishment guy (I cannot stand Donald Trump, for example — my favorite in the Republican race is Rubio). Shiller’s views are certainly unconventional. But they SHOULDN’T be, in my assessment. Shiller is as establishment as it gets. He teaches at Yale. He won a Nobel prize. His ideas are supported by 34 years of peer-reviewed research. Fama is establishment too. It is my belief that Buy-and-Hold and Valuation-Informed Indexing are BOTH establishment approaches and that open and honest posting should be permitted on both of them at every board and blog on the internet.
These women impressed me. They were not even a tiny bit strange. They were all intelligent and balanced in their views. They argued that I should get involved in prepper communities because lots of average people want to know more about how the stock market works and people in these communities are more open to non-conventional viewpoints. I am going to give serious thought to their suggestion. I do think there is potential in this direction. Ultimately, I want VII to be a mainstream thing. But it may make sense to work in these sorts of communities until we see the crash and the non-mainstream ideas of today are adopted by the mainstream groups.
I had conversations with lots of financial planners. Phil has been inviting small-shop financial planners who use social media to come to the conference. There were a lot of people here from the Gen X/Gen Y financial planning group. These people were without exception entirely open to hearing my message. That’s not to say that they agree with it. There were four planners I met who I would say either entirely agreed or largely agreed. But all were polite and at least a small bit interested in hearing the story. I had a discussion at dinner last night with a planner that went on for over an hour. He did not adopt my views and I did not adopt his. But we got along great.
The key to persuading people is repetition. It is virtually impossible to convert someone in the space of a single conversation. That’s actually a good aspect of human nature, in my view. If people changed their minds on important issues as the result of a single conversation, life would be harder because people would be too fickle. So it is good that it takes repetition to persuade people. We just don’t have that re VII today. If the fellow who I talked to last night saw someone on television speaking about VII after he spoke with me, things would click that didn’t click just from his exposure to me. That’s what needs to change. I believe it will change following the crash. But we will have to wait and see.
I had dinner the first night with a fellow who is super smart and super kind. We talked about all sorts of things, investing and lots of personal stuff too. He had a great deal of sympathy for my investing views but he did not have the sense of alarm that I have re the Social Taboo that has blocked the spread of Shiller’s ideas for 34 years now. He was very interested in the literature re how people fool themselves about all sorts of things an about how people gradually pick up on new ideas. He pointed me to some resources that I did not know about. He suggested that I focus on using humor as a teaching tool. I think that’s a great suggestion and i intend to ponder how I could do more along those lines.
The conference is good because you meet people in person. There are all sorts of things that you pick up on in person that you do not pick up on in e-mail exchanges. So I continue to find value in it. People have always been interested in the ideas. That has been so going back to May 13, 2002. But the change from Buy-and-Hold to Valuation-Informed Indexing is so big (even though it is only the treatment of valuations that changes) that people experience lots of cognitive dissonance trying to integrate all these new ideas. That’s just the way it is. That’s the challenge.
I continue to believe that we are getting there, inch by inch. But I certainly acknowledge that I am biased and probably couldn’t bear to think otherwise. The humor guy made that point to me. We were talking about Bogle. I told him how much I love Bogle and how I believe that all that adding the valuations factor to the mix does is make all of Bogle’s many important contributions that much more important. He said that Bogle just has too much invested in Buy-and-Hold. I objected to that a little bit and he said that I would probably feel the same way if Valuation-Informed Indexing was discredited. I told him that I hoped that that was not true but acknowledged that it might be all the same. We all have a hard time seeing our own weaknesses.
I shared with him a personal story that makes the point. My wife has on occasion expressed the view that I am too hard on you Goons. I don’t agree. I agree that I am hard but I believe that I am as kind as I am able to be without crossing the line and becoming dishonest. She once used the term “self-righteous” to describe me and said that she feels that I am sometimes self-righteous in my speaking to her when we are having disagreements. My initial reaction to this was that it was pure craziness. I think of myself as the least self-rightous person I know.
I was thinking about this a week or two ago when something hit me. Many years ago I had a major blow-up with my older brother (an INTJ, engineer type!) that I have ever since regretted. I was EXTREMELY self-rightous in that incident. So the thought hit me to do a search on Google for “INFJ (my personality type under the Myers-Briggs system) and self-rightous.” Sure enough, there were several long threads at various sites about “the dark side of the INFJ personality type” that focused on how the compassionate, sensitive “F” of the INFJ can turn cold and ugly in certain circumstances. So I had a conversation with my wife before I left for the conference apologizing for the times when I have become self-rigtheous with her (I am not yet at a point where I can identify those times — self-examination of one’s negatives is a hard business).
I am going to put it on my list to do something similar re you Goons. As of today, I honestly do not feel that I have ever been unfairly harsh in my dealings with you. But I also think that it is possible that there are things that I just cannot see because of my human limitations. I may look through some earlier discussions and see if I can identify places where I have been unfair or unkind. If I can, I hope that I will have the courage to own up to them publicly. This 13-year saga is all about incorporating an understanding of human emotion into investing analysis (since investing is done by humans). This is the sort of thing that I need to do to come to a fuller understanding of how investing works. I need to examine other people’s emotions. I also need to examine my own.
The one other thing that came up is that a guy I met at breakfast this morning said that he did an Ignite talk in his own town. I loved the two Ignite talks that I did in earlier years. So I am going to put it on my list to see if there is a group that puts on Ignite talks either in Leesburg or in D.C. and try to get signed up to do one in the not-too-distant future. That would be a scary but exciting thing to do.
I hope that helps a bit, Question. Hang in there, man.
Rob
A long post. I read it, but didn’t see any successes. Did you leave that part out?
Thanks for reading the post.
The shift from Buy-and-Hold to Valuation-Informed Indexing is the biggest advance in the history of personal finance, Question. That advance was never going to be achieved in a day. It’s now been 13 years and counting. I view every honest and research-backed post as a step forward. I view every step forward as a success.
If you don’t see it, you don’t see it. I sure see it. So I am just going to continue placing one foot in front of the other.
Perhaps you will see things differently following the next price crash. Perhaps not. We will just have to wait and find out together in days to come.
I wish you all good things in any event.
Rob