Buy-and-Hold Goon to Rob: “What Circumstance Would Finally Lead You to Conclude That You in Fact Are Wrong?”

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:

Then under what circumstance would finally lead you to conclude that you, in fact, are wrong? If (as I suspect) you can’t answer that, then saying “it’s possible that I am wrong” is nothing but false humility.

I would need to see peer-reviewed research supporting the idea that there is no need for investors to practice price discipline when buying stocks. That is, research showing that staying at the same stock allocation at all times can work in the long term.

It never has. Not once in 145 years. I find it impossible to believe that that’s a coincidence. In a theoretical sense, anything is possible. It might be that the moon really is made of green cheese. But that seems so remote a possibility that I cannot imagine putting my name to a statement saying that that is so. I would need to see some sort of scientific evidence to believe that the moon is truly made of green cheese. There’s a lot of intellectual resistance to overcome there. That’s how I feel about Buy-and-Hold. I find the idea that price discipline is not required to be preposterous, insanely far-fetched. But if I saw scientific evidence, that could bring me around.

When I say that I could be wrong, it’s not false humility, it’s a position that I have come to as the result of life experience. There was a thing that happened a number of months back with my boy Timothy. We were playing a card game (Dominion) and a question re the application of an obscure rule came up. Neither of us wanted to stop in the middle of the game to check the rulebook but we both were sure of our positions. He agreed to go with what I believed and then we checked the rulebook after the game. It turned out that his understanding of the rule was the proper one. I was amazed. I had been sure that I was right. But I wasn’t. That left an impression on me.

That sort of thing of course happens all the time with all of us. Humans are vulnerable creatures. We are inclined to have too much confidence in our beliefs because it is scary to not be sure about things that are more important to us than the rules for card games. How many people get divorced? They build their entire lives around their love for this one particular person. They bring children into the world with that person. They move to a different part of the country to make that person happy. They take on financial obligations that they would never dream of taking on but for their love of that person. And then they wake up one day to conclude that the person was not the person they thought he or she was. How could they be proven wrong about a matter so important to them, about a matter re which they were so sure?

It happens. Humans get things wrong all the time. Our political system and our economic system were built with an understanding of this reality in mind. Our systems are built so that mistakes can in time be discovered and corrected. This is why our systems are so dynamic, it is why our way of life is in many ways superior to the ways of life delivered by less open and less flexible systems. I love my country. I love the dynamism of our political and economic systems.

It’s important that we get our understanding of how stock investing works right. A lot is riding on it. Paradoxically, it is because these matters are so important that the Buy-and-Holders are so reluctant to acknowledge the mistake that the peer-reviewed research in this field revealed 35 years ago. The Buy-and-Holders cannot bear to acknowledge that the mistake that they made 50 years ago has destroyed millions of lives. They intended to help people and instead they destroyed millions of lives. They just cannot accept this reality.

I feel that as a friend of the Buy-and-Holders it is my job to help them accept that they made a mistake, or at the very bare minimum to at least accept the POSSIBILITY that they made a mistake. Once they accept the possibility, we are back to normal business and over time things will become clearer and Buy-and-Hold will either be affirmed or rejected. That’s the way things are supposed to work in our country.

Because these matters are of such great importance, we have as a society not permitted the process by which mistakes are corrected over time to proceed in this particular case. People don’t point out the contradictions in the Buy-and-Hold concept because they know that their careers will be destroyed if they do so in an effective manner. So this awful cover-up that is killing us all continues.

Deep in their hearts that not what the Buy-and-Holders want. Deep in their hearts the Buy-and-Holders want what we all want. We all just need to work up the courage and love that we need to evidence to get past this obstacle standing in our path to the future and thereby put everything on a better track. We need to persuade Jack Bogle to give a speech in which he says “I Was Wrong” (or at the very bare minimum “I’m Not Sure”) and then everything changes. No one would feel intimidated into silence from that day forward. Everyone will be saying what he or she truly believes from that day forward and working together in pursuit of a common purpose we will be able to take things to a better place.

I believe that I could be wrong, Sammy. I don’t believe that I am wrong. But I believe that I could be. Experience has taught me that lesson. There have been occasions when I was as sure as sure can be about something and later it turned out that I was wrong. I need to keep that in mind when I put forward statements re what I BELIEVE about how stock investing works.

So does Jack Bogle.

When Jack realizes that he is human just like all the rest of us and capable of making mistakes just like all the rest of us, we all start moving forward at an amazing pace. That’s when things start changing for the better in a very big way.

I look forward to the day when we are all working together to make that happen. We have achieved huge advances over the past 35 years. We should be celebrating them, not trying to intimidate the thousands of good people who want to share what they have learned about an important subject into silence.

My take.

Rob