Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Your problem is with Shiller. He won’t say what you want him to say, which makes him a goon.
My problem is with human nature, as is yours.
There is something in human nature that makes us want to lie to ourselves, to tell ourselves that things are better than they really are and to thereby put ourselves in danger. There are people who are 100 pounds overweight and who are thus at risk for a heart attack but who tell themselves “I haven’t had a heart attack yet, so I will probably never have one.” There are people who tell themselves “I can still drive home even though I had four beers, I don’t need to call a cab” and there are people who fail to confront them about those sorts of decisions. We humans hurt ourselves by lying to ourselves. All the time. It’s not just in the stock investing realm that this happens.
That’s my problem. People want to lie to themselves. The last 39 years of peer-reviewed research in the investing realm makes it hard for us to do that. The message of that 39 years of peer-reviewed research couldn’t be more clear — always, always, always, always practice market timing; whenever a large number of investors fails to do so, we see a crash big enough to bring on an economic crisis, please don’t ever fall for the Buy-and-Hold garbage. The irony is that, the stronger the case is that drunk driving is dangerous, the more angry the drunk guy is when you try to take away his car keys. We really, really, really want to engage in the dangerous activity that our reasoning mind tells us we should not engage in and so we lash out at those who try to use reason to persuade us. When we possess a strong desire to do something unreasonable, reason becomes our enemy. We hate it, hate it, hate it, hate it, hate it. We ban it. We follow it all over the internet and call it names, that sort of thing.
That’s my problem. That is what is working against me.
But you have a problem too. We humans are not only the unreasoning animal that shuts out knowledge so that we can continue to do stuff that seems appealing in the short term but that has been shown to be dangerous. We also are on occasion the rational animal. That’s the hat we are wearing when we do research. That’s the hat we are wearing when we adopt rules at discussion boards that say that death threats are out of line. That’s the hat we are wearing when thousands of us put up posts asking the Goons among us to knock off the funny business and to permit honest posting. That part of us is just as real as the part that wants to do crazy dangerous stuff and to lie to ourselves about the risks.
So we both have a problem. We are fighting a battle of reason versus emotion. You think that emotion is going to win forever because it has won a number of short-term victories. I think that reason is going to win in the end because it must, our economic system will not remain viable for long into the future if we do not come up with some way to provide access to honest and accurate and research-based investment advice to the millions of people who want and need access to it.
The big question is — Will things change when people can see with their own eyes how dangerous the pure Get Rich Quick approach is? Does the fat guy wish that he had made more of an effort to watch his diet after he has had his heart attack and has had a bypass and is spending months taking cautious walks trying to recover from it? Does the heavy drinking guy wish that he had let his friends take his keys after he has been in an accident and has been told that he may never walk again?
I think that seeing things with our own eyes is going to make an impression on us. The next price crash will not be just theory, as people tend to think of the last 39 years of peer-reviewed research. The next price crash will bring on thousands and thousands and thousands of painful realities. And we will as a nation have to reconsider our behavior during the 30-year cover-up and decide whether the ban on honest posting is really such a hot idea. I think we will make better choices at that time. We’ll see. It is beyond my abilities to lie about what the research says in any event. So I would say that, wouldn’t I?
Shiller has a little bit of the Goon in him. He could have included a clear statement in his book saying that: “Given my finding that valuations affect long-term returns, there is zero chance that the safe withdrawal rate is the same number at all times and the Buy-and-Hold retirement studies should be corrected immediately, before they cause even more harm to even more people.” That would have been a great statement. That would have helped us all. I wish that he had included that statement in his book.
But, yes, you are right, Shiller is a human, which means that Shiller has a bit of Goon in him. Shiller wants the other humans to like him so he tells lies when he is placed in circumstances in which he believes that his career will be in danger if he says things in a blunt and plain and clear way. As did that Rob Bennett fellow for a good number of years. As I probably do to a small extent even today. We all want to be liked. So we all hold back on telling the full truth when we see that our fellow humans very much do not want to hear it.
I think that evolution put that part of us in us for a good reason. We need to stick with the herd. We don’t have time to think every issue through for ourselves. So we need to rely on what the other humans around us are saying. If we were all independent thinkers all the time, we would in general die sooner than we do. Evolution doesn’t like to see us dying sooner. So it edited out extreme free thinking. It put in us a gene that causes us to want to follow the herd and to dedicate lots of brain power not to discovering truth but to rationalizing dangerous stuff that the herd wants to see rationalized.
But evolution also sees benefit in a measure of free thinking. So we also have an ability to see through the b.s. of the herd and to move forward as a people. The laws against drunk driving have been tightened. There are now cancer warnings on cigarette packages. There was a time when people laughed at the idea that there would ever be cancer warnings on cigarette packages. But we overcame the herd instinct to laugh in that case. The warnings are there. Those who thought that the research showing that smoking causes cancer was important prevailed in the end. Good for them. Good for all the humans.
We are as a nation working through a process, Anonymous. Yes, we love our Get Rich Quick investing strategies. Yes, we have been investing in ways that cause price crashes and economic crises for a long, long time now. But, no, we are not hopeless cases. We as a society permitted Shillar’s book to be published, We as a society awarded Shiller a Nobel prize. We as a society adopted rules at every discussion board and blog prohibiting the tactics that you Goons have employed to block honest discussion of the last 39 years of peer-reviewed research for nearly 18 years now. We are not an all bad people. We are not an all good people, that much is evident at this point in the proceedings. But we are not an all bad people either. We are in the process of working our way to a better place.
Shiller will make that statement about safe withdrawal rates when he sees that it is safe for him to make it. I look forward to that day. I like the humans. I would like to see them stop beating up on themselves. I would like to see fewer of them drive drunk. And I would like to see fewer of them eat themselves into an early grave. And I would like to see fewer of them believe the words of internet con men who tell them that a 4 percent withdrawal rate is “100 percent safe” even when stocks are priced at three times fair value and the true safe withdrawal rate is 1.6 percent.
It all depends on whether you think that the humans are capable of engaging in reasoned discussion or not. I believe that they are. I never would have become a journalist in the first place if I didn’t think that we were capable of reasoned discussion. Reasoned discussion doesn’t always prevail in the short term. I don’t say that. But, when the issue is important enough, I think that the better bet is that reasoned discussion will prevail in the long run.
We will see.
Rob the Goon (At Least Once Upon a Time and Probably to Some Extent Even to This Day)
How about an update, Rob? Did you finish your book? When will the book be available? Where will it be on sale? Did you find a job? If not, any prospects?
The book is not even close to finished. In early December, 11 of 14 chapters were close to finished and I was aiming for completion by the end of the year. But those three chapters gave me lot of trouble. About a month ago, I abandoned the structure that I had been working on and grealy increased the number of chapters in the book. I now am looking at something like 36 chapters. The chapters are of course shorter. Much of the material from the earlier set-up just pulls over. But there is also new material (some of the new chapters cover issues that were not addressed with the earlier structure). And everything is reorganized. Some of the old chapters have been broken up into two or three shorter chapters. That requires the creation of new transitions and that sort of thing.
It’s anxiety provoking to go through a restructuring like this. Similar things happened with my first book. So it’s not 100 percent a surprise that this was needed. But there’s an inclination to kid yourself about things like this. You want to think that you are going to be finished by a certain date (I had made January 1 my hoped-for completion date) and you ignore signs that perhaps you won’t make it until they cannot be ignored any longer. So my completion date has been pushed back a good bit. I don’t even have a new date at this point. I need to get a better sense of how the new structure is working before I can come up with a new completion date, even in my own mind.
Accepting that the restructuring was needed depressed me and I made almost no progress for about a month. Restructuring is like tearing a house down to its foundation and starting over because the top level was not fitting together properly. You get a sick feeling making that decision. It pays off in the end. I went through this sort of thing with my first book and it ended up perfect. It would not have flowed as well as it did had I not restructured it. But at the time the decision is being made it yields a sick feeling because you don’t know at that time where the end point is. I am confident that things will pull together, But I cannot say that I have a book near completion today whereas I thought that I thought that I could say that a few months back.
About a week ago I got through the depression and began again making serious progress on a daily basis. I am now quickly going through shorter chapters and am close to finishing the current draft of Part One (there are three parts). If all of Part One works (it appears to me that it will), that will restore my confidence that I will be able to get to the end point in not too much more time. So things are looking a bit better. But I am still a little shaky about this at the moment. When all is finished, all that matters is whether it works or not. The twists and turns have no lasting significance. But, when you are living through them, they seem like a big deal. The bottom line is that it is all part of a process that has to be endured if one wants to end up with a good product. So I need to just keeping pushing forward.
I don’t expect that the book will be available anywhere until after the next crash. I will print out a small number of copies and send them to people that I contact who express interest in taking a look at it. But that will be a very small number of people. If the crash increases the number of people who want to hear about the downside of Buy-and-Hold, that will change things. But I do not personally believe today that a book like this can be marketed until prices have fallen dramatically. I would of course love to be proven wrong. But my experience of the past 18 years tells me that this is not something that a large number of people are open to reading today.
Near the end of the year, I sent out a few resumes. I am not doing that now because I want to finish the book before taking full-time employment. There’s one job possibility that I may hear about over the next few weeks. If that comes through, I will just work on the book on weekends. But I don’t expect to be looking for anything else until the book is either completed or very close to completion (I would be okay with accepting employment if all that remained was proofing or fine-tuning). So for now the job search is on hold,.
I hope that helps a bit.
Rob
You are going to wait until after a crash? It has been a very long time since the last major correction. What if we go another 5 years and we still don’t see a crash? What about 10 years?
You think with a Buy-and-Hold mindset, Anonymous. Crashes don’t come along at random points in time. Crashes are times when investors experience irrational depression. Irrational depression follows from irrational exuberance. Emotional extremes beget emotional extremes. Out-of-control prices on the high side bring on out-of-control prices on the low side.
We are today living through the longest stretch of time in history in which prices have remained at insane highs. A crash is long overdue. I cannot say when one is going to come. A crash is an emotional phenomenon. By definition, it is not subject to the laws of reason. But we know that for the entire history of the market emotion in one direction has brought on emotion in the other direction. So we know that there has never in history been a time when we were as much at risk of seeing a crash as we are today.
It is theoretically possible that we will not see a crash for five or ten years. I expect to see one within a year or two or three. But then I expected to see one years ago. That didn’t happen. So it’s possible that I will be proven wrong yet again. Heck, it’s possible that Shiller’s Nobel-prize-winning research is not legitimate research. If that were the case, there would be no more risk of a crash today than there would be at any other time. We humans are imperfect creatures. We don’t know everything. We have to accept our limitations.
I believe that Shiller’s Nobel-prize-winning research is legitimate research. So I have to make my life decisions with that belief in mind. If that belief holds up, then I need to be doing everything in my power to get this book finished before that crash hits, for all sorts of reasons. If that belief doesn’t hold up, then none of the work that I have done over the past 18 years amounts to anything, If Shiller’s Nobel-prize-winning research is not legitimate research, then I have wasted 18 years of my life.
We are just going to have to see, you know? I expect that we will see a crash within 10 years. I expect that we will see a crash within 5 years. I don’t look forward to it. I fear it. A good argument could be made that I would be personally better off if we do not see a crash within the next 10 years. That would mean that my life of the past 18 years would have been wasted and that I will never see that $500 million. But it would also mean that I and my loved ones would never have to experience all the things that we will experience if there is a crash. Given what has happened in earlier crashes, I think I would take that deal, you know?
But I sure would not feel comfortable taking a bet that we will go another five or ten years without a crash. The last 39 years of peer-reviewed research in this field tells me that such a bet is not terribly likely to pay off. So my intent is to go with the safer bet, that stocks may continue to perform in the future at least somewhat as they have always performed in the past.
Make sense?
Rob
But you have placed your bet on the crash giving you the $500 million. What if you don’t see a dime of that? What is the back up plan?
I didn’t work up the courage to begin posting honestly on the morning of May 13, 2002, because I thought that it was going to bring me $500 million. If someone had told me at that time that that decision would someday bring me $500 million, I would have told them that they were out of their mind. I did it because I thought it was the right thing to do. I did it because I truly believed in my heart that Greaney’s retirement study lacked a valuations adjustment and because I had made a lot of friends in that board community and because I did not want to see them hurt.
I later came to believe that my work over the past 18 years will lead to me receiving a $500 million settlement payment in the days following the next crash. But that’s not so much because I will have been proven right re the substantive issue. It’s because all of the people who work in this field will want to come clean at that time. The people who work in this field are like everybody else — they want to do work that helps people. Those people are going to want to come clean and to show that they appreciate my efforts to open up the entire field to honest posting. So I think a settlement payment is a natural. And given the importance of this — it affects the survival of our economic system and possibly even our political system — I don’t believe that there will be too many people saying that the $500 million figure is on the high side. We’ll see, you know?
But the aim here is not just to collect that money. Obviously journalism is the work that I do for a living. So I do expect to be paid for my contributions. And obviously in the event that Shiller’s Nobel-prize-winning research ends up being legitimate research, those contributions will end up being seen as huge. But I am not doing this just for the money. I live in this country. I love this country. The last time we have a bull/bear cycle that produced a CAPE value of 30, we saw a Great Depression. I don’t want to live through a Great Depression and I don’t want my loved ones to live through a Great Depression. So I would feel bound to do what I could to stop one from coming or to prepare materials that will help us survive one that comes even if I didn’t expect to be paid a dime for doing so.
Whats your back-up plan? If Shiller’s Nobel-prize-winning research ends up being legitimate research, I think it would be fair to say that you will be landing in a prison cell. I think it would be fair to say that you need a back-up plan about 500 times more than I need one.
It’s a crazy situation.In ordinary circumstances, we never would have seen a single criminal act and I would not be banned at a single site today. I wouldn’t have made $500 million or anything close to it. But I would have made a good bit of coin. There have been thousands of community members who have expressed an interest in learning more about my thoughts on stock investing. So I would have made plenty of money. The only reason that I am up for a $500 million settlement payment is the crazy circumstances that made it so important that someone overcome the Ban on Honest Posting and make it possible for thousands of people to post honestly re these matters and thereby help us all out. I wish that I had never been placed in circumstances where I had to be the one to do the job. But I am proud that I had the courage to do the job once it became clear to me that it was a job that very much needed to be done.
The only way that I can be shown to have made a mistake is if it turns out that Shiller’s Nobel-prize-winning research is not legitimate research. I acknowledge that there’s some chance that that could be so only because us flawed humans can always be wrong about something we believe. But my personal confidence that Shiller’s Nobel-prize-winning research is legitimate research is pretty darn high given what I have witnessed over the past 18 years. Do you have a back-up plan re what to do if gravity does not apply when you wake up tomorrow morning and you just float off into the sky? I don’t have a back-up plan re that possibility because I consider it a very remote possibility. I view the possibility that Shiller’s Nobel-prize-winning research is not legitimate research about as remote as the possibility that gravity will not exist when I wake up tomorrow. I haven’t spent time concocting back-up plans re either possibility.
Present me with an iota of evidence that Shiller’s Nobel-prize-winning research is not legitimate research and I might start working on a back-up plan. In 18 years, you have never advanced one iota of evidence. You have advanced death threats and demands for unjustified board bannings and thousands of acts of defamation and threats to get academic researchers fired from their jobs. But never one iota of evidence. I am beginning to wonder if that’s because you have not been able to find any. And if you Goons, who are highly motivated to find such evidence, have not been able to find any of it in 18 years, what does that say about the likelihood that anyone else is ever going to find any?
You need a back-up plan more than I do, Anonymous. A lot more. That’s my sincere take.
But we’ll see, you know?
Evidence Seeking Rob
“ Whats your back-up plan? If Shiller’s Nobel-prize-winning research ends up being legitimate research, I think it would be fair to say that you will be landing in a prison cell. I think it would be fair to say that you need a back-up plan about 500 times more than I need one.”
My plan is to live in the world of reality and not the land of make believe.
I wish you the best of luck with it, Anonymous.
I hope that that helps, at least a tiny bit.
Rob