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:
Reread your post. You just proved my point.
Okay.
I stand by the post.
I think that the question that I ask (how does Shiller’s Nobel-prize-winning research findings change our understanding of safe withdrawal rates and of scores of other investment-related topics?) in the post is the most important public policy question before the people of the United States today.
We all need to know how best to invest our retirement money. And, until we launch a national debate aimed at exploring the far-reaching implication of Shiller’s Nobel-prize-winning research, we will not know that. Even if it turns out that Buy-and-Hold really is best after all, we are better off concluding that after hearing out the challenge presented by the many good and smart people (about 10 percent of the population today) who believe that Shiller’s Nobel-prize-winning research is legitimate research.
My best and warmest wishes to you, Sammy.
Rob
I am sure that Robert Shiller, like almost everyone else, has Googled his name to see what people say about him. There is no doubt that he has seen that you have mentioned his name thousands of times. What is interesting is that he has never come to respond to you or comment about you. That demonstrates that he does not agree one bit about what you have to say about his work. It is the only logical conclusion.
I don’t agree.
I agree with the first part. I am certain that Shiller knows about me (because I know that he reads his e-mails and I have written to him on two occasions). My guess is that he is only slightly aware of me. Perhaps he has only seen those two e-mails or perhaps it’s a little more than that — perhaps he has seen one or two discussion threads in which I participated, something like that.
So I agree that there is at least a small bit of awareness. And I 100 percent agree that it is remarkable that he has never offered any kind of endorsement. Shiller should be an advocate of his ideas. It was his life’s work to produce those ideas. I have devoted 18 years of my life to exploring and promoting his ideas. In ordinary circumstances, you would 100 percent expect him to take an interest in what I have done. If nothing else, he should be flattered. You would expect him to be generally supportive. It would not be surprising if he did not agree with everything that I said about his ideas. In those cases, you would expect him to share his own take with me, to tell me what he thought I got right and what he thought I got wrong. The fact that Shiller has not said a word about my work — and he has not — is an exceedingly strange reality. You and I are 100 percent in accord re that one, Anonymous.
I disagree that the only logical conclusion is that he does not agree one bit with what I say.
The reason that I disagree is that this strange reality that Shiller has not demonstrated an interest in my work has evidenced itself in a world in which similarly strange realities have also evidenced themselves. I say that Shiller’s research shows that there is precisely zero chance that the 4 percent rule is a valid rule. What does Shiller say about that? He doesn’t say ANYTHING about it. That’s really, really, really strange. His finding that valuations affect long-term returns obviously has a bearing on the question of what retirement withdrawal is safe. It’s theoretically possible that Shiller believes that the effect is not so great. If that were the case, the natural thing for him to do would be to discuss the question in his book, to explain why he does not think that the effect is that great. I am not able to come up with any logical explanation of why he did not do that.
It’s a mystery why Shiller has not commented on my work. I give you that one. But you are ignoring the other big mystery here. Why did Shiller not address the question at all in his book or in articles or in interviews? And Shiller’s behavior here is 100 percent in concert with the behavior of many others. Bernstein said in his book that the 4 percent rule was two points off the mark at the top of the bubble. That’s what i say. But Bernstein too has not commented on my work. When the discussions were raging at the Bogleheads Forum as to whether the safe withdrawal rate studies are in error, Bernstein never stepped forward and said that he believed that there was indeed an error even though he at times participated in discussions at that board. That’s as crazy a reality as the one with Shiller.
It is a general phenomenon. When Wade Pfau was working with me, he was amazed to find that his research showed that everything that I said about stock investing checked out. One time I said something to him that he found a little hard to believe. But then he noted that, every time he questioned something that I said, he learned that I was right when he went to the trouble to research the question. Wade thought that our work was of huge value. He discussed the possibility that he might be awarded a Nobel prize for the work he did with me. So he was clearly a big believer. But today he is with Shiller and Bernstein — be no longer works with me or even comments on my work. Exceedingly strange. I have seen this same general phenomenon play out over and over and over again.
My explanation is that Shiller’s finding that the market is not efficient is so “revolutionary” (his word) that as a society we have just not been able to absorb it for 39 years now. The ordinary thing would be that there would today be discussions at every investing site on the internet as to whether it is Fama or Shiller who is right. But we don’t see discussions of that nature being held at a single site. That’s a puzzle. If we want to know what is going on here, we have to explain that one.
There is a phenomenon called “cognitive dissonance.” The human brains blocks out information that comes in that it does not for some reason or other want to process. When Shiller published his Nobel-prize-winning research, every person who works in this field understood on some level of consciousness that it changed everything that we once thought we knew about how stock investing works. Every textbook had to be rewritten, every calculator had to be rejiggered, every person who had come to be regarded as an expert in his understanding of the old model now needed to rebuild his reputation by showing a mastery of the new model rooted in the new research. People saw Shiller’s work as a threat. So they went into cognitive dissonance mode, They shut it out of their brains, they ignored Shiller’s research.
Now 39 years have passed. It is no longer just Shiller’s research findings that people want to ignore. They also want to ignore the 39-year cover-up of Shiller’s research findings. The desire to not talk about this stuff is greater today than it has ever been before. Talk about it today and you are going to have to talk about how the promotion of Buy-and-Hold strategies caused the economic crisis of 2008. We were all in on that. We all let that happen. Who wants to talk about this terrible mistake that we made?
That’s why Shiller keeps quiet about the far-reaching implications of his amazing research. That’s why Bernstein keeps quiet. That’s why Pfau keeps quiet. That’s why everyone keeps quiet.
I don’t see the embarrassment that we all feel over the 39-year cover-up as a good reason to keep quiet. If we keep quiet for another year, it is going to become a 40-year cover-up. Is that better? It’s not. Keeping quiet makes things worse, not better. So I speak up. And I urge all others to speak up.
If stocks continue to perform in the future anything at all as they always have in the past. we will be seeing another price crash in the not-too-distant future. I believe that some people will work up the courage to speak up then. Once a few do, the floodgates will open and people will be talking about the last 39 years of peer-reviewed research on every investing site on the internet. I am 100 percent confident that Shiller will be commenting on my work at that time.
I could be wrong. I don’t think that that’s the case. But you never know, right? We will just have to wait a bit to see how it all plays out.
My best and warmest wishes.
Shiller (And Bernstein! And Pfau! And Bogle!) Fan Rob
“ It’s a mystery why Shiller has not commented on my work. I give you that one.”
No, it is not a mystery. People avoid things they do not agree with and support things that are in line with their beliefs.
People also avoid saying things that bring on death threats and threats of career destruction in response.
That’s why we have laws against people advancing those sorts of threats. Those threats have great destructive power.
Non-Threatening (Except in an Intellectual Sense) Rob