The Great Safe Withdrawal Rate Debate

Set forth below are the words of a comment that I recently put to the Goon Central board:

You are not the center of the universe.

Yes and no, Dab.

I cannot pull this off on my own. In that sense it is true that I am not the center of the universe. I could send e-mails to 10 million people and I could write 10 million articles and I could record 10 million podcasts and it won’t matter if I do not persuade at least a small number of my fellow humans to join hands with me and work together on this important project. You got that one right.

The other side of the story is that nothing great was ever accomplished without a single human mind dedicating itself to achievement of that goal. That’s how it happens. That’s the only way it ever can happen. If I am going to prevail, it is going to be because LOTS of people support my efforts. The way Yip likes to put it is that I am going to need to see comments appearing at my blog. He’s right about that in one sense. When I prevail, those comments will be there. If we never see the comments, I never will prevail. So he is making reference to something of great import.

Where I do not agree with you is re your suggestion that, because I cannot prevail alone and because I do not have comments at my blog today, I should give up. Somebody has to do this, Dab. If no one does this job, we all go down together. That is a terrible outcome for every single one of us. So that possibility must be rejected as the first order of business. It may well be that it will be hard for me to pull this off given the lack of comments and the intensity of the people standing in my way and all that sort of thing. It HAS been hard. It has been very, very, very hard. I give you all that. What I say is that I must continue pressing on no matter how hard it has been or how hard it is today or how hard it will become tomorrow.

There is no option here other than success, Dab. There is no Plan B because there can be no Plan B. Letting our society fall into the Second Great Depression is not an acceptable outcome. That’s out. So I soldier on NO MATTER HOW DISCOURAGING THINGS APPEAR AT TIMES. I don’t like it. I am trying the best I can to cope with the realities of a world that I did not create. It crushed my heart when I was banned from Motley Fool. That was May 2003. I allowed myself a little cry into my pillow. Then I pulled myself away from the pillow, brushed myself off, put bandages on my wounds and went out looking for the site of the next battle. Giving up is not an option. The stakes are too high.

We both know that there are not lots of people willing to say publicly “Rob Bennett is 100 percent right in everything he says about stock investing.” Depending on how you use the words, you wouldn’t be entirely off base to say that there is NO ONE willing to say those precise words. My brother Steven, whom I love and who loves me, said in response to me telling him the Rob Arnott story, that the difference between Arnott and Bogle and his brother is that “they have a life and you don’t.” So there you have it — My own brother is a Goon!” I can cry warm tears into my pillow one more time if that gives me some temporary relief, Dab. But the bottom line here is that, when I tire of the crying game, I am going to need to work up the energy to send some more e-mails. Because there ain’t too many other choices open to me.

That’s where things stand on the morning of January 6, 2013.

Most of what I report above is bleak stuff. Full truth be told, though, I don’t think I am being a Pollyanna when I say that the realities are not all bleak. Yes, I am hurting. Yes, I lack a life according to my brother Steven’s definition of the term (I am probably too close to the situation to speak objectively as to whether he is right or not — I do not have the option of giving up so I cannot in fairness to myself entertain consideration of the question of whether I today have a life or not). But, yes, there have been huge changes in a positive direction since the morning of May 13, 2002. You know what they have been as well as I do, so I don’t need to recount them here. Those things are real too, as real as the board bannings and the insults and the lack of book sales and all the rest. Both sides have their little “victories” they can point to. So there! Anyway, it’s not all bleak. If I can acknowledge how much it hurts to have my head slammed against a wall 20 times a day 365 days a year for 10 years running, I can also in fairness acknowledge that those on “your side” have had their heads slammed against a wall one or two or three times over the course of the past 10 years. It doesn’t make us even. But it makes us — well, something.

What it has to make us to bring this all to a successful conclusion is — Equally in desire of a successful conclusion.

That’s where this is headed. There is going to come a day when “your side” is going to want to take this to a good place. Not because I have so many people contributing at my blog. Because I cannot get that without the cooperation and aid and encouragement of many people on “your side.” You’ll have to decide for your own reasons to give me that cooperation and aid and encouragement. When you do (I am not permitted to entertain the possibility that this will never happen, for reasons outlined above), I will get comments, plenty of them. Then there will be peace, a wonderful and exciting and rewarding and enriching peace.

You might be inclined to think this will never happen. Why would the side that has done such a great job of smashing my head into a wall 20 times a day for 10 years now ever want to start doing things that would help and encourage me? There’a a good reason, Dab. It’s because the work that I do helps “your side” as much as it helps “my side.” The secret, hidden truth here is that there is only one side. We all want the same things. John Bogle is a hero to the middle-class. He is the second most important investment analyst in history (in my personal assessment — I won’t argue too strenuously with someone who puts him first). Bogle’s work becomes 20 times more important when he snaps the piece that has been missing until today into place. So Bogle wins when Bogle starts helping and encouraging Rob Bennett’s efforts to do just that. And of course everyone associated with Bogle’s ideas also wins. Big time.

So I am going to win!

I am sorry if that breaks your heart, Dab. But that is the way it is. For Bogle to win and for Dab to win, Rob Bennett has to win. God elected to place us on this planet together and He expects us to figure out a way to make this all work no matter how much we get on each other’s nerves from time to time.

I win on the last page. So does Bogle. So does Dab.

There is no other way this can turn out. I know because I sneaked a peek at the last page before I put up that fateful first post.

Friend! Comrade!

Rob

Yesterday’s blog entry set forth the text of a comment put to this blog by the author of the Financial Samurai blog. Set forth below is a follow-up comment that Sam put to a different blog entry thread, the thread relating to the blog entry called “We Don’t Want to Know What Works, We Want to Hear What Makes Us Feel Good.” Below that is the text of my response.

Sam:

How come I continue to not understand what the debate is about? Seems like nobody else can either, which is why there are no comments?

Rob:

Thanks again for helping out, Sam. You are a smart guy and you ask questions that get to the heart of things.

Say that you lived in pre-Civil Way days and say that you opposed slavery. Say that you noticed what happened to other people who spoke out against slavery. They were beat up. They were turned down for jobs for which they were well-qualified. Their families were shunned. All this sort of thing. Would you conclude that it was the better thing to speak out against slavery or to keep your mouth shut?

To be able to function, societies need to develop Social Taboos. We think of our society as an open society and we indeed are more open than most. But no society is totally open. A society that was totally open would collapse. There are things that cannot be said in our society and in all societies.

For a long time now, one of the things that could not be said in our society is that Buy-and-Hold Investing does not work. The question is of huge importance. Millions of people have their retirement money invested pursuant to Buy-and-Hold principles. This is why a Social Taboo has developed that says — You Cannot Go There, This Is a Third Rail. This taboo was needed (or at least we as a society came to believe that it was needed) for social stability.

The Social Taboo has outlived its usefulness. Today, it is the unwillingness of many to question Buy-and-Hold that is causing social instability. The promotion of Buy-and-Hold is the primary cause of the economic crisis. If people could learn about Valuation-Informed Indexing, we could get out of the economic crisis and we could enter The Golden Age of Middle-Class Investing. It’s a win/win/win, with no possible downside.

So why don’t we make the shift?

There have been thousands of books written promoting Buy-and-Hold. Academics have produced thousands of studies. There are hundreds of blogs that promote Buy-and-Hold. Reputations are tied up in retaining a public belief in Buy-and-Hold. And on and on.

We maintain the Social Taboo because pointing out the dangers of Buy-and-Hold is going to cause a huge social upheaval. Just as doing away with slavery caused a huge social upheaval. The people who failed to speak out against slavery were not bad people any more than the people who fail to speak out against Buy-and-Hold are bad people. They had lives to live. We cannot always be taking on every battle. If we did that, we would never get our jobs done or our families fed.

That said, there comes a time when one of these things must be taken on. Please understand that I did not volunteer for this assignment. If it had been up to me, I would have continued writing solely about saving and I would still today be the most popular poster at the Motley Fool site. That’s not the role that the Fates had carved out for me. I was to be the one who would take on the Buy-and-Hold Monster, whether I liked the idea or not. I feel into all this with zero desire on my part to walk this road.

It had to be someone, eh? Someone has to do it, Sam, We need to make this transition. Buy-and-Hold was a mistake. It can be reformed into something wonderful and all the people who promoted Buy-and-Hold can have their reputations saved by us all pointing out that we wouldn’t have that something something wonderful if it had not been for the amazing work done by the Buy-and-Holders, who laid the foundation for the Second Draft approach, the approach that actually works. But we MUST make this transition if our economic and political systems are to survive. For us to continue to promote Buy-and-Hold today is for us to commit national suicide, Sam. I can work through this step by step and show you why this is so with numbers.

I am very much aware of the need not to tear our social fabric apart making this transition. This is why you always hear me singing the praises of Bogle and Fama and Malkiel and all the other pioneers. We need to applaud the good work they have done while also moving onto a better path for the future.

I need some help in pulling this off successfully! That’s what it all comes down to,. I know what needs to be done. There is not one person who loses out from this. It is just all winners, all big winners. But one person cannot make this happen. It is a community project. I need at least a small number of responsible and loving people to step forward and then all the rest will just sort of go. Once people see that it really is going to happen, everyone will be pitching in and we will be picking up steam. The next thing you know we will be meeting with Bogle and he will be making the speech he needs to make and we all (including Bogle, to be sure!) will be heroes!

We are trying to move humanity forward, Sam. The Buy-and-Holders were trying to do a wonderful thing. The root ideas were gold. They made a mistake. This happens from time to time with the humans. Perhaps you’ve noticed. If we fix that mistake, we all get to learn how to invest far more effectively than we ever have before. We all get higher returns at less risk and we all achieve financial freedom years sooner. We all have wildly successful blogs.

The rub is the three words “I” and “Was” and “Wrong.” There is no way that a group of people can make a mistake that causes this much human misery and then just cover it up. The Three Magic Words must be said. It is the magic that comes from the voicing of those three words that open the door to all the good stuff. So long as there are millions of people trying to pretend that Buy-and-Hold can work, they are not open to be learning about what really does work. Buy-and-Hold is today sucking all the oxygen out of the room. We need to let it die.

That’s why you don’t understand, Sam. You can’t permit yourself to understand until you are ready to act. Once you (and a small number of others) act, it’s one good thing after good thing after good thing and never a negative thing. We are lucky/unlucky enough to be living at a key turning point in U.S. history. We can take things up or we can take things down by the actions we choose re whether to permit honest posting on the Big Fail of Buy-and-Hold or not.

I am voting for taking things up. I could use your help, Sam.

Rob