I want to write a short piece given the events of this week, which highlighted how deep the divide is in the USA. I am not going to talk about politics. That’s not what I do here. And it’s very intentionally not what I do here because I know that politics is absolutely poisonous to sound investing. The stock market does not care what we label ourselves. Money does not care what we label ourselves. And when we assess the stock market and the economy we have to try to be aggressively independent and objective.
I am not an expert at many (any?) things. But one thing I have gotten very, very good at with time is being incredibly open-minded. I’ve missed a lot of investment opportunities in my career because I naively dismissed things I refused to explore a little. And I’ve also been fortunate to sidestep some of the pitfalls in the investment world because I’ve gone beyond the popular narratives. That is, after all, a big part of what I do here – I try to take the scariest sounding narratives, inspect them empirically, try to understand them and then put things in perspective so we can objectively analyze whether the scary narratives are worth being scared about. This requires an apolitical sort of approach that forces you to explore both sides of an argument.
For example, when people say the national debt is going to cause a “debt heart attack” for the USA we have to step back and put things in perspective. That’s an extreme comment and an extreme outcome that requires extreme inspection. Yes, it makes for nice headlines and it will attract a lot of attention. And unfortunately, that’s what a lot of media is these days – emotional exaggerations designed to drive traffic and stoke emotions. But this is serious stuff and it requires serious analysis. In my conclusion to that scary narrative I determined that the probability of that outcome is low. I could be wrong. But I inspect the narrative rigorously from both sides and I consider where I could be wrong (for example, if the US government started spending a lot more money) and where it could be right. But to analyze this concept objectively you have to go way beyond the scary headline and consider the argument from both sides. Ray Dalio might be right about this. It would be silly for me to dismiss such a smart man’s analysis even if I don’t think it’s right. And there’s a world in which he ends up being right. And we need to respect that and, more importantly, make sure that our portfolio can still survive that.
Anyhow, I think we all could use a little more introspection about how we consider both sides of an argument and why different people view the world thru a different lens. I am not saying we need to adopt the other side’s argument. We don’t even need to respect it. But we should internalize it and try to understand where that argument is coming from. And in doing so we might find some areas of agreement even if the disagreements are more substantial. Good investing (and good living) requires rigorous open-mindedness to avoid emotional overreactions and protect yourself from potential blind spots. I think BOTH SIDES could benefit immensely from this approach to life.
Anyhow – I know. I only did one thing this weekend. But it’s a lot more than one thing when you really understand it.
I hope you’re having a wonderful weekend. Get out there and touch some grass, give someone a hug and as always, stay disciplined.