Two Ways That Bogle Could Have Reacted to Shiller’s Research Without Admitting a Mistake


Valuation-Informed Indexing #330

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by Rob Bennett

John Bogle learned that Buy-and-Hold doesn’t work in 1981. That’s when Robert Shiller published his “revolutionary” (Shiller’s word) research showing that valuations affect long-term returns. If that’s so, stock investing risk is not static but variable and investors must be willing to adjust their stock allocations in response to big valuation shifts to have any hope of keeping their risk profiles roughly constant.

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It’s not quite true that Bogle “learned” all that, of course. Shilled’s research really was “revolutionary.” That means that it changed everything, that it played with people’s heads. Bogle had a big emotional investment in Buy-and-Hold. He fell victim to cognitive dissonance. In an objective sense, he understood that Shiller’s research discredited the premise on which the Buy-and-Hold strategy was built (that the market is efficient). But that knowledge did not “click” for him. He went on believing in Buy-and-Hold despite what he “knew.” I think it would be fair to say that Bogle did not know what he “knew” at all.

Bogle ignored Shiller’s research. Buy-and-Hold is the same today as it was in the days before the research was published. And of course millions of good and smart people believe to this day that it is a good strategy, even that it is a research-backed strategy, a proven strategy.

All of the research published in the 35 years since has confirmed Shiller’s findings. The mountain of evidence that investors must practice price discipline when buying stocks grows ever larger, causing the cognitive dissonance of those who advocate and follow the Buy-and-Hold strategy to grow ever stronger.

It was easy to rationalize not incorporating Shiller’s findings into one’s investing strategy in 1981; stock prices were at rock-bottom prices — the thinking no doubt was that this was a “no harm/no foul” situation. The potential harm grew larger as prices rose throughout the 1990s. But then so did the embarrassment that would result from suddenly coming clean. It is a lot easier to own up to a mistake within a few weeks of when it is discovered than it is to do so several decades down the line. The price crash and economic crisis of 2008 of course made it more imperative than ever that the Buy-and-Holders come clean while also making their psychological need to avoid doing so all the more pressing at the same time.

It’s been 35 years now. Everyone who works in this field understands on some level of consciousness that the most important question before investors today is the question of how much they should adjust their stock allocations in response to valuation shifts. And yet very few address themselves to this question in a serious way. Discussing the implications of Shiller’s findings has become socially taboo. Holding open debate on these critically important matters opens too big a can of worms. Doing so might help us avoid future economic crises. But how do we explain to ourselves our failure to not take advantage of what we learned in 1981 to avoid the last one?

The best time for Bogle to act was in 1981. But I really do believe that he fell victim to cognitive dissonance at the time. Shiller’s research really did turn everything that we once thought we knew about how stock investing works on its head. Humans are not able to process fundamental and far-reaching changes in their understanding of matters important to them in a flash. It shouldn’t have taken us 35 years to launch a national debate. But I can see how it might have taken one year or two years or three years or perhaps five years.

Could Bogle have handled things differently?

I think so. I think that there are two approaches that he might have taken that would have taken us down a more life-affirming path.

One, he could have objected strongly to Shiller’s findings. He could have argued that they just didn’t make sense and that other researchers should have stepped in to show the Yale economics professor the error of his ways. I believe that that effort would have failed. But it would have forced us as a society to resolve the conflict between Shiller’s research (which supports the Valuation-Informed Indexing Model) and Fama’s research (which supports the Buy-and-Hold Model). We need to see these two ways of thinking about how stock investing works fight it out in the marketplace of ideas to see one of them prevail in a legitimate and permanent way. That battle was delayed by Bogle’s soft opposition (I have never heard Bogle directly criticize Shiller’s research although he obviously has not thought it of sufficient merit to influence his investing strategy).

Two, he could have adopted a more cautious approach to advocacy of Buy-and-Hold. For so long as Bogle truly believes that Buy-and-Hold works (it is my belief that this remains true today), he is obligated to share that belief with investors. But there is nothing that stops him from noting each time he offers a Buy-and-Hold take on a strategic question that there is another school of thought rooted in Shiller’s research that leads those who believe in it to very different conclusions. Lots of people would have learned about Valuation-Informed Indexing over the past three decades had Bogle followed that approach and those people would have engaged in insight-producing explorations that by now might have persuaded even Bogle of the merit of the new model.

Rob’s bio is here.

Updated on

Rob Bennett’s A Rich Life blog aims to put the “personal” back into “personal finance” - he focuses on the role played by emotion in saving and investing decisions. Rob developed the Passion Saving approach to money management; Passion Savers save not to finance their old-age retirements but to enjoy more freedom and opportunity in their 20s, 30s, 40s, and 50s - because they pursue saving goals over which they feel a more intense personal concern, they are more motivated to save effectively. He also developed the Valuation-Informed Indexing investing strategy, a strategy that combines the most powerful insights of Vanguard Founder John Bogle and Yale Professsor Robert Shiller in a simple approach offering higher returns at greatly diminished risk. Tom Gardner, co-founder of the Motley Fool web site, said of Rob’s work: “The elegant simplicty of his ideas warms the heart and startles the brain.”
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  1. You don’t post a link because it doesn’t exist. Same goes for your silly death threat comments. The only links you have on your website is where you just make the allegations.

    But all of this is just to distract from the obvious, which is the absolute failure of your retirement plan and investing strategy. That is the core issue. How do you think you have even one ounce of credibility in this field when you have failed miserably? Further, how can you remain unemployed for over 14 years and not look for a job to provide for the family? There isn’t magical $500 million windfall coming save you from ruin (your current financial plan). At what point do you stop blaming others and take responsibility for your own actions?

  2. The posts are there, Dan. Go to the blog, look for the “Wade Pfau” category and they will come up.

    I don’t post links here because the idea that there is some sort of question re these matters is 100 percent silliness and I do not want to dignify these phony requests for links by acting as if i take them seriously. 50 links will not persuade a Goon. It is in the very nature of goonishness that you are not open to being persuaded.

    Links would persuade reasonable people. But reasonable people don’t need links. They know what they need to learn by seeing your behavior on this thread.


  3. People are listed in the credits of articles all the time. It does not make them (and you) an author, yet you have specifically claimed to be an author. It demonstrates how you will twist anything to make your story fit the narrative you want. What you have established is a pattern of lying.

  4. Again I quote: “the e-mails in which he expresses his fears of you Goons are posted at my web site.”

    I looked for such posts. The only pertinent one I found is the link I posted, which directly contradicts your statement. You have posted no link to support your claim. Why not? This is your site, you should know exactly where they are.

    There are umpteen posts where YOU express Wade’s supposed fears. But none where Wade himself expresses fear.

    When you make a provocative claim, you need to provide evidence or be dismissed as a crank. For some reason you consider yourself an exception to that rule.

  5. Wade said those words. You are quoting him accurately.

    But of course he said those words AFTER being threatened. You are quoting words from a hostage video. He offered very different sorts of words on numerous occasions PRIOR to the time when you threatened him with career destruction if he continued to say publicly what he really believes about safe withdrawal rates.

    I have a category for “Wade Pfau” at my blog. There are lots of entries listed under that category. Interested parties can read as many of them as like to learn the full realities for themselves. You quoted from one above. Please not that I did not fail to include that one in the mix. Things Wade said after the threats were made are indeed part of the story. Wade is not the only person in this field who has been intimidated. LOTS of people in this field have been intimidated, some in direct ways like Wade and many others in indirect ways (such as by seeing what happens to people like Wade and me when they express their sincere beliefs re safe withdrawal rates and other important investing topics).

    Things Wade said before the threats were made are ALSO an important part of the story. Interested parties need to read both sorts of comments. And then they need to reflect on how far out of the norms of our society this sort of thing is. Why are people who work in this field AFRAID to say what they believe about Buy-and-Hold?

    They are afraid because Shiller’s 1981 finding that valuations affect long-term returns DISCREDITED the Buy-and-Hold strategy and yet advocates of the strategy to his day continue to claim that it is a research-backed strategy. Those people have a responsibility to let people know that there are two schools of thought as to how stock investing works, not one. Every investor alive should know that, if it is Shiller who is right and not Fama, that Buy-and-Hold is very dangerous stuff.

    I had not thought that through at one point in time. Wade had not thought that through at one point in time. Lots of others have not thought it through even today. We all need to be thinking this through. If Shiller is right, Buy-and-Hold is dangerous. If people really believe in Buy-and-Hold (millions of good and smart people do), they need to continue to advocate it. But there is no excuse for those people not to let investors know that there is another school of thought and that the lead advocate of that other school of thought has been awarded a Nobel prize for his work in this field.

    No one should ever feel afraid that his career will be damaged in even a tiny way because he shares his true beliefs re how stock investing works. All of us, Buy-and-Holders and Valuation-Informed Indexers alike, should be making it our top priority to insure that the days when something like what we saw happen with Wade Pfau can never, ever, ever happen again.

    Those are my sincere thoughts re this terribly important matter, in any event.


  6. You are offering a hyper-technical way of looking at things. I agree that in ordinary circumstances a mention in a credit line would not make one a co-author of a paper. In this particular case, the mention in the credit line was a tiny recognition of a much bigger reality.

    What matters is whether Wade thought of us as co-authors at the time the paper was being prepared. He did. He indicated on numerous occasions that he did. He didn’t have any doubt in his mind re this question. He felt bad about it If Wade had a means available to him to make me a named co-author, he would have done so. He was not able to do that because I do not possess the credentials that would be needed to be named as a co-author of an academic paper. So he did the closest thing that he could do. He behaved in a 100 percent honorable way. And the question never would have come up again had you Goons not gotten involved.

    It was the action of you Goons that caused the confusion. When you threatened him, you caused him to behave in a strange way. The natural thing is for Wade to work with me to get the paper featured on the front page of the New York Times. He now is afraid to do that. He now feels that his career will be destroyed if he takes acts that in ordinary circumstances would be the most natural thing in the world. So now this is this weirdness about the matter that makes it important for people to know whether I played the role of co-author.

    I played the role of co-author. I spent years of my life developing the concept that was being explored in the paper. I gave Wade the idea for the paper — he never in a million years would have thought to write that paper had he not learned about Valuation-Informed Indexing from me. He of course had lots of questions he wanted answered before he put his name to such a grounds-breaking piece of research. He asked them of me and I answered them, promptly and in depth. My role was at least equal to his. There certainly was not doubt in Wade’s mind at the time that that was the case, he was entirely open and free about saying it multiple times. And we have a published record of him doing so available to us today to confirm what indeed happened.

    You Goons are involved in a cover-up. I was write in what I said on the morning of May 13, 2002, the retirement study posted at John Greaney’s web site really does not contain an adjustment for the valuation level that applies on the day the retirement begins. Greaney of course understands today that there is 35 years of peer-reviewed research showing that a valuation adjustment is required since valuations affect long-term returns and long-term returns affect the safe withdrawal rate. Greaney cannot think of any way to explain his behavior to people who know the realities and so he engages in all sorts of abusive behavior to intimidate people into not talking about them. One of the people he need to intimidate is Wade Pfau since Wade knows things that Greamey does not want people to know.

    One of the things that Wade knows is the role that I played in getting that paper completed. A simple way of describing my role is to say that I was the co-author. So that is what I say. If you want to note that I am not listed on the face of the paper as co-author, that’s okay, you are being correct in a hyper-technical way by noting that. But people who want to know the full realities need to know the background, that Wade certainly thought of me as the co-author and that he said so on numerous occasions. So I tell them that part of the story.

    It’s up to the readers of these words to decide how they feel about it all, Sammy. You have told your view of things and I have told my view of things. People will decide that they think. I have a funny feeling that the intensity of the feelings that most people will have about what happened here will change dramatically following the next price crash. But we are going to have to wait to see how things play out to find out for sure. That’s where things stand.

    Anyway, I really do wish you all the best things that this life has to offer a person, my good friend.


  7. “the e-mails in which he expresses his fears of you Goons are posted at my web site.”

    Not true, as you well know.

    “I wouldn’t lose my job even if people did complain about me, and as far as I know, no one ever did email or call my employer. My research has not been impacted by any alleged threats, and it is really insulting and disgusting all of the times you’ve suggested otherwise.”

    “You will just spin my comment as proof that I’m really afraid to speak truthfully. You will do this all in a very long series of comments which may approach 10,000 words in total. But it’s all so tiring and implausible. Please don’t spend your day doing this. Go play with your kids. It’s time to move on.”

    But of course, it’s never time to move on.

  8. …..and there again, you are blaming someone else. No one told you to stop working. No one told you you to pull your money from the stock market. You chose to do that.

    As for the “abusive” posting, anyone can use Google and see the history of your little world of hocomania and that you are the cause of disruptions.

  9. If you would have asked me on the morning of May 13, 2002, what the odds were that we would still be seeing abusive posting re these matters nearly 15 years later, I would have put them at 1 million to one, Sammy. I’m afraid that you’ve got me re that one.

    I certainly hope that we are all in a better place re these matters 15 years from today. Yowsa!


  10. The paper doesn’t list me as co-author.

    But that is certainly the role that I played. I didn’t go to Wade asking that he write a paper. He came to me because he had learned about Valuation-Informed Indexing by reading my posts at the Bogleheads Forum. He was afraid to post there because of the abusiveness he saw from you Goons whenever I or someone else discussed Shiller’s research and the many important implications that follow from it. So for about two years he just soaked up knowledge that he had never acquired when he was working on his Ph.D. at Princeton. He was the one who approached me and asked if I would be willing to work on the paper with him.

    He felt that he did not even have the right to work on the paper if I did not agree. He said that he would give me 100 percent of the credit for the Valuation-Informed Indexing concept. He is obviously very well read in this field. And he said that he had never heard of anyone who had developed the concept in a way even approaching the degree to which I had developed it. We discussed scores of issues in e-mails that I have posted to my web site. There were several occasions on which he was amazed by what he learned from me. He would tell me that he was surprised by something that I said but then when he did research to discover the reality that what I said turned out to be entirely. That happened enough times that he said that he had learned to assume that what i was saying was right because his skepticism about something I said had been answered so many times.

    Wade wrote in the Acknowledgments section of the paper that: “The author is extremely indebted to suggestions and reading recommendations provided in the thread ‘Any Studies on Long-term Market Timing?’ at the Bogleheads Forum ( Because market-timing strategies are specifically not part of John Bogle’s investment philosophy, the author wishes to thank without implicating users including Adrian Nenu, afan, alec, Alex Frakt, bob90245, cjking, crl848, dmcmahon, DP, grayfox, Les, lostcowboy, market timer, matt, Mel Lindauer, Norbert Schlenker, peter71, pkcrafter, Rodc, SP-diceman, tadamsmar, wearethefall, and yobria. I am also extremely grateful to Rob Bennett for motivating this topic and contributing his experience and encouragement.”

    The thread to which he refers came into existence as a result of the 15-year Great Safe Withdrawal Rate Debate that began when I put a post to a Motley Fool discussion board asking whether a valuation adjustment is needed to calculate the safe withdrawal rate accurately. Not one person has been able to find a valuation adjustment in the Greaney retirement study (to which I referred in my Motley Fool post) or in any other Buy-and-Hold retirement study or in any other Buy-and-Hold retirement study in the 15 years of discussion that followed from that post. I have developed a funny hunch over the years that that might be because there is no valuation adjustment in those studies. Yet not one of the Buy-and-Hold studies has been corrected in the 15 years. Wade once asked the authors of the Trinity study to correct their study but was rebuffed.

    Wade had zero problem acknowledging that I was the lead author on that study in the days before you Goons threatened to send defamatory e-mails to his employer if he continued to post his honest views about it. Again, the e-mails in which he expresses his fears of you Goons are posted at my web site. I have no problem with the acknowledgment he gave me in the study. It was perfectly appropriate and generous-spritied. I particularly liked it that he also thanked the Buy-and-Holders who participated in the debates that led to creation of the study; that was a very balanced and charitable and life-affirming way to approach things; that was typical of Wade’s behavior in those days.

    I do NOT believe that Wade should have agreed to stop posting his honest views on safe withdrawal rates as a means of appeasing you Goons. I told him that that was an “insane” decision. We had planned to have that paper featured in a front page story in the New York Times. It merits that sort of treatment. Every investor alive needs to know how much valuations matter to long-term investing success. Wade is in a position to help advance the ball re these matters and I strongly believe that he should be doing all that he can do.

    That said, Wade is in very good company re his fearfulness. I have mentioned in earlier comments here that I held back saying what I knew about safe withdrawal rate for three years because I was afraid of what you Goons would do to me if I dared to “cross” you in that way. That was shameful behavior. And of course there are lots of others who remain fearful today. Bogle is in that group. Shiller is in that group. Bernstein is in that group. Swedroe is in that group. And on and on and on and on and on.

    Once we send a clear message that it is safe for everyone working in this field to express his or her sincere views, no one will be holding back. Some will be advocating Buy-and-Hold. That’s good. Some will be advocating Valuation-Informed Indexing. That’s also good. Some will be advocating elements of both models. That’s also good. No one should ever be afraid to express his sincere views re these terribly important matters. The only way to change things is for some of us to work up the courage to show others the way. I have endeavored for 15 years now to set a good example by being as honest as I can possibly be while never crossing the line and becoming uncharitable while also being as charitable as I can possibly be without ever crossing the line and becoming dishonest.

    I am 100 percent certain that there will come a day when Wade and I will be working together again and when he will praise me to the skies for my contributions to that paper as I of course have always praised him to the skies for his contributions. Wade and I are on the same side and are Bogle and I and Shiller and I and Bernstein and I and even in a deep sense Greaney and I and Lindauer and I.

    I hope that helps clear up any confusion re these points at least to a small degree.

    I naturally wish you the best of luck in all your future life endeavors, my long-time Goon friend.


  11. We’ll have to see how it all plays out, San.

    Thanks for taking time out of your day to share your thoughts with us.

    Please take good care.


  12. Those dubious “great successes” mattered only to you, and they were all years ago. Lately you’ve just been killing time. How about a family referendum on future successes, with the ballot choices “Great” or “Crass”.

    No? Didn’t think so.

  13. It depends on how you define success, Sammy. I have had thousands of my fellow community members tell me that they learned more about how stock investing works from me than from anyone else they have ever known. I have had some of the biggest names in this field tell me that they view my site as the best investing site on the internet. I have my name on a research paper that was published in a peer-reviewed journal and that says things that, if true, make it the most important piece of research published in this field in my lifetime.

    That’s success in my eyes. I am humbled by the great successes that I have achieved over the past 15 years. I couldn’t be prouder. I couldn’t be happier with how things have gone on the substance side. I set out to make a small contribution and the cards fell in such a way that I was able to make a very big contribution. It is certainly not something that I expected to see happen when I was a younger man, you know? It’s got to be a pretty darn great country that we live in that such things can even happen. Holy moly!

    You are focused on something else. We didn’t always know how stock investing worked. Shiller published his “revolutionary” (his word) research in 1981. That research supplied the missing piece (valuations) to the stock investing puzzle. Before then, we just didn’t know. So we got it wrong. We wrote lots of textbooks that got things wrong. It’s hard for people to admit mistakes. So those textbooks still get passed around today. There’s a lot of resistance to the new and better ideas. So it has been possible for you Goons to block my efforts to spread the word.

    Too sad!

    I could go up to my room and cry into my pillow re the unfairness of it all. i guess I’ve earned the right to do that. But would it do any good? That’s what I wonder. That’s what holds me back.

    I’ve been successful in the ways that I most want to be successful. Many good people have thanked my effusively for helping them out. That matters to me. I am happy to have been able to do some good. Bob Dylan once wrote: “There’s no success like failure and failure is no success at all.” I couldn’t have done 90 percent of what I have done if I had not been wiling to take the abuse dished out by you Goons. So missing out on success in the crass terms in which you define it is part of the deal here. I don’t like it. But I guess it would be fair to say that missing out on that kind of success is a price that I have determined I am willing to pay for obtaining the other kind of success that means so much more to me.

    My personal hunch is that I am going to obtain the crass form for success too before all the sand runs through the hourglass. I can live with that! I can go with crass so long as the price is not too high. I’ll take a crass trip to crass Disney World when that happens, you know? So long as I have the deeper form of success in the bag as well, I can enjoy a ride on Space Mountain. We’ll have to see how it all plays out.

    Can you wish me luck, my old friend?


  14. This might just be a crazy thought, but don’t you think you need to have a track record of success if you want to have any credibility?

    You know…….how does it sound when you say, “Hi, I am Rob Bennett. My retirement plan was a horrible failure, but you need to listen to me about how to retire successfully.” Or, “Hi, I am Rob Bennett. My investment strategy has greatly underformed most everyone else, but I will lie to you anyways about the results and then you should follow me down the path of fantasy”.

  15. There you go again with the blame game. Those you describe as “buy and hold” had nothing to do with your decision to stop working at 43 with only $400k in savings. Also, it was you that decided to pull all our money out of the stock market, further adding to your financial disaster.

    Stop blaming others for your decisions.

  16. I once believed in Buy-and-Hold, Sammy. So I know how it is for people struggling to figure things out today. Looking back, I had doubts about certain aspects of it. I silenced those. I didn’t want to focus on the doubts. It was easier and more comforting to continue to believe.

    So we are as a society working through a process that in time will take us to all the wonderful stuff waiting on the other side. I certainly don’t say that most Buy-and-Holders behave as you do. That is certainly not the case. But most do tolerate the behavior that they see play out before them. That’s the real issue here. As a society we need to work up the courage to insist on the same standards of behavior that apply in all other fields. Once we do that, good things start to happen and over time we get to a very good place.

    It’s happening gradually. That’s all I can tell you. Even your own comments have changed in certain ways. They are still not pleasant. They are still not life-affirming. But if people took the words of your posts from five years ago and compared them to the words of your posts today, they would be able to identify important differences in tone and content. There’s a softening of tone in evidence. And that’s true with all of us.

    Those are my sincere thoughts. I wish you all good things. Deep down inside we all want the same things. We all want to know how stock investing really works. We all want our retirement plans to succeed. That unity of core purpose will eventually help us all to get to a very good place. I am 100 percent sure of that much.

    My best wishes to you.


  17. You spend all of your time giving your opinions on what you see as other people’s “mistakes”, but you have yet to spend one minute on your mistakes that led to your retirement and financial failure. When are you going to address that? Certainly, you don’t want people to follow your example.

  18. Thanks for taking time out of your day to share your thoughts with us, Sammy.

    My best and warmest wishes to you and yours.


  19. The only mistakes made were when you decided to stop working at the age of 43 with only $400k in savings as well as the decision to pull your money out of the market, Only to see your failed timing scheme go down in flames.

    Instead of acting like a man and acknowledging your mistakes, you have spent almost 15 years blaming everyone else for your mistakes, just like you are doing yet again.

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