I am working on a book that will be titled “Investing for Humans.” That’s a strange title. All books on investing describe investing for humans. It would be absurd to write a book on investing that does not apply for humans. Right?
I’m sorry. There has never been a book on investing that aimed itself at the humans prior to this one. Shiller’s Irrational Exuberance came close. But he deliberately (I have to believe it was deliberate – it’s hard to imagine that one could avoid the most important and controversial issues by accident) avoided addressing the far-reaching how-to implications of his research findings in his book.
Shiller walked up the edge of the fiery pit but elected not to jump in. I understand why. I am not unsympathetic to his worries about what would have happened had he jumped. But I do think that I need to note that I am the first person who has been crazy enough to say the things I say in my book. When I think of some of the things that have happened to me as a result,I wish that the universe had selected someone else for the job.
Humans have emotions. A book on investing that does not deal with the reality that our emotions cause us to set stock prices improperly is ignoring a core reality of what drives stock investing behavior. There were books written on investing prior to the Buy-and-Hold Era that explored emotional stuff. But it was the Buy-and-Holders who made the study of stock investing an academic discipline, a science. Those earlier books had value. But they were crude compared to books influenced by Buy-and-Hold thinking. The Buy-and-Hold books are sophisticated but are hopelessly misleading because they leave out more than half of the story.
So this is a first. The job is too big for me. Here’s how I think about it. Someone had to write the introduction for the real book. The real book will be the one that follows mine, the one that becomes possible when every internet site has been opened to honest posting. That won’t be one book, of course. It will be hundreds of books. My aim is to shake things up so that people can imagine writing such books without being driven out of the field prior to the day of publication.
Buy-and-hold produce misleading results
The subtitle of my book is: How to Get What Works on Paper to Work in Real Life. Buy-and-Hold ignores the effect of valuations. So all of its calculations produce misleading results. You cannot ignore a critical factor and obtain sound guidance. The Buy-and-Holders ignore valuations because they presume that investors are rational. Investors are human. It is true that they are capable of rationality. But it is also true that they are at times highly emotional. Shiller’s research made an extremely obvious but also extremely important point.
We need to know how stock investing works for humans. We do. We cannot plan our financial lives effectively if we do not even know the value of our stock portfolio. And there is zero chance that we could know that until we elect as a society to permit the discussion of ideas deemed heretical by our Buy-and-Hold friends. We cannot discuss amongst ourselves how things work today because, if we did, we would learn important things that our Buy-and-Hold friends never told us and that would make them look bad.
You’re a human. I’m a human. If the Buy-and-Holders cannot cope with that reality, we need to move on from them. They are smart. We should be happy to invite them to return to the party once they take about 500 chill pills.
Scott Burns, after initially evidencing enthusiasm over my ideas on safe withdrawal rates, did a flip and told me that my project would prove to be “catastrophically unproductive.” I of course did not agree but I liked the way he expressed the thought – the word “catastrophe” suggests to me that he appreciated how much was at stake. My response was to say that I believed that my efforts would prove to be catastrophically productive. We are as a society on the threshold of changing the world of investment advice as we know it – and I feel fine.
How stock investing actually works
It’s exciting. If my book achieves what I intend for it to achieve, the humans will be learning for the first time how stock investing works in the real world. Again, I don’t mean just the stuff set forth in the pages of the book. I hope that that stuff is on the mark. I’m giving it my best shot, But the real purpose is to get people thinking, to bury the long-discredited dogmas 50 feet in the ground so that we all can employ our intelligence to develop better and more enriching ideas. Mark Twain said that it’s not what you don’t know that hurts you, it’s what you know for certain that just ain’t so. The Buy-and-Holders know a lot of stuff that just ain’t so. If I clear the decks of that garbage, I will have added to the world’s knowledge of this subject in a big way even if none of the how-to advice that I offer stands up to scrutiny.
There’s a phrase that I have used at times. I have said that the same laws that apply in every field of human endeavor other than the investment advice field should apply in the investment advice field as well. That makes sense, no? I view that as an exciting change. Permitting progress over time has worked in lots of areas of human endeavor. I think it makes all the sense in the world to permit progress in the investment advice field as well. The words “I” and “Was” and “Wrong” are powerfully liberating words.
The joke in the title of my book is a deadly serious one because, if we fail to make this huge leap forward, the Buy-and-Hold monster may make it a “game over” situation for both our economic and political systems. It was a close call in the days following the Buy-and-Hold Crisis of 1929 and we reached a higher CAPE level in this runaway bull market than we did in that one.
It’s just so weird to say that this will be the first book that tells you how to invest if you happen to be a human. The first time that one crossed my mind, I knew that I had found my title. It’s absurd and provocative – but true! And of course it’s very scary to see that we have been prohibiting the people who work in this field from considering the human element for all these years. Yowsa!
I am a child of the 60s. The Beatles told us what we need to do. Let it out and let it in. Begin. The thing to do here is to take a sad song and make it better.
Rob’s bio is here.
