Barry Ritholtz had an excellent story this morning explaining why he views some fund managers, pundits and journalists differently. He said:
“There are those folks who have an approach based on a defendable methodology. There approach to evaluating markets or the economy could be based on fundamentals, it might be derived from quantitative metrics, it could be valuation, balance sheet, macro, momentum, GARP, trend following, technicals, long/short, psychology, sentiment, contrarian analysis.
Call it plug & chug: It doesn’t really matter what the methodology is, so long as it begins with some objective input, runs through a process of sorts, and determines an output.
There are folks in this camp who I am happy to occasionally disagree with. They force me to sharpen my own analysis, be more specific, consider alternatives. These include the likes of Doug Kass or David Rosenberg or Lakshman Achuthan or James Bianco.
Anyone who has an objective approach to evaluating the ever changing mix of inputs to the markets or economy or stocks. These folks are often intellectually curious, have flexible minds, and a high degree of integrity. Whether I agree with their conclusions or not, I respect their process.
Then there is that other group. They are all conclusion, zero input. Process is irrelevant to them, Outcome is all.
They work backwards. They start with a conclusion, and sift through all the data to justify that conclusion. They do not change their minds. They do not care about facts or data or input. They never admit mistakes. “Truth,” as we have discussed in the past, is an irrelevant inconvenience.
They are ideological jihadists.”
This is an excellent comment on many levels. It’s the ability to understand that you will be wrong that allows you to be right. Too many people go through life believing that they have the right conclusions. What they fail to even ponder is whether their process has been correct. For some reason these people accept their conclusions as truth. Perhaps they were traditions handed down by their parents or perhaps they read these conclusions in a book by someone they believe to be smarter than themselves. The great visionaries throughout history have always challenged the process, however. They did not come to some broad conclusion based on historical reference. They challenged the status quo because the process did not appear to be accurate to them.
There’s a great deal of misinformation in this world across all spectrums of life. Do not trust something as fact simply because some great economist or historian concluded as much. That sort of thinking is certain to get you caught up running with the herd and in this business that is almost always a recipe for disaster.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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