Investing Books Are Boring Because They Talk Down to the Reader.
There is a line in a book by William Bernstein (The Four Pillars of Investing) that served as a breakthrough for me in my effort to understand why today’s investing advice is so poor. Bernstein noted that he discusses lots of mathematical concepts in his writings and commented that he has been told that each numerical calculation included in a book decreases sales dramatically. The clear suggestion being put forward was that this is a bad thing.
Is it?
I suppose that some think it would be nice if we were a society of Albert Einsteins and we all counted down the hours while we were at work until the coming of that wonderful moment when we could return to the one thing in our lives that made it all worthwhile — being able to stay up all night studying the mathematical calculations set forth in the latest investing guide. Bruce Springstein wrote a song about this special moment of the day:
When I’m out on the street, I never feel sad and blue
When I’m out on the street doing investing calculations with you!
It goes something like that anyway. I’m not convinced that this would be such a great thing. That sort of world would be a world of monsters, in my estimation. We need Numbers Guys and Gals, to be sure. But I don’t want to live in a world in which everyone is a Numbers Guy or Gal. I see it as a healthy thing that the people who are not Numbers Guys and Gals and who work hard all day are looking for something a bit more on the light side for the bedtime reading table.
Bernstein blames the reader for not liking mathematical calculations. He should be blaming himself for liking them so much that he feels a need to include in his books more of them than most people can tolerate. I like Bernstein. I like his book. But come on.
Mathematics is part of investing. That’s a fact. It doesn’t follow that investing guides aimed at the general public need to include extended discussions of mathematical concepts. The idea is for the author to learn from that stuff and then present the insights developed by doing so in a nice easy-to-swallow format for the benefit of his readers.
I detect a bit of a patronizing tone in Bernstein’s comments. I don’t think it is intentional. I don’t think he sees it himself. I think he believes that he knows more about investing because he is comfortable with mathematical calculations. I think he is wrong. I think that Bernstein could learn a lot from some of those people who are not willing to work their way through too many mathematical equations in an investing guide.
The job of an investing guide is to help people learn. If mathematical equations don’t do the trick, the job is to find another way, not to complain that the way in which you would prefer to proceed doesn’t do the trick.
Investing Books Are Boring Because They Are Written by People With Poor Communication Skills.
We’ve had a good number of conversations at the Retire Early boards about the differences between different personality types. The “planner” type (these are INTJs, in Myer-Briggs personality testing lingo) dominate in the investing advice field. This type is good with numbers. This type is terrible at communication with other humans. This type should not be writing investing guides.
Please do not think that I am down on INTJs. I have picked up hundreds of investing insights from INTJs. Still, I believe that this type generally should not be writing investing guides. INTJs are not good communicators.
Do you remember how people used to say that Ronald Reagan had no business in politics because he was just an actor in B-Grade movies? It turned out that Reagan went pretty darn far in the politics field despite his lack of “credentials.” What he possessed was communication skills. Communication skills matter.
Too many investing guides are written by people with the wrong sorts of skills for writing an investing guide. They are written by people who manage lots of money or by people who love numerical calculations or by people who elbowed their way to the top of a mutual fund and want the ego gratification that comes with having your name on a popular investing guide. The millions of middle-class investors who need to learn how to invest are looking for something very different from what these sorts of people can provide. So they are naturally bored by many of the investing guides available to them in bookstores today.
Investing Books Are Boring Because They Don’t Tell the Full Story.
The types of people who are widely referred to as investing “experts” tend to stick together. They read the same articles, attend the same speeches, think the same thoughts, offer the same advice. The dominant model of how investing works in recent years is the Stocks-for-the-Long-Run Model, which is rooted in a belief in a disastrous academic theory known as the Efficient Market Theory. If these people got out and talked with people not associated with the stock-selling industry more often, they would come to see the holes in this theory and in this investing model. But they have permitted themselves to get all caught up in what Elvis Costello once referred to as “a brilliant mistake.”
I wish that I could push a button
And talk in the past and not the present tense,
And watch the Efficient Market Theory
Disappear like it was common sense.
It was a fine idea at the time.
Now it’s a brilliant mistake.
Again, it’s been a few years since I listened to the album that contains that song. It’s possible that I’m just a little mixed up about a word or two of that one. I’ve got the feeling right anyway. That’s what counts in the investing advice biz, right?
Analyses rooted in the Stocks-for-the-Long-Run Paradigm ignore the human element of stock investing, the manner in which emotional humans first push stock prices up to absurdly high levels (this article was posted in September 2007) and then down to absurdly low levels. Ignore this element and you ignore half of what you need to know about how to develop realistic long-term investing strategies.
Can you imagine any book that ignores half of what those interested in the topic addressed need to know about it being exciting? The writers of investing books need to get their heads out of the In-the-Koo-Koo-Clouds World dreamed up by the Ivory-Tower Eggheads and get real. Real is not boring.
Investing Books Are Boring Because They Don’t Make Sense.
Please don’t think that I have it in for William Bernstein. His book is the one that often comes first to mind when I am formulating these arguments because it is so frustrating a read. Chapter Two of The Four Pillars of Investing is my favorite chapter of any investing book that I have read. The rest of book is gravely flawed and at times extremely dangerous. The mix of the good and the bad contained in this book sums up for me all the flaws that make so many investing books so boring. A community member named “Raddr” (he’s the owner of the Raddr-Pages.com site) once went so far as to assert that Chapter Two is “out of context” with the rest of Bernstein’s writings! That one kills me. How can an entire chapter be out of context? But Raddr has a point. Chapter Two puts forward critically important points about valuations that Bernstein ignores in most of his other writings.
Bernstein says on Page 3 that: “Assets with higher returns invariably carry with them stomach-churning risk, while safe assets almost always have lower returns.” He says on page 234 that: “it’s likely that future real stock returns will be in the 3.5 percent range.” He says on Page 235 that: “Treasury Inflation-Protected Securities (TIPS) currently yield a 3.5 percent inflation adjusted return” but that “for firm believers in the value of a diversified portfolio, this options is profoundly unappealing.”
Huh?
The point of diversification is to reduce risk. It’s not possible to have less risk than is present in an all-TIPS portfolio. Bernstein is saying that TIPS are likely to provide the same long-term return as stocks at far less risk. So what’s the downside of this “profoundly unappealing” asset class? Bernstein is holding all the pieces of the puzzle, but he is not able to figure out how to fit them together. He puts forward a good number of intelligent-sounding sentences. But then he offers advice that is at odds with the course of action arrived at by a logical consideration of the points made in those sentences. Bernstein himself doesn’t find his arguments sufficiently compelling to cause him to take them into consideration when formulating his investing advice; how can he expect them to hold the attention of his readers?
Bernstein’s clear preference for stocks even at times when stocks are absurdly overpriced does not make sense. An argument that does not make sense is like a song without a melody. Playing it so loud that it demands attention works for only a short while. That sort of thing gets boring fast.
If I discovered such a logic error in a book that I wrote, I would be mortified and would want to call the book back. But if all the investing books that contained such elementary errors in reasoning were recalled, the bookstores would need to hire more employees to handle the massive increase in foot traffic. By no means is it only William Bernstein who is guilty of this sort of thing. Truth be told, Bernstein is one of the best, not one of the worst. My sense is that the authors and editors of most investing books just flat-out do not care whether the arguments in them make sense. The aim seems to be to attain enough surface plausibility to attain a sale in a field in which standards are low but not to worry whether the ideas put forward hang together or stand up to serious scrutiny.
Have you ever watched a suspense movie in which the plot does not make sense (I know you have because I’ve watched dozens of them!)? Such movies can pull you in and keep you excited for a time. As the plot line grows more and more absurd, however, you lose interest. Investing books that do not make sense are boring.
Investing Books Are Boring Because They Place Too Much Focus on Numbers.
The most valuable poster in the Retire Early community is John Walter Russell (owner of the Early-Retirement-Planning-Insights.com site). This fellow is not just a Numbers Guy, he is Numbers Machine. The numbers are important. You must study the numbers to know how investing really works.
It doesn’t follow that investing books need to be filled with numbers. I am making a separate point here from the one I made above. The point above is that most middle-class investors do not find much appeal in a book filled with numbers. The point here is that, even if they did find appeal in such a book, a book that is focused on the numbers is telling the boring part of the investing story.
What do the numbers mean? What do the numbers tell us? That’s the exciting part of the story. The numbers must be discussed in any effective investing guide. But let’s not get carried away, eh?
My sense is that the authors of many boring investing books focus on the numbers because it is safe territory to talk about them. Many of the people frequently referred to as “experts” possess only a surface understanding of the subject and do not feel comfortable exploring too deeply what the numbers mean.
The authors of many investing books are faking it. Faking it produces a boring read.
Investing Books Are Boring Because They Get the Numbers Wrong.
It’s not just that most readers don’t like struggling with numbers and that investing books focus too much on the numbers. Another reason why many are so boring is that they get the numbers wrong. If there is anything more boring than having to work your way through a lot of dumb numbers, it’s having to work your way through a lot of dumb numbers that don’t add up.
Stocks for the Long Run is the granddaddy of numbers-based investing books. I wouldn’t call that book boring; it’s been too influential to be called boring. I would say, though, that Stocks for the Long Run will not stand the test of time. When stock prices come down, the holes in the arguments put forward in the book will be revealed (please see the article at the “The Book I Read” tab for a discussion of the flaws of this investing guide), and most people in search of an investing guide will be much less interested in learning what it has to say than they are today.
If you are going to report the numbers, be sure to get the numbers right. That’s the ticket to producing a non-boring numbers-oriented investing guide.
Investing Books Are Boring Because They Take Copycat Positions.
They all say pretty much the same thing, don’t they?
Buy-and-hold. Stocks are best. Timing doesn’t work. Blah, blah, blah. Blee, blee, blee. He said it and he made lots of money doing so, so I’ll say it too, maybe I’ll add a chart or a cartoon to bring a bit of something that might look for a moment like life to the dead horse. I hope that many fall for it a second time and I catch a big wad of that easy money I have seen so many others grab onto in recent years, blee, blee, blee.
When those trite phrases from the huge bull fade from popularity, there will be a new series of trite phrases inspired by the huge bear that inevitably follows a huge bull that will be just as boring to those seeking an understanding of how stocks really work in the long run.
The truth about stock investing cannot be summed up in a trite phrase or two or three. An exciting investing guide needs to report the truth in the phrases noted above while also pointing out the flaws in them. Science is more exciting than science fiction.
Investing Books Are Boring Because They Fail to Explore the Connection Between InvestoWorld and that Place That We Fancifully Refer to As “The Real World”
Few people buy cars because they like cars. People buy cars because they want to be able to get from one place to another place.
Few people buy telephones because they like telephones. People buy telephones because they want to have conversations with their friends.
Few people buy investing books because they like investing books. People buy investing books because they want to do things with their lives that they will only be able to do if they obtain a strong long-term return on their accumulated savings.
Too many investing books talk about investing as if it were a separate topic from the topic of how to live a successful life. It is not a separate topic. An exciting investing guide must always keep the connection between the little picture and the big picture in mind. Telling people how earning better investing returns can change their lives, that’s exciting. That’s the point of the project. Too many of today’s investing guides get too caught up in their convoluted arguments on behalf of the trite catch phrases that they fail to address the point of the project in an effective way.
Investing Books Are Boring Because They Are Quickly Dated.
I noted above how the trite observations that serve as the driving force of most of today’s investing guides will become outdated once stock prices return to reasonable levels. People should not have to buy new investing guides each time we enter into a new stage of the investing cycle. An exciting investing guide is one that can be read for profit both in bull markets and in bear markets. Investing books written to appeal to the investor prejudices of one particular type of market come to be seen as boring in a relatively short amount of time.
Investing Books Are Boring Because They Overlook the Drama of the Topic.
The investing story is an exciting story. It is a story of fear and greed and hope and love. It is a story of shame and guilt and friendship and generosity and determination and humor. It’s all there. It is a story of how pride causes the downfall of those who have come to see themselves as bigger than they are. It is the story of how the little guy can gain an edge on the powerful by tapping into a few powerful insights of the type that helped David overcome Goliath.
The investing story is an exciting human drama. You wouldn’t know it from reading most of today’s investing guides. But it’s so.
Ask Bruce Springstein.