The following is a guest post by Rob Bennett, who writes at many venues. We’re grateful that Balance Junkie is one of them. This instalment of Rob’s monthly column is sure to stir some debate, so I’d love to hear everyone’s thoughts on his thesis here. Enjoy!
My boys (Timothy, age 12, and Robert, age 9) and I were watching a DVD of the old television series I’ll Fly Away a few days ago. The series tells the story of the civil rights struggle of the early 1960s and how it affected the people of a small town in South Carolina. There’s one scene that we watched that I believe tells a good bit of the story of what is going on in our minds re the economic crisis of today.
A black minister and several members of his congregation make a decision to sit down at the lunch counter and order sodas. The white people in the town are horrified and take action. A milkshake is poured on the head of the minister. A cup of coffee is poured on the head of one of the members of the congregation and he runs screaming from the premises to the sound of the taunts and laughs and threats of the white people of the town.
It’s tough stuff. Obscene stuff. It’s stuff that I am confident left an impression on my boys.
The wonderful thing about the series is that its message is not “Weren’t those people awful?” That is one message, but it is balanced with others. One of the other messages is “Weren’t those people afraid?” Even the father of the black maid who is the protagonist of the show warns her against registering to vote because he fears the social unrest that will follow once people like her start making choices like that.
We have goodness in us. And we have e cowardice in us. That’s the full truth.
The people who turned to hate during the civil rights battles made bad choices. It doesn’t follow that they were 100 percent bad people. They were frightened people. Change is scary. They used their minds to rationalize justifications for behavior that could not be properly justified on grounds that “that’s the way it is” and that racism can never be ended and so it only causes trouble and pain to take steps in that direction.
That’s where we stand today re the Get Rich Quick investing advice that Wall Street has been shoving down our throats for decades now and re the unimaginable amounts of human misery that we have caused by our failure to speak up.
Moving on to better models for understanding how stock investing works is going to mean pain. Thousands of books will need to be rewritten. Thousands of big shots who made their reputations promoting failed ideas will either need to leave the field or remake their reputations promoting very different strategies. Thousands of lawsuits will be brought by those who trusted in economic and political systems that have failed us all.
The question that prudent people need to ask in situations like this is — Is there another way? Is it possible to avoid the pain that we see coming if we do the right thing?
The people who pushed for civil rights laws were right to do so because there was no other way. The way of life that had come to be in that South Carolina town could not continue. It was degrading for blacks. And it was degrading for whites. It was unacceptable times ten.
So it is with Buy-and-Hold. Those who follow the academic research have known for 30 years that there is precisely zero chance that this “strategy” could ever work for any long-term investor. But those who can imagine the pain we will all feel as we make the transition to something better are able to rationalize not speaking up. It’s always been this way. Wall Street has always been in the business of exploiting human weaknesses and getting rich off of tall tales. That can never change.
If it were true that it could never change, the foot-draggers would be right. No good is served by fighting battles that cannot be won.
But this battle can be won and cannot be avoided. Once we did away with defined-benefit pensions and put the responsibility on workers to finance their own retirements, we made it impossible for the Get RIch Quick garbage for which Wall Street has long been famous to continue too much farther into the future. The human suffering that follows from the continued promotion of Get RIch Quick has grown too great. What cannot be will someday no longer be.
I believe that we will win this battle. I know from my conversations with tens of thousands of middle-class investors that most today want to kick the can down the road, to avoid talking openly about what caused the economic crisis and about what we need to do to bring it to an end. I also know that many also possess a secret longing for learning the realties, a longing that will achieve greater influence after the crisis worsens enough to leave us all feeling that we simply have no choice but to stop kicking the can and to start talking real.
We’re not bad people. We’re flawed people We’ve done a terrible, terrible, terrible thing in letting this situation go on so long. But my hunch is that we are going to surprise a lot of people with the good we do once we put our minds to it. Once we accept that we have no choice but to fight this fight, we will fight it hard and we will fight it to win and we will achieve a great deal of good in a short amount of time.
Those of us who oppose can kicking need to keep all this in mind. Those who aid the can kicking project will be our friends when we get to the other side of the Big Black Mountain together. I have a catch phrase that I use to remind myself of where to draw the line: We need to be as loving as we can possibly be short of becoming dishonest and we need to be as honest as we can possibly can be short of becoming unloving.