A "Personal Confession and Manifesto" to Darkgreen, slightly off-topic and FWIW:
Hi, Darkgreen,
In your Sunday evening post #6959, you ask whether I have any answers to the questions you asked in your recent posts to me and Pronichev. In reply, no, I do not. I sense answers in the present context will lead in a direction I do not want to go. I do not want to be drawn further into what I sense is devolving into a debate where only rhetoric triumphs. (I admit, though, the post by Jacques Tenzel offered the possibility that some good may yet come of it). I find rhetorical arguments tiresome. I do not enjoy, or even quite trust, debating for the sake of debating. I must even confess to a certain contempt for debates. In so far as debates merely pit quick intellects in mental dueling matches with no larger purpose, I sense they risk producing misleading and even pernicious results. Of course, this attitude merely reflects my personal style, but I have a substantive reason for it.
For many years I lived in a powerful academic environment in which high intelligence was the coin of the realm. Everyone was bright and well-educated. One had a Nobel prize, and others may yet receive one. What I learned, however, was that not everyone was also wise. Some were very bright fools. I vividly remember several conversations in which it was argued that intelligence and wisdom are synonymous. They thought their intelligence made them wise, and their well-crafted arguments were wisdom. The confusion stunned me. I thought then, as I think now, that intelligence is inherited while wisdom is cultivated. I thought then and now that a high level of intelligence is valuable for good analysis, but wisdom is essential for good judgement. To me, in the academic context as in the Valence context, wisdom is the ability to step back from one's own arguments to make a fresh and dispassionate judgement about the subject matter.
From observation I also slowly learned that high intelligence was often the enemy of wisdom. Many experiences made it clear that the extremely bright are capable of making such clever arguments to win the debate of the moment that they were vulnerable to actually believing them. While there was something attractive about the passion behind their arguments, still it was sad to see the passion bind them to thoughts a wiser and more dispassionate perspective would have quickly abandoned. The sophistic results blinded them to other possibilities, often for many years and high cost. The upshot of their high intelligence was that, in a funny way, it made them somewhat impervious to the process of acquiring wisdom that is ordinarily the prerogative of increasing age and experience. It turns out, I suppose, that there is an optimal level of intelligence; too much can turn out to be as detrimental as too little. I felt lucky.
My interest in the academic environment, and in this thread, came out of a different motivation. I enjoy play; I enjoy playing with ideas. I enjoy playing with something from as many perspectives as possible. I enjoy teasing out an idea's assumptions and implications, its strengths and weaknesses, its aesthetics and its utility. I enjoy juxtaposing alternative ideas. I enjoy discovering new perspectives and devising new ideas. I enjoy discovering how one idea relates to another and how sets of ideas create forests out of trees. I enjoy the resulting sense that my understanding of the subject has been deepened and enriched. And I enjoy doing this with other like-minded people. I don't care where the ideas come from or where the credit goes. The joy of intellectual play is what drew me into the academic world for so many years, and more recently to this thread.
I tell this story because I think it has a bearing on my ability to be a successful investor. I find that playing with ideas both enables their careful analysis and preserves my capacity for fresh and dispassionate judgement. The trick is force myself to continually recall the distinction between skillful argument and wisdom. That is, the trick is to always be recalling that one perspective, no matter how compellingly argued, is only one perspective, and that other perspectives may have their own merits even if they are not as skillfully presented. Investing -- which is forward-looking by its nature -- is not a mathematical computation with one right answer, nor is it compelled to reward the debater with the best argument or the most points. Beyond the sheer role of chance, a part of successful investing, I think, is the ever-present awareness of the necessity of recognizing that one's own passions and supporting arguments and beliefs have all the weaknesses and limitations implied by the existence of other perspectives.
It is because I want to protect the dispassion that enables this awareness that I distrust engaging in debate. I try to avoid getting sucked into debates which capture my ego and blind me. I find playing with the ideas surrounding the investment is far safer and more productive.
For this reason, I will continue as before. As a participant in this thread, I have offered most of my posts in the spirit of playing with ideas. My challenge to you last summer was in this spirit. I have brought little else to this thread. When the comments of others on our existing materials have led me to a slightly new and interesting perspective, I have posted my thought on the chance that someone else might be stimulated by it to see things in their own slightly new way, and on the hope that they in turn might post their thoughts to stimulate my own thinking further. This is the process of playing with an idea. Of course, it is only one form of contribution to the thread. Others make their own contributions in many forms. New information, links to other sites, discussing the interpretation of things, and even humor are all at least as important to the thread. Fortunately for me, not everyone shares my style or thinks my thoughts. It is the diversity of perspectives and styles that makes the thread work for me. I'll leave the informing and linking and discussing to others, and use the stuff they provide for play.
Meanwhile, net-net, I still find Valence worthwhile despite the wisdom of your advice to wait.
Regards, lws
PS. Your response to my rather inept treatment of opportunity costs was appropriate, but I'm afraid our joint efforts still leave the matter in a muddle. The concept is simple on the surface, but subtle and illusive when examined closely. Books have been written on the subject (e.g., J. M. Buchanan's Cost and Choice). I had thought of returning to the subject, but I think now I will let it go after one comment: "...making solid risk/reward assessments" in order to "lin(e) up all the investments of equal risk" entails much subjectivity, and certainly is full of difficulty and hazard. Like "opportunity costs," the "risk/reward" concept is simple on the surface, but subtle and illusive when examined closely. While I agree in principle with your proposal to hold risk constant, for the purposes here I don't think it is workable enough to be reliable in practice.
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