On Looking the Other Way
My last blogpost had a horticultural flavour to it, reflecting on the Dutch Tulip Bulb speculation of the 1630s as an example of the entirely predictable kind of phenomenon which, from a rational perspective, is only likely to have one kind of outcome. A distinctly unhappy one.
And there were other examples too. I supplied a couple of those within the blogpost, and I am sure you could come up with many more. It's worth exploring this topic a little further, as it has perplexing implications. You will no doubt recall the rather unsavoury Dominic Cummings debacle, resulting in his fall from grace: it was like watching a car-crash in slow motion, and with the benefit of hindsight, it is almost impossible to conclude that things might have worked out in any other way. That trip to Barnard Castle was like a gift to the meme industry, and there have been other prominent falls from grace for politicians who told us to do one thing and, privately, did something quite other. There's really nothing surprising about their comeuppance, so what's going on?
After all, we pride ourselves on our education system, one that is now measured and benchmarked down to the last possible permutation. It's not only complex, and pre-loaded with the kinds of regulation that all of us have wearily become accustomed to over the last few decades, it's expensive too. It's no longer 'just' expensive for the chinless wonders who go to Eton, and end up making a Mess in Downing Street - it's expensive for every single undergraduate who will, one day, emerge from college with a tottering pile of student debt and a degree in 'socio-economic sexuology' (credit: Rowan Atkinson). And will feel unaccountably aggrieved that they can't walk into the career of their dreams.
So, if human beings make Really Bad Decisions, there must be something else going on, right? There is, apparently, no lack of intelligence - in my last blog, I referred to Sir Isaac Newton, a man with a brain the size of a double-decker bus, who somehow managed a feat of such monumental silliness that he must have spent the rest of his life with a terminally-bruised backside, due to the number of times he kicked himself. In this connection, I recall the day when the Girl From Harlequin Property called, to persuade me to endorse their offshore (unregulated) holiday property product to ValidPath Members. Everything about this encounter screamed 'Danger, Will Robinson!' (you need to be a certain age). Firstly, I had no idea that dresses could get that small, and still actually qualify as a garment. Secondly, the product literature more than made up for deficiencies in the apparel department by an over-supply of lavish scenic photographs, and the generosity of the promises. If there were a statutory regulatory warning along the lines of 'Too Good To Be True' (in red letters), then that would have been stamped all over the glossy brochure. It wasn't of course, but you did not need to be possessed of any special degree of insight to go and hide in the nearest cupboard.
I am hopeful that ValidPath Members are grateful that I did not succumb, but I can't lay any special claim to either insight or IQ. And here's the point: plenty of IFAs all over the UK did recommend this toxic stuff to their clients. All of them would have had good technical qualifications, and I gather that plenty of them jeopardised their own retirement prospects by using their SIPPs to acquire an asset that was just on the cusp of becoming worthless. Clever people do Dumb Stuff, so that (self-evident) observation should at least cause us to pause along the road to Almost Certain Financial Oblivion. The failure to take that necessary step is, I suspect, due entirely to conceit - a misplaced belief in one's own capacity to sidestep the bullet, somewhat akin to the chap who steps out into the road directly in front of your moving car, and deliberately looks in the other direction.
I've seen enough instances of this kind of mayhem over the years to have learned that the pathology of Looking The Other Way is to blame for the kinds of financial decision which can only be described as lunacy. The solution is the opposite: look directly at whatever proposition is currently commending itself, and look at it from multiple angles. Advisers who recommended those Arch Cru funds simply did not look closely enough - in a sense, they allowed their own opinions and self-image override the duty of care that we should reasonably expect from diligent Advisers who care deeply about the nature of outcomes. In a sense, a good dose of humility is an essential corrective for any deficiencies we might have when it comes to technical analysis.