Outcome vs Process
I wanted to share an interesting email exchange from this weekend. “R” writes:
“You occasionally shred an argument with more than a hint of animus. I don’t want to say its ad hominem, but it comes damn close. Some people get viciously disemboweled, while others are more gently corrected. Why?”
That’s a fair question. You have identified a pattern, and it is not a coincidence. There are some commentators, analysts, economists, fund managers and strategists I respect. There are others who do not warrant that respect, and I actively dislike their approach.
Why? In a word, Process.
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 group contains a mix of bad fund managers, perma-xxxxs, political ideologues, corrupted journalists, partisan hacks. They are prisoners of the cognitive biases that are so fatal to good investors.
Its called “reaching a conclusion” for a reason; its how you end, not how you begin. We do not say “reaching for a conclusion” but that is how member of this group seem to operates
Once upon a time, I used to respectfully disagree with these folks. That has faded over time, as I have concluded (from various input) that these folks are simply not worthy of that respect. They are not honest brokers of intellectual debate, they merely seek to further their own agendas.
In the process, they make the jobs of those trying to assess the world in terms of risk and reward, opportunity and chance more difficult. To investors seeking truth, clarity, and understanding, these folks are the enemy.
That is why I give them no quarter.
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September 20th, 2010 at 7:19 am
Well put! I was kind of surprised to see this as a post, but “R” does point out an interesting observation and quite eloquently too! Same holds for your response.
September 20th, 2010 at 7:24 am
It might be helpful to remember this assemblage of six words: “Anger is the antidote to Thinking.”
And to this point:
“Thinking is the hardest work there is, which is probably the reason why so few engage in it.”
—Henry Ford
September 20th, 2010 at 7:35 am
Anger (annoyance, really) is what motivates. Its the source of fuel for the long dissertations against ideological stupidity
September 20th, 2010 at 7:50 am
Anger is just the sparks that fly when forging a thought or solving a problem.
Handsomely written response, by the way…
September 20th, 2010 at 7:57 am
Caring very much to disembowel ignorance can be motivating, whereas anger in itself lacks a good bit of the focus and precision to properly confuse the enemy..then there’s anger that finds its most useless expression in alcoholic rage. I’m often called on to put on my Grecian formula K-Y lube’d suit and act as professional prick to get to the heart of a pus-filled impasse. Only after that disinfectant can the bigger, single picture emerge.
September 20th, 2010 at 8:06 am
ToNYC: horrible mental imagery.
September 20th, 2010 at 8:06 am
“Anger is the antidote to Thinking.”
So, what’s the antidote to anger?
Anger can be appropriate, when confronted with the anger or the dangerous/disingenuous stupidity or dishonesty of another.
You don’t have to be polite to someone who is trying to (or aiding another who is trying), to break your leg or pick your pocket. In fact, a harsh and overwhelming put-down (physical or ideological) is probably all they will understand or respond to.
Interestingly, this is where the Dems fail every time: Trying to reason with an angry, irrational opponent.
September 20th, 2010 at 8:06 am
respect is earned, not given. of course intelligence requires one to be polite until the person on the other side removes any doubt that he deserves to be respected.
September 20th, 2010 at 8:07 am
Barry,
Excellent post! I might add that these people (I like to call them “rotters”, and yes, I generally apply this term to the Randians who go to sleep with their Atlas Shrugged tucked safely under their pillow) seek to hide their agendas behind the honest discourse of ideas. They show up on our television screens, our newspapers, our blogs, always careful to appear as nice, good people positing on one side of the debate. This false balancing of ideas, as if their arguments deserved equal weighting to begin with, is insidious. All too often, euphemisms are used to mask their true words, and then when someone pulls away their masks and displays them for what they are, the rotters shriek of shrillness, and swoon as if something impolite was just said and their delicate sensibilities were offended.
September 20th, 2010 at 8:24 am
Reminds me of an old/bad joke:
Q: How do you stop a clown from laughing?
A: Hit him in the face with an axe.
September 20th, 2010 at 8:37 am
Interesting but open to interpretation a little.
Perma sell siders, politicians selling an agenda to economic illiterates, ignorant news reporters, pundits, some tv hosts, and the like are all easy to criticize.
Then you have people like me who can think through a situation and use education and logic. Is that a process if you don’t work on wall street, especially if you ridicule magic charts as a matter of routine while other ‘professional’ claim they are valuable assets to their work? Is ‘process’ a matter of my good process vs your bad process, much like antagonists compare their good kung fu to other’s bad kung fu in karate movies? While I’m sure it is rude to say “My Process is stronger than your process,” is it something that just goes unsaid between dueling analysts? If you use process, will it get you publicly tossed off CNBC by Erin Burnett?
When the Fed floods the world with printed money using various distribution methods, is that process or a Hail Mary? Given their failures in the past, I just assume it’s “trying shit until something looks like it works,”, but I guess it might be process.
Thus, I agree with the overall concept above, but the term ‘process’ need a clearer definition.
~~~
BR: The key word is “Defendable.” Unless you can show some objective causative relationship — thereby eliminating the astrologer/gut instinct/magic thinking crowds — it is not legit.
September 20th, 2010 at 8:47 am
Thanks, bulfinch. I read your Mythology and got deep but no horrors. I’ll spare you further imagery, it’s for my use and value.
I learned from my teen-aged orange tabby how to deal with anger. Stewart does nothing but observe the noise and static from snarling pitbulls looking for a reaction. Expressionless chill, acceptance without care. Not finding the appropriate set of reactive responses, they don’t play that…and you may formulate your response at leisure. You must be conflating all this with a massive, invasive physical attack perhaps?
September 20th, 2010 at 9:30 am
With all the anger quotes on here, I just have to share one I like. “Depression is just anger without the enthusiasm.” Great joke Petey, I’ll have to remember that one!
September 20th, 2010 at 9:39 am
You wouldn’t be referring to Amity Shlaes would you? Or Jerry Boyer or Don Luskin ?
September 20th, 2010 at 9:46 am
[...] Outcome vs Process post gives us a perfect segue to examine exactly the point he was [...]
September 20th, 2010 at 9:57 am
I think “reaching *from* a conclusion” scans better than “reaching for a conclusion”.
—
My opinion is worth what you paid for it.
September 20th, 2010 at 10:10 am
“The most common of all follies is to believe passionately in the palpably not true. It is the chief occupation of mankind.”
– H.L. Mencken
September 20th, 2010 at 10:16 am
Agree with many of the comments, that anger can be productive and a driving force for actions. It is rage that blocks thinking, not anger. The part of the ideological rationalization that makes me angry is that it is dishonest at its heart. If these pundits on financial programs simply said: “I want tax-cuts for the rich because I am rich and greedy, so I want more for myself”, I might respectfully disagree. But they try to put a cloud of “its actually best for all you poor suckers too” and that is so maddening dishonest that it makes me angry.
September 20th, 2010 at 10:44 am
yes
September 20th, 2010 at 10:46 am
Great stuff Kemosabe! Now I realize where the word ” rAnger” derives… a contraction of RightANGER.
A driving force for action. So when we headed out to get that bloody perpetrator of the ambush of our brother Texas Ranger, the Lone Ranger eschewed Rage, and channeled his Anger. I still think if he chilled a bit, he be a steadier shot and have a better plan, but no better actor to execute that plan. Anger was in this case is really just a big push for Justice now.
September 20th, 2010 at 10:51 am
there is a lower level of hell here, or despicableness
there is just aiming at outcome,
then there are…
those who make shit up they themselves KNOW is a lie, like Kudlow
September 20th, 2010 at 11:12 am
BR, your stance reminds me of a comment John Kenneth Galbraith made in a 1984 commencement address at American University (reprinted in the collection, View From the Stands, as “The Convenient Reverse of Logic in Our Time”):
“Increasingly in recent times we have come first to identify the remedy that is most agreeable, most convenient, most in accord with major pecuniary or political interest, the one that reflects our available faculty for action; then we move from the remedy so available or desired back to a cause to which that remedy is relevant.”
Strategically I remain more of a value investor than anything else but have noticed I spend more time analyzing political influence and agency capture than I used to; e.g., it’s easier to ‘not fight the Fed’ by following the logic backwards from where (and to whom) money is flowing …oh yes, and read Tim Duy [g].
WRT emotion, it’s generally a good thing IMO as long as Benford’s Law of Controvery is kept in mind: “Passion is inversely proportional to the amount of real information available.”
September 20th, 2010 at 11:21 am
That should be Benford’s Law of Controversy
(sheesh)
September 20th, 2010 at 11:48 am
dedude,
“The part of the ideological rationalization that makes me angry is that it is dishonest at its heart. If these pundits on financial programs simply said: “I want tax-cuts for the rich because I am rich and greedy, so I want more for myself”, I might respectfully disagree. But they try to put a cloud of “its actually best for all you poor suckers too” and that is so maddening dishonest that it makes me angry.”
More accurately…”Im a paid advocate for positions Im taking.” “The facts for the most part dont support what Im saying but I will try my best to fool you”…Welc0me to the oxymoron of TV news!
September 20th, 2010 at 12:36 pm
[...] Analyzing the analysts: methodology vs. ideology. (Big Picture) [...]
September 20th, 2010 at 1:00 pm
This is really an excellent post. But keep in mind, if everyone were smart, whose money would we take?
September 20th, 2010 at 1:05 pm
DH,
“…Then you have people like me who can think through a situation and use education and logic…”
Can you show me the peer-reviewed statistically-verifiable white paper on this important subject: from n your arm chair – or around your cracker barrel – you can divine the future?
Oh you can’t? Well, you’re perfect for the Tea Party.
September 20th, 2010 at 1:15 pm
Well, JesseLivermore; you were quite good at trading and sitting but you never learned that “Losers Average Losers”. h/t PTJ
“…keep in mind, if everyone were smart, whose money would we take?”
We would take your money. If you were really smart, you’d be a producer and the money appears for doing the right thing that you own. No need here for just takers.
September 20th, 2010 at 1:17 pm
Very well said. You should probably start an owner’s manual for your site and put this down as the First Commandment. Hmmm, maybe I should re-phrase…
September 20th, 2010 at 1:57 pm
From Michael Mauboussin on process and outcome: http://michaelcovel.com/pdfs/UntanglingSkillandLuck.pdf
September 20th, 2010 at 4:56 pm
VD – DH as a tea bagger? Really? I don’t buy that at all.
BR – awesome post. PragCap gave you a shout out for it as well.
September 20th, 2010 at 5:04 pm
Thanks BR for yet another great post. I notice you gave some specific examples of some of the Good Guys, yet no specific “Intellectual Jihadists”. Perhaps there are just too many to mention.
Thanks also to Covel– that was a very interesting article you attached.
September 20th, 2010 at 6:29 pm
“Inquiry is fatal to certainty.” – Will Durant
September 21st, 2010 at 2:33 am
Understood. So that Kudlow one of the respected ones?
September 21st, 2010 at 2:33 am
Understood. So that makes Kudlow one of the respected ones?
September 21st, 2010 at 9:11 am
[...] more clarity and force than I can so I’ll just ask that you take a minute to read his post on outcome v. process. It shouldn’t take more than a couple of minutes or so to read and it will be a few minutes [...]