Lessons from the 2012 election
Barry Ritholtz
November 10 2012



Wisdom can be found in many places. Whenever I encounter some momentous event with winners and losers, I try to discern broader lessons to apply elsewhere. The 2012 presidential election was no different, with lessons that can be applied to investing and business.

1 Process, not outcome, is what matters. When it came to forecasting the election, the winner was mathematics. Sharp data analysis beat squishy feelings every time. The accuracy of the new class of data junkies and statisticians was the single most important story line of the election for investors. Nate Silver showed data, logical reasoning and mathematics outperform “gut feel” and instinct. The bloviating punditry got it wrong, the stat geeks got it right. To quote the delightful nerd comic XKCD, “To the surprise of pundits, numbers continue to be the best system for determining which of two things is larger.”

2 Do your homework and practice. Yes, I refer to the first debate. “No Drama Obama” created a lot of drama by making an awful showing. He looked unprepared and surprised that his opponent wasn’t simply going to lie down. Perhaps he was cocky after enjoying a comfortable lead for most of 2012. Regardless, the lessons were obvious: You can never be too prepared. And practice is crucial, even if you are the president of the United States.

3 Think deeply before you speak. Grand pronouncements have a big appeal to our egos. They can make us look smart, and play to the policy wonks of the world. But they have limited upside and immense downside. In Mitt Romney’s case, his Nov. 18, 2008, New York Times opinion piece, “Let Detroit Go Bankrupt,” probably came back to haunt him in Ohio, where one in eight workers was employed by the auto industry.

4 Avoid clichés. The media completely misread this election. There were a series of narratives about razor-thin margins, another late night waiting for results, even the House of Representatives having to break a tie. In the end, the incumbent received 3 million more votes than the challenger. But that margin understates the electoral college blowout, with the incumbent winning 332 electoral votes to the challenger’s 206. The one cliché the mainstream overlooked: There are strong advantages to incumbency.

5 Don’t live in a bubble. Large swaths of the conservative movement seem to live in a world of their own creation. The balkanization of media outlets allow people to read only that which they agree with. This selective perception and confirmation bias creates a self-reinforcing alternative universe. Facts don’t matter; data and science are irrelevant. You only hear exactly what it is you want to hear.

Outlets like Fox News and pundits like George Will and Dick Morris were forecasting a Mitt Romney landslide. Don’t like the polling data? Create a site called “UnskewedPolls.com” to provide numbers you do like. As it turned out, UnskewedPolls was the least accurate polling aggregator this election cycle. If you spend most of your time rationalizing why the polls are inaccurate and the media are biased, you will probably be surprised at what happens next. As smart investors know, this sort of bias can be very expensive.

6 Have influential allies. At times, the GOP primary seemed to be a Federal Reserve bashing contest. There was a constant critique about Federal Open Marketing Committee interventions, quantitative easing and the zero interest rate policy. Rick Perry accused Fed chief Ben Bernanke of treason, and seemingly threatened to lynch the man (“I don’t know what y’all would do to him in Iowa, but we — we would treat him pretty ugly down in Texas.”) Ron Paul’s book “End the Fed” made his intentions clear. It was a far cry from George H.W. Bush’s complaint that then-Fed Chairman Alan Greenspan didn’t do enough to help the economy during his 1992 election campaign.

Have a look at Gallup’s Daily U.S. Economic Confidence Index. This survey combines responses to polls on current economic conditions and future economic outlook. The survey reported big spurts in August 2011, following the Fed’s Operation Twist. There was another spurt after September 2012’s announcement of QE3, the third round of quantitative easing. The Fed seemed to be driving economic confidence higher.

The lesson I learned? It is smart not to alienate powerful, well-placed people of influence and authority, especially those who might assist you.

7 Be true to yourself. Romney was a moderate, pro-choice governor who worked as bipartisan chief executive in Massachusetts to deal with a health-care budget crisis. He created a statewide health-care program that was the basis of Obamacare. But Romney ran from that record, tacking hard to the right to win over the base during the GOP primaries before shifting to the middle during the general election campaign.

He would have been much better off running on his credentials instead of morphing into a series of personas trying to please everyone. That is an important lesson to anyone running a business: Understand who you are and what you do best. Focus on providing that.

8 Choose your business partners well. The vice-presidential choice is a major decision any presidential candidate makes. Romney’s selection of Rep. Paul Ryan added nothing to his electoral chances. Ryan failed to deliver his home state, Wisconsin. He fumbled his debate to a grinning and goofy Joe Biden. And Ryan’s plan to “voucherize” Medicaid probably hurt Romney with Florida seniors.

9 It takes more than money. No one is happy about all of the money in politics, but the impact may be more muted than we believe.

Consider the outsize money interests in this election cycle. Sheldon Adelson poured $100 million into six races, and lost them all. Karl Rove’s super PAC put more than $300 million into myriad races; he found success in Indiana – but was shut out everywhere else. And the $91 million dollars Connecticut candidate Linda McMahon spent in two Senate campaigns yielded her exactly zero electoral success.

A threshold amount of money is necessary to be competitive in any business endeavor, but only to a point. Beyond the marginal utility of a minimum dollar amount, pouring more money onto a project is no substitute for substance, a clear value proposition and a product consumers want.

10 It helps to make your own luck. In the waning months of the election, two tragedies presented each campaign an opportunity to respond. The first was the tragedy in Benghazi, Libya, where four Americans, including the U.S. ambassador, were killed by terrorists. The second was Hurricane Sandy, which became a superstorm and devastated parts of New York and New Jersey.

The responses to these to circumstances were markedly different: Obama put partisanship aside, worked closely with New Jersey Gov. Chris Christie and focused on managing the response to the storm. Christie, the keynote speaker at the GOP convention and vocal Obama critic, was effusive in his praise of the president.

Romney’s response to Benghazi was not nearly as bipartisan. He came across as opportunistic, even craven in response to the tragedy. He was, in the light of American deaths, not especially presidential.

Emergencies are opportunities to demonstrate an understanding of priorities, a sense of what matters most. How you respond to circumstances is important. There are times to focus on your business, and times to put that aside and focus on your people.


Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture. On Twitter: @Ritholtz.

Category: Apprenticed Investor, Rules

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Lessons from the 2012 election”

  1. seekye says:

    For item 1, I prefer the title “Process matters.”

  2. Bob is still unemployed   says:

    I’m not sure if this excellent TED talk on The Filter Bubble has been mentioned here previously.

    imo, it is well-worth the time to view it.

  3. ilsm says:

    The GOteaparty depended on their loyal tea party bundes to out number the dems.

    Their polling ignored the possibility that dems could come out like tea partiers did in 2010, or that non tea party republicans might be repulsed by the attack ads and stay home.

    Declining republican voter turnout, with dem getting out the vote skewed the GOteaparty models.

    By 1 Nov it was too late for the expensive, frat boy cribbed campaign apparatus with subdued GOteaparty (kept local dems in a comfort zone that was not there) effort to overcome the dems’ GOTV.

    The campaign against the middle class caused centrist republicans to be a no show. And the independents only went tea party in local and some state house contentions.

    Obama might not appoint a judge to roll back R vW.

    A party of, for and by the 1% leading on the aging white male one percent wannabes is not going to do well in the future.

    This was their last chance at that and they ran a LBO type flim flam.

  4. ToNYC says:

    Two words to remember not found in this list of ten and 1221 words; good now and for the next 4 years:
    Authentic rules.

  5. call me ahab says:

    “The lesson I learned? It is smart not to alienate powerful, well-placed people of influence and authority, especially those who might assist you.”

    100% lock that critiquing the Federal Reserve turned the tide of the election . . .lol


    BR: Not if you go by the longstanding projections of 538

  6. call me ahab says:

    you’re alright BR- still read your blog pretty consistently- don’t comment much anymore as my comments are always moderated-

    regarding the election- my opinion is the results were set in stone when those two GOP bozos commented on rape and abortion . . .reminding every woman in the country why they hated the GOP

    Bill Maher has it right (just as Chistopher Hitchens did- RIP):


  7. Eric Schneider says:

    #11 “Always tip your waitstaff.”

  8. Neil C Denver says:

    Obama received 6,003,912 fewer votes than he did in 2008. Romney received 297,233 fewer votes than McCain in 2008. The lesson that I learned from this election is that Americans are getting disgusted with Washington politicians.

    What’s most disturbing is that for the most part, both candidate’s supporters were fervently for them and totally ignored bald-faced lies by “their” candidate. When the truth no longer matters, there is no light at the end of the tunnel.

  9. romerjt says:

    Those are good lessons . . I’m still hung up with some questions:
    1. Can the Democrats continue to count on the Republican incompetence? Without the disaster that was George Bush, Obama probably would not have been elected. And again, how could they not beat Obama this time? Is this something the Dems can always count on?
    2. Can’t wait to read the book on Jim Messina and big data, has this changed campaigns forever and how so? Anybody watch Person of Interest?
    3. Can anyone imagine Mitch McConnell or John Boehner going to Mississippi or Alabama and telling a Republican crowd, about half of which believe he is a Muslim, that he is not? What are the probabilities that the Republican leadership will speak truth to power to their fringe?
    4. Black Swans – Nixon had Watergate and resignation, Carter the hostage crisis, Reagan got shot, Clinton had Monica, George W. had the housing bubble (911, Katrina and others) . . . What’s Obama’s Black Swan?

  10. SecondLook says:


    For what it’s worth, my take on your questions:

    1. I wouldn’t call the Republicans incompetent. In fact one could argue the opposite: 30 Republican governors; 27 state legislatures (really 28, Nebraska’s officially non-partisan unicameral legislature is dominated by Republicans); 22 where the Republicans control both the state house and the governor’s mansion, as opposed to 11 for the Democratic party; likely a clear majority of local offices throughout the country. On the National level, they have controlled the House steady since 1994 with only a four year interruption. In the Senate, they have had the majority 6 out 10 times from 1994. Arguably, over the past 18 years, the Republicans have been the competent, as in being successful than the Democrats.

    By without Bush as a disaster do you mean if they had selected McCain instead, or if Bush hadn’t been such a failure? It’s really hard to predict, but we do know from history, that Americans strongly tend to favor incumbents, and don’t like to have one party control the White House for more than 8 years – I’d suggest that 2008 was likely to be a Democratic year, regardless.

    3. The Republican leadership is between the proverbial rock and a hard place when it comes to changing their agenda, even moderate. Their core constituency are evangelicals, conservative populists, and and semi-libertarians; all of which are rather passionate about their positions. Frankly I doubt that they can make any meaningful moves… perhaps some to try to gather some Hispanics by diffusing the immigration issue, but that will only get them a few more percent of that voting group; Hispanics have other issues with the Republicans that are being glossed over by the focus on simply immigration reform.

    4. If you think about, none of the events you described as Black Swans really were. Nixon who would have been a perfect character for Euripides, was a tragedy waiting to happen. The hostage crisis comes close for Carter, although once the Iranian revolution happened, anyone reasonably knowledgeable about the Middle East knew that bad things were going to happen. I strongly doubt that if the assassination attempt on Reagan hadn’t happened it would have changed the 1984 elections, or any of his policies. Clinton, like Nixon, was just one misstep from being a tragedy (or a farce) – anyone who knew him, and many did, know that. As for George W. Bush, it was predictable, ask any honest Texan.

  11. malinvestment says:

    “9 It takes more than money.”

    I think I disagree somewhat. I’m not sure Big money was muted…more like Big money was poorly invested.

    The right wing likes to denigrate Obama because he was a “community organizer”, like that means he is unqualified. Ultimately, his campaign organization reflected those roots and at least for now that’s the model everyone is analyzing.

    What happens when the big money gets poured into that model…the better investment.

    I think it is way to soon to proclaim that big money doesn’t matter in winning elections.

  12. JimRino says:

    Romney was not bipartisan. He delivered 800 Veto’s in office.
    It was the Democratic party, with 87% control of the legislature, who delivered Romneycare.
    Romney just signed a veto proof law.

    Romney is just as much a Tea Party Nut as Morley Tait.
    He would have been GBIII.

  13. JimRino says:

    Americans fought back on the pac’s, we gave our $25 – $100 gifts to Obama to keep him competitive.
    Then we voted.

  14. JimRino says:

    Romney was a flawed candidate, because of his business “experience”.

    While he was bashing Chinese trade practices, and saying he was going to increase jobs in the US, Bain was in the weeks before the election Outsourcing another factory to China, a company in OHIO!
    - His stupid greed was stronger then his presidential desire. He undermined is own election.
    - Then there’s Bains record of Robbing Republican shareholders, bond holders and small businesses that had done business with Bain.

    3 Million Republicans stayed home. They were the smart ones.

  15. JimRino says:

    A bigger question is: Did Anonymous Save Ohio by putting up a Firewall to block the Rove Man-In-The-Middle attack on the vote tabulation numbers? And if there’s any proof of a real Man-in-the-Middle attack, why isn’t ROVE IN JAIL.

  16. DeDude says:

    The task GOP face at every election is to get about half of the 99% to be in favor of policies and a party that serve the 1%. Two of their big tricks have been: 1. tribalism (mostly race-based) convincing poor white’s that the important tribal divide is between races rather than economic class; 2. the trickle down fable that giving more money to the 1% is supposed to be what is best for the 99%. Both of those are losing power as whites become a lesser fraction of the electorate and trickle down has failed so often that even the biggest fools are beginning to refuse being fooled again. Furthermore, religion is slowly losing its power so bribing the priests to tell their sheep that God want them to vote for GOP is also losing power. But I would not count the GOP out. The 1% have all the resources, and the science of manipulation is making huge progress. They will likely come back with a bait-and-switch moderate and are probably win in 2016. They just need to convince their tea-party dummies that in order to get power they need to lay low – not that hard to convince them to use deception to gain power.

  17. Jim67545 says:

    BR: A particularly good piece of writing.

  18. dvdpenn says:

    A better lesson than the one provided for #2 is that you should be wary of fading the favorite because of poor performance in the first quarter.

  19. Joe Friday says:


    Clinton, like Nixon, was just one misstep from being a tragedy (or a farce) – anyone who knew him, and many did, know that.

    * Nixon was a criminal.

    He ordered the FBI and CIA to break into people’s homes and offices, wiretap journalist’s phones and open their mail, and ordered the theft of a psychiatrist’s private medical records. He authorized forgery and the illegal payment of hush money to illegally obstruct an investigation.

    He orchestrated a massive cover-up involving the FBI, the CIA, the IRS, the INS, and the Justice Department involving obstruction-of-justice and perjury, as well as a vast illegal destruction of evidence. He then ordered his aides to lie before a grand jury.

    He ordered fire bombings !

    It was a vast constitutional abuse of authority by a President of the United States who attempted to subvert government by wholesale shredding of the U.S. Constitution.

    * Clinton left office with the highest approval rating of any President since Franklin Delano Roosevelt, who had been elected to four terms. He was able to successfully enact more of his campaign agenda into law than any other President since FDR.

  20. KGaetano says:

    Re #7:

    If Romney had been “true to himself,” he might not have won a primary, and I venture to say NEVER would have secured the nomination. The GOP “base” (never has a group been more aptly named!) wants ueber-reactionaries.

    Romney stands for nothing, so transmogrifying to the Right wasn’t difficult for him. But he couldn’t hew to his Massachusetts record. The 47% remark would seem to indicate that his Massachusetts record was an aberration, but that’s uncertain.