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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