Last week, I tweeted my disappointment a favorite singer/songwriter had gone off the deep end: Van Morrison, well known as an eccentric musical genius, suddenly began spewing conspiracy theories about Covid and Lockdowns (even veering into Anti-Semitism). Then he wrote a few songs about it. And then a few more. It was as if the 75-year old had spent the past year in Facebook conspiracy groups and Q-anon chats.
Fans were scathing about his demand for full-capacity audiences: “This is madness. The science is real.” And another said, “We love you, Van, but calling pandemic management protocols ‘pseudo-science’ is probably the dumbest and certainly the most dangerous idea you’ve ever put your name to.” The Los Angeles Times asked “How could the man who sang so empathetically about a girl dying of tuberculosis in 1967’s “T.B. Sheets” now speak and sing so callously about a disease that has claimed the lives of more than 3 million people worldwide?”
It is not just Van the man, but his pal and Guitar God Eric Clapton as well. Slowhand had a serious reaction to his Astra Zeneca vaccine and feared he would never play again. He joined Van Morrison on his anti-lockdown song, ‘Stand and Deliver.’
Are these rock stars out of touch with reality? Are these the babblings of old men who watch too much Fox News?
I can’t say.
But I am intrigued by the idea of motivated reasoning: Emotionally biased people creating rationalizations for the decisions they make, rather than objectively reaching fact-driven conclusions. Large public gatherings have been canceled, and this includes music shows and festivals. Can you blame touring musicians for being upset? I suspect that for both Morrison and Clapton, it is less about the loss of revenue (they are both well off), and more about constraints on their choices and freedoms.
But the broader topic goes far beyond fading rock stars — we all can engage in motivated reasoning, especially when it affects portfolios, other assets, and the decision-making processes used to manage them.
How many of the positions I take are a function of what I want to be true rather than what I should be objectively reasoning as true? How much of my views are merely me talking my book? How difficult is it, to paraphrase Upton Sinclair, to objectively understand something my compensation depends on? 1
Consider these five issues:
• Bull Markets: RWM charges fees on assets. The goal is to keep our interests aligned with those of our clients; it also keeps my firm’s income aligned with rising asset prices and bullish sentiment; how might this affect my perspective?
• Passive vs Active: I’ve long been an advocate of Passive investing, but Active management had a great year in 2020. Is my decision to lean passive objectively correct, or am I refusing to acknowledge a sea change in asset management just because I do not want to admit error?
• Inflation: I want low inflation, which keeps borrowing rates low. My variable mortgage rate has only gone lower over the past 7 years but my plan was to refi this summer — it will be more expensive if inflation is a thing and the Fed starts to get nervous and the bond market takes rates higher; Am I still being objective about inflation?
• Hedge Funds: I believe nearly all charge too much for performance that is middling at best; we theoretically compete for assets with other firms that have HF’s on their platforms (while we don’t);
• Employment / Wages: These new increases for McDonalds and others — are they really not inflationary? My belief that wages have lagged on the low end of the salary scale got me on The Daily Show, but are they preventing me from seeing inflation in labor cost structures? Can I even admit I was wrong if that were the case? I am not wrong, but if I were, could I admit it? (But LOL I am not).
What other conclusions have I made that are motivated not by objective thought by rather by self-interest? How much of my beliefs are merely me trying to prove to myself (and others) that I was correct?
Finally, I do not think Clapton is dumb. That shared image was from a DM (originally trending elsewhere), and while I disagree with Van/EC about the lockdowns, I think they are both bored, frustrated, angry, and upset, as well as being somewhat ignorant on the science.
Their views gave me an opportunity to ask myself questions:
What am I wrong about?
What am I missing?
Where is my reasoning compromised? My logic motivated? My own interests trumping my analyses?
I don’t know to what degree we can avoid Motivated Reasoning, but at the very least we can continually check ourselves to see if we are blatantly engaging it.
Oblivious (February 3, 2021)
MiB: Michael Lewis on Pandemic Planning (May 8, 2021)
1. The\ original Sinclair quote: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”