What’s the truth?
The recent tick down in the stock market picked up a bit of steam this past week. The S&P 500 fell 2.1%. The Dow fell 2.2%. And the Nasdaq again was the worst performer on the week, falling by about 2.6%.
In an interview with author William Green last year, Arnold Van Den Berg gave listeners a great piece of advice that applies to investing and just about all of life:
All of a sudden, something flashed in my mind. If you want to follow the truth, you have to go wherever it leads you. In that incident, I thought about that and I said, “You know, that’s right. Why am I worrying about who’s right? The most important thing is I’m focusing on the wrong thing. I should be focusing on what’s the truth.” And that became [a] pillar in my thinking. That was my first real deep principle that I said, “Okay, no matter what happens, I’m always going to follow the truth.” And that has opened up a whole new world to me because I always accepted things because you were raised that way and you believe that way, you go to school and they teach you that way. But all of a sudden, I started questioning things, looking at the other side. And if you question your belief, you’re going to come up with some things that you were taught and you accepted, but aren’t really truth. They’re not reality.
Humans fall for stories. When someone tells us something, especially if it’s within the narrative of a believable story, our natural tendency is to believe the story being told to us, whether or not it’s true.
That tendency is not something we can fully overcome. But, often, asking a simple question like ‘What’s the truth?’ can go a long way in helping us mitigate some of the harmful effects of our hard-wiring.
Let’s consider an example from investing to illustrate the usefulness of Van Den Berg’s system: meeting management teams.
Some people believe meeting the management teams of potential investments is essential. Some people believe it’s a complete waste of time.
What’s the truth? From our experience, the truth is that sometimes it’s essential, and sometimes it’s a complete waste of time.
Sometimes, visiting a company and its management team can be key to helping one understand a given business and the capabilities of that management team.
But there are plenty of other times when investors get too caught up in the excitement of a management team or its presentation—and that excitement clouds an objective assessment of the business's facts and future prospects.
While, as humans, we may want to take a side in the meeting-management-team debate—as we seem to want to do in so many other areas of life (politics, sports teams, etc.)—the truth, we think, is that it depends. It depends on the investor and his or her experience. It depends on the management team. And it depends on the business.
Whenever you feel yourself taking a side on an issue or digging in your heels to defend a position, ask yourself: ‘What’s the truth?’ Are you taking your stance because it’s objectively true? Or are you taking it because of a limited, personal experience or, perhaps, because you heard one side’s story before you the other side’s story?
“Your life must focus on the maximization of objectivity.” —Charlie Munger
“We work really hard never to get confused with what we know from what we think or hope or wish.” —Seth Klarman
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