Mental Toughness!

There are three nevers in fashion design. Never confuse fad with fashion. Never forget it’s your name on every label. And, when showing your lines to the press, never let them see you sweat.

— Donna Karan, GilletteDry Idea” advertisement (1984)

I’d come so VERY close to getting her to go in for treatment (to the same place Catherine Zeta-Jones went for her successful bipolar treatment program). I’d spoken with them on the phone (not telling them exactly who the patient would be). They agreed to fly in and talk with her and take her with them to the treatment center.

She was all set to go — but then chickened out by morning. I even said I (would) go with her and be a ‘patient’ too (she liked that idea). That seemed to make her more comfortable, and we’d get sooo close to packing her bags, but — in the end, the ‘image’ of her brand (happy-go-lucky Kate Spade) was more important for her to keep up. She was definitely worried about what people would say if they found out.

— Reta Saffo (Sister of Kate Spade), The Kansas City Star, “Kate Spade Suffered Years of Mental Illness” (2018)

At the beginning of my career, it was very hard to go up. Now, it’s very hard to stay on top. You have to stay there, and I want to stay there so badly. I’m still standing.

— Gianni Versace, The New York Times, “Gianni Versace, 50, the Designer who Infused Fashion with Life and Art” (1997)

If you know me at all, you know that I am not a fashionable person.

I did, however, develop a brief fascination with fashion in the mid-2000s. My first boss was a notable banker to investment firms by the name of Roberto de Guardiola, and at the time he lived in a beautiful townhome on E. 64th Street. Roberto was an intimidating, old school banker. Gold glasses, suspenders, Southampton estate, Turnbull & Asser — the whole package. Like many peers of his vintage, he wanted printed models and presentations hand-delivered to his home. Unlike many peers of his vintage, he was home a lot, because that’s where his kids were. Something I admired a great deal about him.

No, in case you’re wondering, the fascination with fashion wasn’t the result of the resemblance this story has to a similar scene in The Devil Wears Prada, although the reality was very much like that. I got buzzed in and left the papers on a table in the anteroom, which had a separate set of doors to the imposing empty black marble foyer. It was unthinkable that I would even try that second set of doors.

The fascination came from the neighbors. You see, Roberto lived across the street from the Versace mansion, and it was for sale. I think Thomas Sandell ended up buying it. Being a curious young lad, I went back to my 420-square-foot studio and researched the property and its prior owner. Being an uncultured hick from the sticks, when I read about Gianni and Donatella Versace, I was learning about them for the first time. The rise, the flamboyance, the murder. New York was already impossibly glamorous and ridiculous to me. This just put it over the top.

It had never really occurred to me before, but the more I read, the more I came to the conclusion that fashion must be the most mentally exhausting white-collar job in the world. Its very name tells you why. The industry is change, and as much as its practitioners will talk about timeless design and bucking trends, there is an incessance to the demands it places on designers and creatives. There is always a new season. Always a new thing. And it’s always better to decide what that new thing will be than to be the one responding to it. There’s another job that looks a lot like this: The life of a professional chef.

I don’t know why Kate Spade committed suicide this week.

I don’t know why Anthony Bourdain did the same.

In Tony’s case, it happened only today. We know very little, other than that he was apparently found by the remarkable Eric Ripert, chef of what I think is still the best restaurant in New York (Le Bernardin). We know more about Kate. But we don’t know how — even if — the unique pressures of fashion directly influenced or triggered the depression that it seems plagued her for years. When I read her sister’s account of the failed attempts to get help for Kate, it hit me pretty hard. She confessed to her sister how concerned she was that people would react badly if they discovered she had sought professional help for mental illness. More tellingly, she expressed her concern that it would damage the brand that was Kate Spade, which for those of you unfamiliar with the brand, is fresh, bright, young, colorful and, as she put it to her sister, happy-go-lucky.

The people who loved her tried to help, but in the end it seems she suffered in silence.

Surviving Markets

If you’re reading this note, you are probably familiar with another “what have you done for me lately” industry. Like those who choose to be a fashion designer or chef, the people who choose finance and investing as a profession are a motley crew. But they also have some things in common. Most are very smart. Most want to make a lot of money. Nearly all are very driven to succeed, by which I mean to grow in responsibility and reputation. Outside of that, you’ll find all kinds. The empathetic, the selfish, conscientious and socially clueless alike find homes in our industry.

Intelligence and drive are found in abundance. But success in finance requires something else that is in somewhat shorter supply: mental toughness. Resilience. When I say that it comes in short supply, I perhaps understate the matter. Every person employed at a high level in finance would be better at their jobs if they were mentally tougher. More able to endure changes of fortune. More resistant to our biologically adapted fight-or-flight responses to stress and perceived danger.

Well, almost everyone. Ben and I are fond of observing that so many of the very successful people in our industry are high-functioning sociopaths. Given that I’m writing about mental illness, I should probably be less reckless in throwing out pseudo-clinical terms, especially in a pejorative way, but I hope you have enough grace to understand what I’m trying to say. At a minimum, accept my contention that a less emotional response to the day-to-day changes in the value of an investment portfolio is an asset of immense value.

This is true in almost every job in this industry. The executive assistant to a high-powered investment banker or investment executive hears unspeakable horrors. He’s the first one to learn about the layoffs, the employee being disciplined. He’s the one who must endure the rapidly changing moods of someone who must grapple with every hard reality of running a business. What is he called upon to do? To be even. Calm. To ensure that meetings still happen and that people still make their flights when the shit is hitting the fan. Mental toughness.

It’s demanded of the salesperson who walks into yet another office that forgot about the meeting. Four people show up for your pitch because, well, you brought breakfast, and they feel like they have to be polite before their “hard stop” in 20 minutes (who has a meeting that starts at 9:10 AM?). But no decision-makers in the room. The lady who scheduled the meeting isn’t there, and you passed up another meeting because of that 10% weight in her model where’s she’s looking to swap out managers. Quarter’s almost up and you’re halfway to your sales targets. What’s your spouse going to say? Time to stop daydreaming and calmly, respectfully, helpfully answer that question from the young kid that you already anwered. Mental toughness.

The advisor working with clients endures this daily. Why are we still holding this value fund / low vol fund / quality fund / hedged strategy when it has underperformed the S&P 500 by so much, they ask? Do you remind them of your last conversation, where you agreed that this holding was a long-term position motivated by their portfolio risk appetite? Are you serving them better by pushing back on specious arguments, or is the customer always right? They seem furious, and a sense of justice and righteous anger is rising up in you as they express it. You suppress it. You empathize. Your mind is racing. What is the right thing to say to help them understand how to resist emotional investment decisions without being condescending? Mental toughness.

In investment roles, the need for a short memory, for the ability to come in the next day unchanged and unperturbed by the prior day, seems almost self-evident. And yet, you feel the weeks of things not working weighing you down. You don’t get this market. You’ve progressed from doubting the sanity of other investors, to doubting your process, to doubting yourself. My process says max long here. Am I really willing to go all-in? Maybe I should just pull things in for a bit. But is that what my investors expect? What if they see through me here? Mental Toughness.

Our industry recruits and trains people to be mentally tough, because those who cannot achieve some growth in this trait must choose between charlatanry or failure.

There’s no getting around this. We are fiduciaries. This is how it must be.

But there is a problem. Because we require mental toughness of the people we hire and promote within our organizations, we have allowed the emergence of a meme of mental toughness! Friends, there is a vast gulf between mental toughness and mental toughness!

The Mental Toughness! Meme

When we emphasize traits of mental toughness in our employees and the people we hire, we recognize their importance to the roles we serve as fiduciaries. After all, for so many of us, the value that we add is almost wholly the result of our role in preventing the layperson from investing emotionally. But when we do so, we must recognize that we create an incentive to signal that toughness. This is where things go off the rails.

Mental toughness looks like the ability to shrug off rough days in the market without questioning fundamental investment beliefs. It looks like the ability to maintain composure under withering fire from an angry client. It means continuing to work through a model when your intentionally iterated circular reference sends a cascade of errors with a change of a cell that requires you to delete multiple ranges and re-enter the formula… if you could only find which ranges to delete.

But it’s tough to show those things to the people who need to see us doing the right things to promote us. To pay us more money. To empower us with more responsibilities. And so instead of pressing on with personal growth in our temperament that is so critical to success in this fickle industry, we see in mental toughness! all the trappings of credibility, but with a quicker payoff.

Mental toughness! looks like never showing weakness to anyone. It means believing that complaining or venting concerns to a confidant is never appropriate. It’s telling ourselves that a lot of other people with tougher jobs would be happy to take our place, to get paid what we get paid, so we should just suck it up and deal with it. It’s an unwillingness to talk to anyone about doubts we have about our skills and decisions we made. It’s putting in facetime, and no vacation time and always-on mobile phones because it’s so damned important that we show our commitment to the job even when we’re wiped out and barely have enough to give to the people who love us.

It’s an unwillingness to talk to a trained professional about real mental health problems because we’re worried that it would make us look like we lacked real mental toughness. It’s being worried about what doing so would do to our brand.  

How Do We Destroy the Meme?

Fixing this is tricky.

The importance of the traits that cause investment professionals to feel like they must signal mental toughness! is real. Those traits are not a meme. We can’t change this, because then we’d cease to serve our main function to our clients and, well, society, which is already a narrow enough matter as it is, not to put too fine a point on it.

We also can’t solve it through rhetoric or words. Look, I love it as much as anyone else when a celebrity comes out and tweets that there’s no shame in acknowledging mental health issues, and that if anyone needs help they should call this number. They’re trying to help how they can, and that’s not nothing. But saying that there should be no stigma attached to mental illness is not the same as destigmatizing mental illness. The only way to destigmatize it in our industry, I think, is for people who have reached senior positions and meaningful success in our industry to talk about it. Openly. Bluntly.

Remember in my last note how I told you we were going to lose so much we’d get sick of losing? Let me take another L.

I mentioned in that note that I was a dumb kid. That’s true in more ways than one. I married my college sweetheart when I was 21 years old. We moved to New York and were just miserable. There’s nothing special or noteworthy about my dumb story, except that it’s my dumb story. In under three years, we were divorced. As with any such story, there are a million details, and you and I are not good enough friends for me to tell you all of them. But I was devastated.

Compounding is the most powerful force in the universe, to be sure, and nothing compounds like shame. And God, was I ashamed. I was ashamed about the marriage ending, and the way it ended, of course. I was more ashamed at being stupid enough to get myself into that situation, and not being able to salvage it. I was ashamed at what people would say and think about me. He was married for what, two years? He got married right out of college? I thought he was smart? I was most ashamed that I’d become so petty and superficial that I felt worse about what people would say rather than the thing itself. It’s a recursive, ugly cycle of shame, all the way down.

I drank too much. I self-medicated. I felt ashamed about that. I poured myself into my work and sought to attach my identity to it. I felt ashamed about that. A naïve and gentle person by nature, I became vindictive and angry. Unfair. Nobody made me act that way. It was all me. I felt ashamed about that. I started to think that maybe that was who I was, and that was the first time my thoughts really started going to really bad places. Alright, no euphemisms. There were times where I was convinced in my heart of hearts that the world would be a less crappy place if I weren’t in it. I let my mind wander briefly to how I might make that happen. Then I would feel ashamed about that, too, and try to fall asleep. But mostly I just lied there in bed.

In the mornings I felt like an anchor was dragging me down into my bed. Weekdays, weekends, it didn’t matter. I didn’t want anyone to see me like that. Vanity again. Shame. One day I boarded the 1 train going up to my place on 157th street, and somewhere around Columbia University, maybe 110th or 116th, I just couldn’t take it. All the people. My skin felt like I’d walked into a spider web in the dark. I had to get off. I was dead sober, but I have no memory of getting home.

It’s weird to write about this. Part of the reason is that there were maybe a half-dozen people in the world who knew any of this before today. Only two who knew it all. Now there are thousands. It’s also weird because this was 10 years ago, and my life today is a blessed, healthy one. Seriously, I live a damned good life. Oh, there are days when the black dog comes stalking, when the pull of that anchor is firm, but with help I’ve found ways of coping, of thriving. For me, getting that help meant talking to a professional. Once. Honestly, it didn’t help, directly anyway. But the act of making a call, setting it up, taking the train there and saying the words out loud made all the difference. There is no one-size-fits-all to this, because everyone’s battle is different. Anthony Bourdain was as open a book as you can be about his daily struggles, and for him, it seems, they never went away.

Maybe there’s some part of this story that seems familiar to you. And maybe not. But if you’re running or managing an investment firm of any size, I can guarantee you that it will be familiar to someone on your team, or to someone who wants to work for you. Here’s the important part of my story for you: if you ask anyone who has worked with me or for me who they’d pick to be the least likely to lose his head in a crisis, I know what they’d say. If you asked them who would be the least likely to succumb to giddiness and lack of discipline in the good times, I know how they’d answer that, too. Mental Toughness is NOT Mental Toughness! If you’re running an investment firm, it’s important that your staff know that signaling their toughness isn’t necessary. Real mental toughness is.

If my story is more personal, I won’t tell you all the well-intentioned but unhelpful things that people tell you. But I do hope you’ll take this to heart: asking for help does not signal a flaw in your mental toughness. It doesn’t mean you can’t be an exceptional investor. It doesn’t mean you’re going to slow down your professional growth. It doesn’t mean you won’t be the superstar you’ve planned on being, with the trajectory you daydream about. It really doesn’t.

Some of you are hesitant to say what you’re going through is a mental health issue. You’re not sure if you’re just stressed, or frustrated, or sad. And that’s OK. Still, talk to someone. You aren’t respecting anyone by trying to make the problems you’re fighting through smaller than they feel to you. Even so, somebody will invariably give you the old wise Persian proverb that Abraham Lincoln used to greatest effect:

It is said an Eastern monarch once charged his wise men to invent him a sentence, to be ever in view, and which should be true and appropriate in all times and situations. They presented him the words: “And this, too, shall pass away.”” How much it expresses! How chastening in the hour of pride! How consoling in the depths of affliction!

This too shall pass — it’s a great expression, really, and a sort of memento mori. If I can be forgiven for ending an uncharacteristically serious note with a bit of lightness, however, I think there’s only one response to that counsel. You have my full permission to give Marcus Vindictus’s response to the insistent “Remember, thou art mortal” refrains from the court spokesman from History of the World, Part 1: “Oh, blow it out your ass!”

It doesn’t always pass. When it doesn’t, please ask for help.

If your boss is worth anything, he or she will know that the mental toughness! meme that makes us afraid to ask doesn’t have a damned thing to do with your mental toughness in the job.

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The Acrobat and the Fly

No, nothing makes sense, nothing seems to fit
I know you’d hit out if you only knew who to hit
And I’d join the movement
If there was one I could believe in.
Yeah, I’d break bread and wine
If there was a church I could receive in,
Cause I need it now
To take the cup
To fill it up, to drink it slow
I can’t let you go
And I must be an acrobat
To talk like this and act like that,
And you can dream, so dream out loud,
And don’t let the bastards grind you down.

— U2, Achtung Baby, “Acrobat” (1991)

It’s no secret that a conscience can sometimes be a pest
It’s no secret ambition bites the nails of success
Every artist is a cannibal, every poet is a thief
All kill their inspiration and sing about their grief
Over love
A man will rise
A man will fall
From the sheer face of love
Like a fly from a wall
It’s no secret at all

— U2, Achtung Baby, “The Fly” (1991)


Maybe because of their popular appeal, or the fact that our society can’t abide a person like Bono with unapologetic earnestness about his beliefs, or because of the band’s retreat into musical weirdness and emergence into arena bombast, U2 has been treated rather uncharitably by modern commentators. But at their best, U2 were mesmerizing. Stylistically, I prefer Unforgettable Fire or War, and for sheer songwriting genius, Joshua Tree remains one of the greatest albums ever recorded.

But where art about making art (e.g., La La Land, Birdman) can sometimes veer toward self-indulgence, Achtung Baby reaches a different kind of peak. It is raw and self-critical, with no attempt at final redemption. I mean, it is melodramatic as all hell, which is kind of the concept of the whole album, but if its arc carries any absolution for the artist, it is that hypocrisy is the universal result of art and not some unique moral failing. Every artist is a cannibal, every poet is a thief.

But in the end, neither the artist’s cannibalism nor the poet’s thievery invalidate their art. You can dream, so dream out loud, and don’t let the bastards grind you down. There’s a narrow lesson in this that goes like, “You can still read Ender’s Game even though Orson Scott Card once ate a Chick-fil-A sandwich.” But there’s a bigger lesson, too: if you go around looking for hypocrisy in your enemies, you’ll always find it. Doing so will always feel good. Doing so will rarely get you closer to truth, beauty or love.


I was recently explaining to a friend and former colleague what I write about on Epsilon Theory. They asked me if it was a behavioral investing blog, and I wasn’t sure how to answer.

In a sense, yes, of course Epsilon Theory is a behavioral investing blog. We believe that humans and the stories they tell heavily influence, and sometimes determine asset prices. And we write about that. But when most people say “behavioral economics” or discuss investment strategies that account for investor behaviors, what they usually mean is “cognitive biases.”  Yes, we write about those things, too.

But except in the way that all human activities are influenced bv the way that our brains evolved to process information, Epsilon Theory isn’t really about cognitive biases. That isn’t because we don’t believe in those biases. Quite the contrary. Instead, it is a recognition that our biased brains are riding on meat puppets that spend most of their time interacting with other meat puppets. Our brains are rarely tasked with drawing conclusions from raw data. Most of the things that matter to us and our lives are social. That means that the stimuli that reach us, the basis for our judgments and opinions, are usually the outputs of other compromised brains, processed through established cultural and social structures.

It is intuitive that understanding and mastering our own biases should mean not only being aware of innate evolutionary impulses, but also understanding how they manifest in social behavior. This is what Ben meant when he wrote about acknowledging our own vulnerabilities to the introduction of memes and Narrative in This is Why We Can’t Have Nice Things. We like to think that we operate from internally coherent, epistemologically sound ethical, social and political frameworks. You don’t. I don’t. We don’t. We’re making it up as we go along and we all know it.

It is rarely possible to divorce ourselves completely from the ways in which our human brains are wired to respond to society that is increasingly aware of the ways in which other human brains are wired to respond. We cannot pretend that it doesn’t change anything that companies like Tesla and Salesforce now seek to foster rabid audiences and stabilize their stock price through targeted social media engagement strategies — what we write about on these pages as Missionary activity. We cannot pretend that it doesn’t change the priors that drive how we build investment portfolios that standing governments consider markets to be utilities for maintaining public order and assent, and actively employ communications strategies to establish Narrative around fiscal, monetary and trade policy.

And so it is that in our investing lives, and in our public, political lives, it is very difficult to refuse to play the game. Ours is a Narrative-driven world, and surviving in it means doing more than understanding how our biology predisposes us to cognitive biases. It means understanding how our engagement with social structures and with one another creates new biases and pitfalls altogether, a kind of special susceptibility to brutal logical fallacies. Many of these are so-called ecological fallacies, discussed in an ET note from 2013 that still reads very well.

Ben wrote recently that the memeification of information — the transformation of Emails into Emails! or Lyme disease into Lyme disease! — is a big part of why we can’t have nice things. I want to suggest to you that it is possible to have nice things again. Real conversations with other people that result in real outcomes. Perhaps even a move back in the direction of Cooperative Games from the Competitive Game we are in today. I argued in my essay from last August that this would require a critical mass of well-intentioned people willing to give up on, to lose, non-existential battles. I also warned that you wouldn’t like my advice. In the interest of providing you with yet more unsolicited advice that you won’t like, allow me to outline the four Competitive Game equilibrium-enforcing strategies I think we must give up if we’re going to make ourselves and our thinking less vulnerable to memes, abstractions, tribalism and Narrative.

Know in advance that in a Competitive Game, each of these four is a dominant strategy. To wit:

  • The People Who Disagree with Me are Hypocrites
  • The People Who Disagree with Me are Stupid
  • The People Who Disagree with Me are Evil
  • The People Who Disagree with Me are Controlled

If you give up using these strategies as I will recommend to you, you will lose. You will lose credibility. You will lose standing. You will lose popularity. People will believe you are losing arguments. People will believe you are less intelligent. People may believe you are less committed to ethics, morality and justice.

Wondering where you can sign up yet? Good. We’re going to lose so much, you’re going to be so sick and tired of #losing.

You’re Too Biased to Measure the Impact of Hypocrisy on Credibility

Before we get too far, however, let’s get one thing out of the way: the people who disagree with you really are hypocrites.

I don’t know the people who disagree with you and I don’t need to know. Hypocrisy has been the human condition since Adam proclaimed his holiness by blaming the apple eating on his wife (I mean, it was kind of her fault, if you think about it). But the game of find-the-hypocrite isn’t really about finding gaps between the behaviors people condemn in others and the actions those people take themselves. We all know those exist, and I hope you came here for meatier arguments than, “We’re all hypocrites, so live and let live, amirite?” No, the game is about how we go about quantifying that gap. Who is the bigger fraud, the bigger phony? It’s also about why we seek out hypocrisy in others.

You might think that this strategy would be played out by first looking for the worst actions and then aligning them with incongruous statements of condemnation. Turns out that isn’t exactly the case. Four Yale researchers in psychology published a fascinating study in 2017 on this topic. It’s a well-written, very digestible bit of research based on cleverly formulated questions. A rarity for such papers, I recommend reading the whole thing. It holds a few interesting insights:

  • People attribute more moral value to condemnations of bad acts than to claims of good acts.
  • People will forgive admitted actions that don’t jive with values, but they won’t forgive bad acts that conflict with condemnations of bad acts.

In other words, what people hate about hypocrisy isn’t the immoral act, or even the gap between values and actions. It’s the intentionally false signal from moralizing about the act. And while the paper doesn’t suggest this directly, it is my belief that this aversion is one reason why excessively strong signaling or moral condemnation, when coupled with even suspicions that someone may be acting in conflict with those signals, is so distasteful to many of us. You’ve heard of virtue signaling, I presume.

The gulf between a false signal and simple conflict between values and action may seem like a distinction without a difference, but it isn’t. It matters that our anger about hypocrisy is not the response to a moral failure, but to a failure in ideological signaling. That means that it is an opportunity to assault the credibility of those signaling.

It just so happens, of course, that credibility is one of the most important social signals we send, and one of the ones that matters most in Narrative-driven political, financial and other social and civic markets. The mechanisms of credibility within social capital are so pivotal to influence, wealth generation, capital formation, new lead generation and popularity in general that signaling “I am a credible person” becomes for many of us an objective unto itself. We may complain about Missionaries and their attempts to influence us, but we would all be Missionaries in a heartbeat if we could. For those who have read my piece exhorting us to Make America Good Again (and to stop worrying about being great), you won’t be surprised to learn where I come out on this issue. Those who have built on the sands of cringeworthy credibility signaling may come to a different conclusion.

One of our most potent weapons for winning the credibility game — or so we perceive — is seeking out and identifying hypocrisy in others. We are attracted to assaulting hypocrisy for two reasons. First, it acts as a credibility signal for us. It tells others that we are players in the great game. It tells others that we care about logical consistency and other Good Things. Second, it acts as a credibility reducer for our opponent. It challenges and reduces their believability and standing, and seeks to insinuate that they care less about intellectual honesty and logical and moral consistency. In effect, it is a force multiplier for our arguments, because once we establish that another party has made hypocritical statements, we can summon that spectre again and again to relieve us of the need to dispute further arguments on their merits.

There’s just one problem with this: we are hopelessly prone to bias in our assessments of others’ hypocrisy. Why? Because our anger about hypocrisy doesn’t begin with systematic, objective observation of moral failures or flawed reasoning under our value system. It begins with our selective observation of moral, philosophical or intellectual condemnations made by others — and guess what? We tend to pay a little more attention when someone condemns someone we like or something we believe in. In other words, when someone expresses a criticism of us, our friends, our allies and their behaviors or actions, we are simultaneously inspired to diminish that person’s credibility to protect our ego, and to search for actions that conflict with their condemnation. It’s like handing a three-year old a club and telling him that other boy over there took his favorite toy.

It’s an overwhelming bias that seems so obvious and non-partisan in its pervasiveness when you step back to view it with as much dispassion as any of us can muster. It’s why the political right quickly finds every example of a preening Hollywood numbskull moralizing about some progressive social justice issue right before they end up in TMZ for abetting the abuse of young actors and actresses.  It’s why the political left is lying in wait for any Bible-thumping family values Republican politician to get caught in an ethics scandal. It’s why there are millions of people still penning gotcha pieces on the hypocrisy of Bill Clinton supporters who criticized the moral failings of Donald Trump and why millions of people are still writing pieces on the hypocrisy of Donald Trump supporters who had criticized the moral failings of Bill Clinton. Claims of hypocrisy aren’t about morality. Claims of hypocrisy are about ideology.

But Hypocrisy! the meme isn’t about either of those things. It’s about credibility. And Hypocrisy! the meme is warm, wet garbage. In those rare moments when we are honest with ourselves, we know that the reason we accuse others of hypocrisy rarely has anything to do with a good-faith belief that it justifies devaluation of their opinions or arguments which would often stand on their own merits. Likewise, research tells us it has next to nothing to do with any moral objection on our part. No, we do it because we know that those we disagree with will use this same technique at every opportunity to devalue us and those we agree with. We know that not responding in kind makes us vulnerable.

I saw a lovely anecdote recently from Ethics and Public Policy Center fellow Pascal-Emmanuel Gobry recently, which expresses a similar idea somewhat more succinctly:

My high school best friend’s dad was one of the most talented jazz guitarists of his generation. When my friend was a kid, he asked his dad if he could teach him to play guitar. The dad was of course thrilled. “I’d love nothing more in the world, he said. But first, you’ll have to learn music notation and music theory and chords. Then I’ll teach you to play.”

My friend, being a wiseass, retorted, “Paul McCartney never learned any of that stuff, and it didn’t stop him.” My friend’s dad, being a wise man, replied, “Yeah, but you’re not Paul McCartney.”

Yeah, in the Bible Jesus calls people broods of vipers and whitewashed tombs. And Paul, and the Prophets, and saints, used salty language. Yes, there are times when such language is called for. But the reality of original sin means the odds of you using this language out of pride overwhelm the odds of using it because of the necessities of speaking love in truth.

You’re not Paul McCartney.

Whatever social structure or biological impulse evolved in us to make us respond the way we do to hypocrisy makes us uniquely unsuited to routinely rely on our detection of it as an indicator of anything other than our own bias. Neither you nor I are Paul McCartney (unless you are Paul McCartney, in which case, hello, thank you for reading and what is the weird chord in the second half of the third verse of “Let It Be” when you sing “Mother Mary” because I’ve been trying to figure out what’s happening there for 20 years).

I should be clear about the narrow point I am making, and the point I am certainly not making. From a moral and ethical perspective, there is no particular reason why being biased should prevent us from holding one another accountable for dishonesty, hypocrisy and other flaws. If we only spoke up about injustice and error when we had no dog in the fight, we would comprise an ugly society indeed. But I hope that you can see the difference between the impact of bias on the justifiable use of it as an argumentation technique and the justifiable reference to it in good faith efforts to improve our own behavior or of those who we love, trust and want to grow us with as humans.

Being a Hypocrite Doesn’t Make You Wrong

Even if we can play a mean left-handed bass and believe that we are capable of being even-handed in using accusations of hypocrisy as an element of our political and social engagement, it doesn’t take long to recognize that doing so is frequently counterproductive to the whole point of that engagement in the first place. It’s pretty simple. If what you care about is being considered right and winning those arguments, then the hypocrisy! meme is the right tool for the job. If your objective is to get to a better policy or portfolio outcome, then it isn’t.

The next time you’re looking to bring this tool out in an argument or disagreement, ask yourself: does this person’s false signaling really devalue the argument he or she is making? The data he or she is using to support it? Or is it just a tool I would use to discredit this person so that I don’t have to bother with the whole debate? It’s a bad, biased heuristic.

Consider Warren Buffett, the investing world’s moralizer-in-chief. Here he is on leverage.

Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade — and some relearned in 2008 — any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people.

Here he is in 2003 on derivatives:

No matter how financially sophisticated you are, you can’t possibly learn from reading the disclosure documents of a derivatives-intensive company what risks lurk in its positions. Indeed, the more you know about derivatives, the less you will feel you can learn from the disclosures normally proffered you. In Darwin’s words, “Ignorance more frequently begets confidence than does knowledge.”

Guess who sold protection on a bunch of munis starting in 2007, not entirely different in scope, although admittedly in scale, from similar trades that sunk AIG around the same time? Guess who, according to research from AQR, has historically generated his returns through effective leverage of 1.6-to-1?

For someone like me, who is convinced that randomness would almost certainly produce a Buffett or two through sheer chance rather than skill, applying the hypocrisy! meme is tempting. I am envious of his reputation, and I hold the good-faith belief that people who follow what Buffett does are focusing on things that don’t matter. I believe that the people who follow what he says about index funds place too much emphasis on costs and too little emphasis on getting the right level and sources of investment risk. It is so easy for me to justify why it isn’t just correct, it’s the right and moral thing to do to throw this guy under the bus for hypocrisy, to try to reduce his influence.

Except he really is an incredibly thoughtful investor with innumerable traits I wish I had, wisdom our world would be worse without, and perhaps the keenest insight into the role of temperament in the success of the investor we’ve seen in the last 50 years. The Competitive Game strategy says to seek to diminish him — to make ourselves the Fly. To kill our inspiration to sing about our grief.

But that’s just the meme talking. The fact that Buffett’s views on leverage and derivatives are insanely hypocritical don’t change the fact that he has a tremendous amount of investment wisdom to share.

Letting Ourselves Off the Hook

Maybe the worst harm this tick has in store for us, however, is the doubt it sows in us. You and I are both hypocrites. There’s a fine balance between internalizing the moral importance of honesty, consistency and forthrightness on the one hand, and not internalizing the hypocrisy! meme in ways that would cause us not to champion causes and values we believe in simply because we know we can’t live up to them on the other. This is a real danger.

In many cases, our hypocrisy is just growth. When I was 23, I put myself at odds with some genuinely nice and thoughtful people I worked with and for. Why? Because I was an arrogant ass who knew that no one could build and code a model as quickly and efficiently as I could, and because I knew that my skills in this area were creating all the company’s value. Except that wasn’t true. Of course it wasn’t true. I was a stupid kid with no concept of the value of different people and skills. Should I let this moral failure keep me from teaching young analysts today that modeling is a commodity skill? That their real value in an organization will come from cultivating trust, honing temperament, identifying business drivers that matter and becoming better communicators?

In some cases, what looks like hypocrisy is just the reality of a world of contradictions. I’ve written and, yes, moralized about the things investors waste time on, and the things they should focus on more. In these pages, I’ve condemned bad behaviors, like focusing too much time on picking stocks, on picking funds, on fees over other costs. And yet, like many who agree with me on these topics, I still spend far too much time doing each. I’ve spent days trying to figure out if my largely systematic framework for selecting U.S. stocks for our wealth management business is missing something on consumer brands. I’ve spent more time thinking about General Mills and Colgate-Palmolive than I have about things that I know will have greater long-term impact on financial markets and investor outcomes. But I know that these things are important to my clients, too. I know that it matters to them to understand what they own, and why, in a very qualitative sense. And if it matters to them, it matters to me. The hypocrisy that seems so clear in others is not always so cut and dry when we apply it to ourselves with all the details. Our life and work are complicated.

We are complicated, too. Today I relish the trappings of my Texas identity, but it wasn’t always that way. It took me five seconds to decide where I would go to college when the opportunity to escape a small town in southeast Texas presented itself more than 20 years ago. While I can’t imagine harboring that sentiment now, there’s a part of me that can’t figure how much of that refound identity is affectation, a resistance to things I didn’t like about living in the northeast, or an authentic expression of my values. We’re all complicated, conflicted, growing and changing, and there’s no nobility in allowing the hypocrisy! meme to cause us to withdraw from figuring out our own small issues, or helping our communities and societies figure out the big issues.

This isn’t some weird attempt to present hypocrisy as moral, or something we should be more or less prone to forgive or criticize. None of that. It’s awful and you should stamp it out wherever you see it whenever you have the standing with someone to be influential. It is about how you will respond to the tick, the meta-meme of hypocrisy! that seeks to shut off people you would learn from, deepen your falsely held belief in your tribe’s moral superiority, and short-circuit your own brilliance out of false-humble feelings driven by knowledge of your own hypocrisy.


Now because by reason of those daily sins of which I have spoken, it is necessary for you to say, in that daily prayer of cleansing as it were, “Forgive us our debts, as we also forgive our debtors;” what will ye do? Ye have enemies. For who can live on this earth without them? Take heed to yourselves, love them. In no way can thine enemy so hurt thee by his violence, as thou dost hurt thyself if thou love him not… In this he is as thou art: thou hast a soul, and so hath he. Thou hast a body, and so hath he. He is of the same substance as thou art; ye were made both out of the same earth, and quickened by the same Lord. In all this he is as thou art. Acknowledge in him then thy brother.

— Saint Augustine of Hippo, St. Matthew’s Gospel, “Sermon on the Lord’s Prayer”


The most painful realization of all in a world awash with Narrative, of course, is that the people who disagree with us are not especially hypocritical or contradictory. It is that they are our brother. Our sister. Made out of the same earth. And probably every bit as smart, upstanding, independent-minded and, yes, flawed as we are.

When we stop telling lies about why we disagree and start telling this truth, we can grapple with the uncomfortable fact that our brothers and sisters saw the same facts and came to different conclusions. As Narratives force us into ever narrower bands of acceptable views on markets and politics, the speech we must tolerate becomes more uncomfortable, and will feel more extreme. It will also feel more contradictory. Friends, if you would end the Competitive Game, if you would triumph over tribalism, you must learn to tolerate some hypocrisy — in yourself and in others. You must embrace the Acrobat and not the Fly. How?

Dream out loud, and don’t let the bastards grind you down.

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