But the fruit of the Spirit is love, joy, peace, longsuffering, kindness, goodness, faithfulness, gentleness, self-control. Against such there is no law.The Bible, Galatians 5:23
God does not save those who are only imaginary sinners. Be a sinner, and sin boldly.Martin Luther in a Letter to Philip Melancthon (1521)
I have a 2- and a 4-year old. They have taught me to revere lessons of self-control.
Now, there were three things my lifelong Texan wife and I knew we had to do immediately when we moved to Connecticut. We had to find a grocery store that sold Shiner Bock, we had to find a butcher who sold full packer cut briskets, and we had to find a restaurant that sold Tex-Mex style queso and another that sold chicken fried steak. Of all these tasks, the last was the hardest. You may not be familiar with the dish. Chicken fried steak – called ‘country-fried steak’ in places that make terrible chicken fried steak – is a steak that has been pounded flat and thin, dredged in a flour breading and pan- or deep-fried. It’s unclear whether its origin is more southern (in keeping with the name) and related to a very similar process for breading and frying chicken, or more related to the very similar schnitzel dishes that the many German immigrants to Central Texas would have brought with them. My money is on the latter. Chicken fried steak is basically Wiener Schnitzel, except that it is made from beef from cows a year or two older, usually without breadcrumbs in the breading, and with cream-and-pepper gravy instead of lemons and parsley. My undying thanks go to Adolphe, Grand Duke of Luxembourg, who sponsored the Verein zum Schutz(e) Deutscher Einwanderer in Texas, better known as the Mainzer Adelsverein, for the greatest unanticipated result of his patronage.
The best chicken fried steak I ever had was at a place called RO’s Outpost, a mediocre, now-closed BBQ joint in Spicewood, Texas that also pounded, breaded and fried an extraordinary steak to-order. Other very passable fresh preparations are available in places like Goodson’s in Tomball, Texas. But in most cases – even in Texas and the south – you’re going to get a frozen product distributed by Sysco. Maybe by PFG or US Foods. Sadly, your best bet is finding a restaurant that does the most consistent job of frying the flour-dredged, ‘naturally shaped’ version of a frozen steak. Sysco calls theirs the Angus Country Fried Steak. The most consistent version used to be at Chili’s, believe it or not, before most locations took it off the menu. The worst? An unnaturally shaped, low-end version served by the pseudosouthern Moxie and Charleston Chew sign-bedecked hellscape that is Cracker Barrel. Your best nationwide bet these days is at Louisville, Kentucky-based Texas Roadhouse.
So it happened that I took the family to a nearby Texas Roadhouse location, where my two sons decided to regale the restaurant with their newest trick, which is to combine toilet humor silliness with catchy songs. Their choice for all the other restaurant guests that day was the theme song to Mr. Rogers’ Neighborhood, but one that replaced the word “neighbor” with a different, funnier word. Their flagship variant was “would you be mine, could you be mine, won’t you be my poopoo,” but there were as many others as there are two-syllable words for body parts or bodily functions.
So yes, even though I spent three paragraphs talking about fried ribeye steaks smothered in gravy, I AM, like every other exhausted parent of toddlers, a believer in the lessons of self-control. Or at least in the idea that it will, someday, emerge.
This goes double for my views as an investor.
I have written (in language stolen from Friedman) that investment returns are always and everywhere a behavioral phenomenon. There is very little that the average or professional investor can do to improve their thinking more than by becoming students of behavior, psychology and evolutionary biology. Some of those benefits may be gained by exploiting the recurring and predictable tendencies of other humans, although it is a thing much easier said than done. I still think that the greatest – and certainly most attainable – gains are to be had through awareness and command of our own tendencies. Through self-control.
But there’s a problem with this idea: self-control, at least as it manifests in our brains, is an imperfect tool for overcoming behavioral biases.
Most of self-control as we think of it works through mental models. We synthesize a lot of different ideas, concepts and experiences to build an abstracted idea of what acceptable behavior looks like. Then we (mostly) consciously enforce it on ourselves. Most of those concepts are moral standards or cultural norms. Limit your gluttonous consumption of fried beef, on the one hand, and don’t stand up in your chair at Texas Roadhouse to sing songs featuring your sexual organs at the top of your lungs, on the other. Reasonable enough. As investors, it is easy and helpful enough to incorporate aphorisms and heuristics into this conscious management of our own behavior. Be fearful when others are greedy, don’t play for lottery outcomes, be a seller of insurance after a hurricane, that kind of thing.
The problem is that the same mental models we create to self-audit and control our behavior are exactly the ones on which narratives work. The language of common knowledge is the language of normative thoughts.
When we write about the nudging oligarchy, we write about those with influence over common knowledge, who exert small pushes on our framework toward what they believe to be right behavior. Political and patriotic correctness are forms of this, too, seeking to exert explicit influence on the cultural norms we incorporate into our baseline to which acts of self-control would return us. Many narratives are just repurposed versions of ancient memes, and are themselves sources of behavior to be controlled by our awareness and capacity for self-control. But just as many seek to tell you how to think about what it means to be a good person. A positive social influence. A real investor. A real financial advisor. A real Graham & Dodd adherent or student of Buffett. These aren’t behavioral biases. They are attempts to change the baseline against which you measure behavioral deviation!
I’m not saying all those things are bad or that all the intentions behind those promoting them are evil. We are all trying to influence one another, after all. But if we, as investors, rely only on our self-control and discipline to navigate biases, even if we succeed (and we won’t), we remain susceptible to those who would change seek to change our measuring sticks.
There’s only one way around this tendency: we must be explicit in stating our principles, and we must convert those principles into process.
I think there’s another powerful benefit to this as well: the protection of a process to constrain bias allows our conscious thoughts to be much less constrained by the abstractions of socially constructed norms about investing. We are free to think dumb ideas, irrational-sounding ideas, absurd-seeming ideas.
To sin boldly.