The Art of the Good Life #37 : The Dogma Trap.

Today I got called to the Bar. So it is a happy day for me.

But I can't seem to stop being a magnet for weirdoes.

At the Supreme Court, my mother asked me why is there a strange looking flap at the back of my barrister's gown. I said I don't know. It looked like a gun holster, so initially  thought that perhaps it contained some kind of weapon in the medieval era. Then this strange person whom I will designate as Tiger Mum, overheard my conversation with my mum, brutally interrupted me, and said," If you don't know, why don't you ask other lawyers. After all, you lawyers must be intellectually curious, right ?"

I have no idea who Tiger Mum is, but I'm not surprised that this is the kind of mum that produces the straight 'A' kind of JC students who eventually end up in law school (or become nervous wrecks) , but this was a happy day so I smiled and just walked away. 

Why must lawyers be intellectually curious?

It certainly helps in litigation but intellectual curiosity is not a trait that I found when I dealt with legal counsel when I was working as an IT professional, the ability to block my project initiatives did not require curiosity at all, just a stubborn adherence to some kind of rule which, on hindsight, can be quite arbitrary.

Tiger Mum is dangerous because she is dogmatic. She has fixed ideas on how lawyers should behave. Right now, the legal industry is undergoing a lot of change, so I feel sorry for her kid because we probably will end up being a different kind of lawyer than those in practice today. That is an article for another day.

You can identify dogma in three ways : they attempt to explain everything, they are irrefutable and they are obscure.

The investment world is full of gurus who spout quotes from Warren Buffett as if it is investment dogma.

Take for instance the following quote from the Oracle of Omaha :

Price is what you pay, value is what you get.

Of all the WB quotes, I hate this one the most.

You can seriously use this in any situation to sound wise and profound.

Victim : "Oh shit, I just got a margin call."
Guru : "Ah, price is what you pay, value is what you get. You should review your investments. You are not buying value."

a) It can be used to explain everything.

"So what if you bought a low P/B stock, it has negative free-cash flow. Price is what you pay, value is what you get. You got no value, that's why you lose money. "

"You did not enjoy yourself in Geylang last night ? Price is what you pay, value is what you get. Better get checked for STDs."

b) It is irrefutable. 

Price is indeed what you pay. Value (or lack thereof) is indeed what you get. Sometimes you obtained value if you make money. If you lose money, you did not get value. Hindsight 20-20.

How can you falsify this statement ?

c) It is obscure. 

What is value ? I have been investing for over a decade and frankly, I have no idea what value means within the context of this statement, it might a combination of factors in factor investing.

Based on my quantitative approach, I can at least say with some mathematical precision that, in SGX,  value is low P/E, low P/B and high dividends but it does not persist across time periods. Some people will say that value is an investment moat or a good management team.

Anyway, the book has a really effective way to trip up demagogues who spout dogma in the investing world.

Simply ask them this :

What kind of facts would need to arise for you to consider your idea wrong ?

Back to that strange flap on barrister gowns...

A lot of folks initially thought that the flap was some kind of a pouch for clients to pay barristers so it functioned as some sort of a money pouch. But a deeper investigation showed that the barrister gown evolved from a mourning dress during the period of Charles II 1685. It is remnant of a hood. You can find details here.

So dear Tiger Mum, If you are intellectually curious about something, Google it and make sure you have credible sources.

Happy Mass Call 2018 !