I do my best to ignore it but this year it’s hard not to look away. Like a car wreck at an intersection, this year’s political circus has grabbed a lot of attention. Train wreck probably better describes it. I’ll spare you my opinion of the candidates, except to say it looks like a choice for the least worst option. Neither candidate is a glowing example (spray-on tan doesn’t count) of much. But I’m cynical.
As is so often the case, there is perception – what you’re being
told sold – and reality. And 20-second sound bites drive most of what voters perceive (not much different then the markets). Reality, on the other hand, requires a bit more time and thought and logic to weigh outcomes and trade-offs of all the complex issues being discussed. But our time is short, so 20-seconds suffices for too many of us.
The latest Marks Memo came out this week and delves into this issue.
Now let’s think about the nature of elections. In The Intelligent Investor, Ben Graham described the stock market as a weighing machine in the long run but a voting machine in the short run. What he meant by the latter reference was that in the short run, intrinsic value is often ignored and the stocks that do best are usually the ones capable of winning a popularity contest.
I believe that, over time, elections have become more like popularity contests. The successful campaign speech isn’t one that does the best job of analyzing the challenges and supplying optimal solutions. It’s one that most provides what people want to hear.
In business and investing, people invariably compare the benefits and costs of A against the benefits and costs of B. Then they select the alternative with the better expected net result (and hopefully one whose bad outcomes are survivable). A lot of mistakes may be made, and the process is sometimes misguided, but the effort to make good economic decisions is undeniably there. Decisions usually have clear consequences, and they are likely to become known before the people responsible depart.
In contrast, politicians tend to believe the best decision is the one that is most likely to lead to election or reelection. Responsibility for outcomes is highly diffused, and the results may only become clear years – or decades – after the elections are held and the decisions are made. Few voters have the ability to assess the reasonableness of candidates’ promises, and – given the time lags mentioned just above – it can be difficult to judge candidates for reelection on the basis of their performance on the job.
I tend to agree.
In elections past, it was highly likely that the best speaker got elected. The candidate who delivered the best, most eloquent, and moving message, got the votes. But what happens when neither candidate fits that mold?
You get an overwhelming play on fear. It is so much easier to play on fear and bad news because that’s what we all pay attention too. And since we get so much more news and information today and at a faster rate than ever before, it can seem like things are worse off than in years past.
We now know, within minutes, of an earthquake devastating a city halfway around the world. We all have video cameras in our pockets ready to record and upload whatever we see. And the bad news gets all the clicks.
We live in a glass half full world. It’s not perfect but it’s far improved from any decade in the past, despite human nature and technology pushing that perception toward half empty.
Marks Memo: Political Reality
- Why Can’t We See that We’re Living in a Golden Age? – Spectator
- A Bunch of Data That Shows How Great The World is Doing – Medium
- The Upside of Losing Half Your Money – M. Housel
- Investing and Valuation Lessons from the Renaissance – Musings on Markets
- The Playbook Interview: Warren Buffett – Politico
- Tim Cook, the interview: Running Apple ‘is sort of a lonely job’ – Washington Post
- Michael Mauboussin on Skill and Luck – MiB Podcast
- How Lending Club’s Biggest Fanboy Uncovered Shady Loans – Bloomberg
- The Man Who Got No Whammies – Priceonomics