Doctors who understand why
we get fat and what to do about it are obviously hard to find;
otherwise, this book wouldn’t be necessary. The truly unfortunate fact
is that even those doctors who do understand the reality of weight
regulation often hesitate to prescribe carbohydrate restriction to their
patients—even if this is how they maintain their own weight. Physicians
who tell their fat patients to eat less and exercise more, and
particularly to eat the kind of low-fat, high-carbohydrate diet that the
authorities recommend, will not be sued for malpractice should any of
those patients have a heart attack two weeks or even two months later.
The doctor who goes against established medical convention and
prescribes carbohydrate restriction has no such safeguard.
--Gary Taubes, Why We Get Fat
--Gary Taubes, Why We Get Fat
I’m
convinced that for many institutional investment organizations the
operative rule – intentional or unconscious – is this: “We would never
buy so much of something that if it doesn’t work, we’ll look bad.” For
many agents and their organizations, the realities of life mandate such a
rule. But people who follow this rule must understand that by
definition it will keep them from buying enough of something that works
for it to make much of a difference for the better.
In 1936, the economist John Maynard Keynes wrote in The General Theory of Employment, Interest and Money, “Worldly wisdom teaches that it is better for reputation
to fail conventionally than to succeed unconventionally” [italics
added]. For people who measure success in terms of dollars and cents,
risk taking can pay off when gains on winners are netted out against
losses on losers. But if reputation or job retention is what counts,
losers may be all that matter, since winners may be incapable of
outweighing them. In that case, success may hinge entirely on the
avoidance of unconventional behavior that’s unsuccessful.
--Howard Marks, Dare to Be Great II
--Howard Marks, Dare to Be Great II
If
the behavior of institutional investors weren't so horrifying, it might
actually be humorous. Hundreds of billions of other people's
hard-earned dollars are routinely whipped from investment to investment
based on little or no in-depth research or analysis. The prevalent
mentality is consensus, groupthink. Acting with the crowd ensures an
acceptable mediocrity; acting independently runs the risk of
unacceptable underperformance. Indeed, the short-term,
relative-performance orientation of many money managers has made
"institutional investor" a contradiction in terms….
The
pressure to retain clients exerts a stifling influence on institutional
investors. Since clients frequently replace the worst-performing
managers (and since money managers live in fear of this), most managers
try to avoid standing apart from the crowd. Those with only average
results are considerably less likely to lose accounts than are the worst
performers. The result is that most money managers consider mediocre
performance acceptable. Although unconventional decisions that prove
successful could generate superior investment performance and result in
client additions, the risk of mistakes, which would diminish performance
and possibly lead to client departures, is usually considered too high.
--Seth Klarman, Margin of Safety
--Seth Klarman, Margin of Safety