Saturday, June 15, 2019

Groupthink and Academic Culture

Dan Klein gives a lecture on academic groupthink, tying in our joint paper and my "Heterogeneity" paper. Dan asks how groupthink can dominate entire academic disciplines.

Departmentally based decision making, collegiality, depends on majority vote.  Democratic processes are eminently susceptible to conformity pressure, as de Tocqueville noticed in the 1830s.

Scholars like Irving Janis (also Milgram and Asch) have suggested that groups tend to conform.  Love of people like ourselves, homophily, leads to the eradication of alternative viewpoints.  Highly intelligent people are easily capable of groupthink, as Janis's book Groupthink points out with respect to the Kennedy cabinet.  Klein points out that academic beliefs are more closely related to self-image than the decisions that Janis describes; the nature of academics' beliefs is closer to Jonathan Haidt's "sacred beliefs."

Klein uses the example of the  ideological field of history. At the departmental level, homophily leads to groupthink.  At the national level, the field's hierarchical hiring allows the elite universities to create a monotone ideological perspective.  Learned societies scour non-conforming academics by keeping them from publication opportunities.  "The profession answers these questions for all."

Universities are the reverse of what they appear. They do not encourage thought. They encourage mindless conformity.

Klein asks: "What if waiters worked as professors do, so each waiter job is controlled by a central waiter department?"  Of course, waiters are not as inept or incompetent as professors because there is no centralized waiters' learned society.

Wednesday, June 12, 2019

Is Value Investing Dead?

Vitaliy Katsenelson, CFA, has an excellent post on LinkedIn:  “Is Value Investing Dead?”  Katsenelson concludes that it is not, and he is right, although there might be muted returns to value investing for several more years. 

There is a parallel between commodities and value stocks because both are devalued by monetary creation in the early phases of a bubble market. Something similar occurred in the late 1990s, when gold was bottoming near two hundred, and everyone was saying that Warren Buffett had gone the way of the Brontosaurus.

In the early phases of a bubble market, low interest rates stimulate competition. Hence,  enterprises that are viable in the long term face more competition than otherwise because  the Federal Reserve banking cartel subsidizes inefficient competitors.   In the commodity sector viable mines are forced to compete with mines that the Fed artificially makes viable with low interest rates.  The results are supply gluts. 

At some point increasing competition causes bankruptcies of the less viable manufacturers, natural resource firms, and mines. Given intensifying competition, the subsidized interest rates are no longer sufficient to sustain the inefficient producers.   For value stocks, oil firms, and mines, subsidized output strains the least competitive firms, which ultimately go bankrupt. 

At this point in time, we see depressed value in the gold mining, oil, and value stocks.  The depression in those stocks has lasted a long time because the monetary creation of the 2008-2016 period was exceptionally great. The bubble period might continue for several more years.  Before it ends, I would expect higher valuations in the bubble stocks, recently known as the FAANG stocks--Facebook, Apple, Amazon, Netflix, and Google.  In the 1920s radio and automobile stocks played a similar role. In the 1960s the Nifty Fifty, including American Home Products and Xerox, did.  In the late 1990s the Internet stocks such as and did.  

As artificially intense market competition ends because of supply gluts, the value stocks survive and enter a less competitive environment; so do the most efficient natural resource firms. In a less competitive environment, they thrive.  

Hence, oil wells, miners, and value stocks are depressed in this period, but they have a bright future.  In all bubble periods, the claim that "we have entered a new era" becomes common.  The mania is fueled by the myopic definition of risk as standard deviation, which is  favored by finance economists.  This statistical definition overlooks longitudinal patterns and the effects of crashes on individual well being and stress.

Late-stage-bubble buyers force up the stock prices of the favored, speculative stocks in what Steve Sjuggerud calls a speculative melt-up. The inevitable crash is worst for the most speculative stocks.  There is some spillover to all stocks because of panic selling, but the value stocks then outperform. 

The most important characteristic to make money is patience or persistence.  Another is focus. These are not characteristics taught or valued in American educational institutions, which function with a win-lose, socialistic mindset and emphasize scientism at the expense of common sense. 

Tuesday, June 11, 2019

Do at Least One Politically Incorrect Thing a Day

Do at least at least one politically incorrect thing a day. Gold day: The Daily News calls you a "jerk" and other media attempt to deplatform you. Silver day: Fake history and Black Studies professors, effete Antifa students, and other dumbed-down Democrats attack you with hate speech and hate emails. Bronze day: Fake law professors say you have bad taste. Runner-up day: Facebook or Twitter throws you off.
Second-runner-up day: HR or diversity department scolds or investigates you for thought crime.

Friday, June 7, 2019

A Witch Hunt Comes to Cambridge

Dan Klein wrote an excellent piece about Cambridge fellow Noah Carl's sacking because left-wing extremists disapprove of his work on IQ.  I wrote the following letter to President Trump:

Dear Mr. President:

I urge you to amend your executive order requiring First Amendment compliance by public colleges  to prohibit funding to American universities that do business with foreign universities that violate the First Amendment.

Professor Noah Carl was a fellow at St. Edmund's Cambridge.  He was recently fired for pursuing objective scientific research about IQ.  There was a demonstration at Cambridge at which 1,400 left-wing students and professors--out of about 30,000 Cambridge students and professors--demanded his firing. Cambridge caved to the extremists' demand and revoked Carl's appointment.  A recent article about his sacking is  at

American universities can subvert your First Amendment executive order by collaborating with intolerant, left-wing universities in foreign countries.  Eliminating federal funding of  universities that do business with foreign universities that violate the First Amendment will ensure that public monies are not used for extremist causes.


Mitchell Langbert