Perspective (noun) 2b : The capacity to view things in their true relations or relative importance. – Merriam-Webster
If there is anything we are missing in our world today, it is perspective. As we close out March Madness aka the NCAA Men’s Basketball Tournament, we have seen it at full force. The number one team in the nation and overall number one seed in the tournament, the Virginia Cavaliers, fell to lowly University of Maryland Baltimore County, a team that made it into the tournament by barely winning their conference title on a last-second shot, and the last 16 seed, which supposedly means the NCAA considered them the worst team in the tournament. For all of the “greatest upsets ever,” that one may truly be it.
However, we may be numb to it all. We are awash in hyperbole. We hear the words “greatest ever” all the time. We hear “the worst ever” all the time. Recently I saw an article about a financial adviser in California who got in trouble because he posted on his social media outlets that Donald Trump is “the Devil.” Everyone is certainly entitled to an opinion, but as the late Pat Moynihan was fond of saying, “You’re not entitled to your own facts.” I’m not going to tell anyone that they have to like the man, but the Devil?
This is our nature. This election will be the most important ever. This crisis is the worst crisis ever. This restaurant is the best ever. To all of it I have one response, “Really?”
Adding perspective is a large part of our job at Iron Capital. We are often asked to add our perspective to issues not directly related to investing. Other times we are asked our perspective on a specific investment opportunity. To that end, we are introducing a new communication channel. Welcome to our blog, appropriately titled “Perspective.”
So, what is perspective and where does it come from? Merriam-Webster defines it several ways, most fittingly as, “the capacity to view things in their true relations or relative importance.” I believe it comes from a healthy dose of skepticism and, of course, experience.
Skepticism is an underrated quality now a days. One would think that with increasingly more evidence coming out that everything we see on Facebook is staged and/or planted by Russians, we would become more questioning. This is not happening. As Annie Duke points out in her book, Thinking in Bets, we think we create beliefs by hearing things, reasoning what we hear, and deciding whether or not to believe it. That is not actually how we do it. It turns out that we hear, then we believe, and then if we have time some time later we think about what we believe and decide if it is actually true. At that moment we selectively pick and choose facts that support what we already believe.
In other words, we lack skepticism. We need to question what we hear, and we learn this from experience. My wife and I honeymooned in Scotland. Sometime during the planning of our wedding when we were talking about the honeymoon, she mentioned that she had always dreamed of going to Scotland and staying in a castle. Later she asked me which beach destination we were headed to for our honeymoon (after all if one is romantic then he takes his bride to some exotic beach, right?), to which I replied, “We’re going to Scotland.” We did compromise, I left my golf clubs at home and she never got to stay in an actual castle.
We did venture through a few pubs in Edinburgh and one had a plaque on the wall that read: “Good judgment comes from experience. Experience comes from poor judgment.”
Hopefully, our natural skepticism and our experience will collaborate to offer some compelling perspective. We’ll find out together.
Chuck Osborne, CFA