Update No. 166 – 07/06/14

This will be a post that is only at best tangentially related to investing. Some ideas in it, to be sure, can usefully be applied to investing, but that is not why I’ve written it.

Hypocrisy, more than any other human behaviour makes me angry. Plenty of others disgust me also, envy probably near the top of the list, obviously lying, stealing, deceptiveness generally, unfortunately I could go on (and on and on) about human failings. In fact once I start thinking about all the ways humans fail to be as good as they could be, well, it’s a depressing topic, so I tend to avoid thinking about it too much, I’ve spent more than enough of my life disappointed in my fellow man.

Hypocrisy really is the greatest failing; in essence it is lying to yourself.  To some extent, I can understand lying to someone else, people have their reasons when they do that (usually poor reasons it should be said). Lying to yourself is inexcusable.

I have avoided talking politics very much over about 4 years of blogging, unless there was a policy that related specifically to investing somehow. The idea that the side of politics you prefer is always right is absolute lunacy. It is in the field of political belief that hypocrisy is most prevalent. People tend to pick a side they will follow and then parochially follow them in the way they would a football team. After deciding which side of politics they will follow, people will blindly howl down virtually any proposal generated by ‘the other side’. It is the reason I would never go into politics, I could pick a side and be happy to follow the policies perhaps two-thirds of the time, but if a really good idea was generated by an ‘opponent’, I would be unable to resist reaching across to borrow the idea. To succeed at politics, you need to be able to shout down your opponent, even when you agree with them. Think about that last sentence, the very idea of it should make your skin crawl, and your teeth itch, but that’s politics.

Once people have decided who they will support politically, they tend to eliminate most sources of media that propose an alternative viewpoint. This will not only reinforce existing biases, it will ensure that whatever good ideas are generated by your political opponents you will not properly understand their benefits, for any coverage you hear of these ideas will be in the negative from the partisan news sources you have self-selected.

I think it is particularly galling that someone who described the ‘Ditch the Witch’ signs as some sort of abhorrent injustice would not find ‘Kill Abbott’ signs at least equally offensive. I would prefer neither sign existed, and people learned to use intelligent discourse to discuss such matters, but if you want to live in a world where one is OK, you need to accept both. If you find one of them tolerable, but not the other, you need to take a good look at yourself.

News sources almost all have biases. It is inevitable, organisational culture over time ensures this. Even if you were to create a deliberately non-partisan media organisation, inevitably over time a leaning one way or the other would develop. As a citizen, in my view, you need to make yourself acutely aware of the biases of the various media you consume, and view the writings through the sceptical lens of one aware of partisanship. If you cannot acknowledge radio personalities Alan Jones or Ray Hadley are ‘right-wing cheerleaders’ then you are only lying to yourself. If you can’t spot the left leaning nature of SMH, The Guardian or Crikey or the right-wing leanings of The Australian and News.com.au then you probably can’t be helped. All of those organisations have their ‘token’ journalist with alternative views/opinions in the interest of appearing ‘balanced’. Anyone who doesn’t believe the ABC have a substantial left-wing bias likewise has their head in the sand, a university survey conducted through late 2012 indicated that voting intentions of ABC staff were strongly skewed to the left with those who declared their voting intentions having 83.4% chance of voting for the Greens/Labor alliance over the Coalition, with the average ABC journalist being 5 times more likely to vote Green than the average voter. Interestingly, News Limited journalists were more likely to vote left of centre, presumably the iron-fist of editorial keeps their reporting along the right-wing…

Your job as a citizen and voter is to read widely and think critically, working hard to ensure any view on any subject you come to is a personally held view, informed by a deep understanding of why you hold that view. I probably spend more time reading opinion from journalists whose view I expect to generally conflict with the majority of my views. Challenging your own biases constantly is how you become a better human. Thinkers I generally respect have lost standing with me because they are hopelessly partisan. I read Paul Krugman, and think him a wonderful economist and thinker, but he fell heavily in my estimation when he declared he doesn’t read ‘conservative media’, for an academic to be blind to the possibility that roughly 50% of the world are incapable of generating a worthy idea (because their political views differ from yours)is ludicrous, but according to Krugman ‘we’re supposed to pretend that both sides always have a point’ – that is weak and unintellectual.

Parochialism in the main we think of regarding sports. Rugby League was my sport of choice, I played until a few years ago. I have entered four Rugby League tipping contests in my life, winning twice and being placed in the top 3 twice. These were contests with an average of perhaps 60 contestants, so such results are statistically significant I would say. Why am I successful in tipping contests? Did my time as a player give me an advantage in understanding? I doubt it, I believe it is for the same reason I have had some success as an investor. It comes down to a deeply embedded rationality. In part I think innate, but in very large part self-trained. I support the Parramatta Eels in the NRL, but in a tipping contest I can evaluate their prospects with the same cold-calculation I use to evaluate any teams prospects, avoiding the handicap many players have of always tipping their team, or often tipping their team when they shouldn’t. I also spent a great amount of time researching home and away win/loss ratios and the effect of historic betting odds on results. In part my success in tipping contests came because I have a small problem – I generally won’t engage in any form of competitive activity where I don’t feel like I have an edge. Charlie Munger has said of his success in stock-picking “My guesses are better than yours”, when I decided to participate in a tipping contest, I had to make sure my guesses were better than my opponents. I worked hard to make sure any parochial views I may have held were overridden by rationality and reason. The point being, if being correct is more important to you than agreeing with a crowd whose ideas you like or support, then you can override your natural tendency to parochialism.

This all drives to an idea I told a friend I would blog about this week (therefore the reason it is largely unrelated to investing). Environmentalists lately have struck me as unusually blinkered and some of the more egregious hypocrites in our society. Like many, I find Al Gore preaching on green matters offensive based on the fact he lives in a home that consumes more than 10 times the electricity of the average US home & regularly flies around in private jets. It is offensive to say one thing and do another. Whenever I see a protestor drive away from an environmental protest in a clapped out bomb, inefficiently burning fuel and dripping a trail of oil in their wake, I can’t help but think of them as ‘poverty Al Gore’ based on the equivalent hypocrisy. If that protestor really cared for the environment, they’d leave their polluting piece of shit car at home.

Worse than the hypocrisies described above, the World Bank has stopped funding coal-fired power plants, this in my view contradicts their stated mission to ‘End extreme poverty within a generation and boost shared prosperity’. The simple fact remains coal-fired power remains the current cheapest source of electricity (notwithstanding the recent low price of natural gas in the US – but certainly for the majority of the rest of the world), particularly in Africa with the most countries in the ‘Low Income’ (.pdf) category and with enormous undeveloped coal deposits. To deny low-income countries the opportunity to build prosperity through the same means developed countries used because we now have some new-found preference for other power sources is frankly offensive, particularly for those citizens and countries still trapped deep in poverty. Lifting people out of abject poverty should be a higher priority than mitigating an inestimable future risk to the climate. Furthermore, the cost for adjusting our energy future should be borne by the countries that have benefitted most in getting to this point in history. When wind and solar-farms are genuinely economically cheaper, they should be the focal point of future electricity installations, with fossil fuel supplying only base-load. Until then, the World Bank should execute their mission as stated.

To clarify my climate views, as I have previously described the effects of human economic advancement on the earth as being like smoking on a human body. It undoubtedly has effects, those effects are virtually certain to be almost exclusively negative. I cannot believe how long it took for the idea that smoking was dangerous to become accepted as fact. It should have been intuitively obvious. Human proliferation and economic improvement is undoubtedly impacting the earth in the negative. However as Dean Morel recently wrote a post called “The Global Warming Religion” we need to ensure we don’t arrive at a position and parochially support it regardless of facts over time. We need to make sure the issues that we tackle are genuinely the most important issues, not just the ones with the loudest protest groups, for those in extreme poverty tend to be disturbingly quiet. And we need to be willing to change our mind if the facts are different to the predictions.

Despite my above stated view that human impact on the globe is a certainty, I wish there were some acknowledgement that the median forecast of the effects of climate change has been meaningfully incorrect. The ‘decadal forecasting’ has been steadily declining, such that the UK’s ‘Met Office’ felt the need to release a lengthy explanation discussing methodology as there have been several downward revisions in the last few years and the 10 year rolling global temperature mean is now lower than in the early part of the 21^st century.

The fact that the global annual temperature is lower than at the turn of the century does not change the long-term upward trend and should not change shift toward cleaner energy technology. Nor the idea that the costs of the trend should be borne by rich countries, with poor countries allowed to use cheaper slightly less environmentally friendly technologies to alleviate poverty.

In dealing with ethical questions, I am primarily utilitarian. With the famous ‘trolley problem’ I would have no trouble pulling the lever to save five if it meant sacrificing one, I reckon I would do it to save two, or even to divert the trolley away from a single very young person toward a very old one… For that reason, I would take the certainty of lifting the very poor out of poverty through the provision of inexpensive, reliable power over the possibility that holding some poverty stricken Africans in poverty for a few more decades while gradually we develop more cost-effective ‘green’ technologies. The greatest good for the greatest number demands it – Tony Hansen 07/06/2014

EGP Fund No. 1 Pty Ltd. Up by 2.83%, trailing the benchmark by 1.24% since January 1^st. Since inception, EGP Fund No. 1 Pty Ltd is Up by 68.95%, leading the benchmark by 38.59% all-time (April 1^st 2011).

^{*1 after 31May 2013 dividend of 2.333 cents per share plus 1 cent per share Franking Credit & 31 May 2014 Dividend of 7.000 cents per share plus 3 cent per share Franking Credit}

^{*2 calculated based on dividends reinvested}