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5. Barry Ritholtz

5. Barry Ritholtz

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In this series we aim to shed light on the motivations, inspirations and writing processes of some of the leading financial bloggers. Here, Barry Ritholtz of The Big Picture explains why he writes.

Marco Nappolini: Your blog, The Big Picture, is read by half a million people a month, it’s on TED’s 100 websites you should know and use list, you’re a regular presence in the financial press, and as Nouriel Roubini puts it, ‘a beam of enlightened thinking in a sea of delusional complacency'.

Tell me, how did it all start and what was the inspiration.

Barry Ritholtz: I write mostly for myself. It’s a process, one that helps me to better understand my own thinking and ideas. Daniel Boorstein once said ‘I write to figure out what I think’. It’s a surprisingly accurate quote – until you sit down and put pen to paper (or fingers to keyboard) you have nothing. Not until you have a coherent work with a beginning, middle and end, AND a justifiable premise, AND the ability to defend it to other people’s attacks, you don’t really know what you think. Writing it out is a very, very different process than just having a half formed idea kicking around inside your head.

Aside for writing for myself, there is a small dedicated audience – just a handful of people really – who are tired of what’s out there. They want thoughtful discussions about markets and investment that is intelligent and without hype or pretense. I hope they find that philosophy on my site.

The blog has been around for 11 years. It started in the early part of my career when I worked as an investment strategist in firms that had a couple hundred brokers. I would write up my notes, do the morning presentation for a few 100 guys. The rest of the day was a constant stream of phone calls “hey, what was that stock you mentioned? What were the GDP numbers?”  So to make my own life easier, I started putting it all on Yahoo Geocities, literally, so that I wouldn’t have to answer the same broker questions all day long.

Back then, it’d take me a half an hour to write something and then 2 hours to code it in HTML. It was a great tool but kludgy. When someone asked ‘hey what was that thingie you mentioned’ I’d just say, ‘go to the website, you know where it is, just go look it up, go’. 

I was self-taught in HTML, and learning it was an interesting experience.

By the time Typepad came along, I found myself with a somewhat different problem. I never seemed to be able to find what I was looking for. Now remember this was way back when – before Google Docs, before the Cloud, before any desktop search technology. So I just started throwing stuff up on the blog – links, charts, research - not because it was ‘hey take a look at this’ so much as it was, ‘I’m going to need this later and it’ll be easy to find here’.

M.N: So it started off as a digital scrapbook, to keep track of your own personal documents.

B.R: Exactly. It became a simple straight forward way for me to archive and keep track of all of the interesting stuff, so whether I was in the office or home or travelling or away, at least anywhere where I had internet access, I could find things.

I was more surprised than anyone when an audience came along that wasn’t my mother. I was getting 10 or 20 pageviews a day, most of which was me. And what slowly started happening over time was, lo and behold, people started coming and commenting and discussing posts. It was pretty clear that the idea of a practitioner discussing what he was looking at in an interactive way was attractive to a lot of people.

M.N: Which brings us to your Comments Policy

B.R: That has evolved over the years. I used to consistently get two to three hundred comments, of which, half were just nonsense, and of the remaining half, three quarters had little or no value, so I’ve had to take a wholly different approach. (I think it was the Guardian that published a report saying that 0.2% of readers were responsible for more than half their comments) There’s always a few people that ruin something for everyone. Comments are no different.

I pre-moderate now. So, most bloggers read comments and then try to moderate out the bad or the offensive, and once I flipped that on it’s head, and said, “hey, I’m having a small dinner party, and not everyone gets to sit at the big boys table” it became easier. And if you want to sit at the table you have to prove that you’re not engaging in non-sensical rhetoric or verbal sleight of hand.  If there is even a whiff of asshattery about the comments they’re gone.

So instead of having to correct all those people, I just say, nah, you haven’t earned the right to publish here. It’s much easier and faster to spot quality and permission it. I didn’t have time to correct the contradictory, disingenuous, artificial comments.

So when I find a good comment and post it, there is value to it.  The trade-off is I have a lot less comments on the site. Though you’ll see that some of the threads are just really high-level discussions, its great.

You have to earn the right to publish at the site; otherwise just GYOFB.

M.N: There’s a great quote on your press reviews page from Dealbreaker that says: ‘Barry Ritholtz takes down financial writers like it’s his job’.

Now if the role of the mainstream media is to hold power to account, could you say that it’s the role of the blogosphere to act as a check on the mainstream media?

B.R: Well that died a long time ago – the media as a balance to power – but let me give you the arc of that, because there’s a development within that arc, that I think is interesting.

When you first start blogging, you have this platform and no one is paying attention. You become completely outraged with some of the of things that you see and read and it’s not just that the media or corporate press is outright corrupt, its more that their business model is so awful.

A perfect example is economic coverage: They’ll throw some kid onto the economic beat who graduated from a liberal arts college last year, or has a degree in media or journalism but not mathematics. This poor bastard is suddenly forced to cover economic data even though they just don’t have the chops for it, they don’t have the tools. So what happens is they actually believe some of the bullshit that gets fed to them – how important NFP is (its not) silly survey projections about Xmas shopping (wildly wrong every year), National Association of Realtors reports (mostly spin) – its kinda crazy.

Now understand, there’s a mix of data sources, most of the people that appear in the financial press have a very specific agenda. They appear on TV and radio or get quoted because they want to attract clients. We understand their motivations. Where things begin to get dicey is when they start to say ever more ridiculous things in order to do more media interviews. They figure that no one will remember what they said, so long as they’re on TV a lot they’ll attract more business.

So that’s one particular sub group of people that really deserves to be metaphorically slapped around.

There’s another group of people though, that just say nonsense that no one stops and looks at. My background is a little eclectic for someone who works in finance. I have a law degree, but undergraduate I spent my first four years of collge studying applied mathematics and physics; I then switched to Poli Sci / philosophy because I wanted to drink beer and chase girls. (It was so much less work to be a Poli Sci major).

I know just enough math to be dangerous to myself, but I can also spot the bullshit, which is the best part of having any science or mathematical background. You learn how to identify statistical bullshit, and then the legal education teaches you how to identify rhetorical bullshit, so I am pretty good at telling if either your left brain or your right brain is lying to me – that’s a very useful skill in finance.

Over the years, I frequently find people write stuff that is just nonsense. And I feel its my obligation to call these nonsense-spouters out. It’s like being a witness to a crime – as a citizen, you feel obligated to testify.

One of my favourite examples, I don’t remember which writer it was but it might have been what led to the Dealbreaker quote. About 8 years ago Michael Dell bought 60million dollars or so worth of Dell stock, and some writer guy who I think is kind of a jerk started touting that this a reason why you should go out and start buying Dell.

Now Dell was about $40 at the time, so I wrote a whole piece saying, ‘well let’s put this into some context’. Michael Dell is worth $20 billion – he got that money by selling much of his Dell stock – and now he’s buying a mere $60 million back?  That’s a tiny insignificant fraction relative to his net worth. It’s the equivalent of someone who makes $50k a year, going out and buying $100 worth of Dell stock, so really, who gives a flying fuck about this teeny tiny Dell purchase.

It’s not advanced calculus its just basic mathematics, but if you don’t have some familiarity and ease of interaction with the numbers, you’re going to think WOW, $60 million dollars, that’s a lot of money. No, not relative to 20billion it isn’t, it’s bullshit, $60million is less than one third of one percent of his prior Dell sells.

It’s a minor PR buy for this bastard, he’s spending $60million dollars on PR. I wanted to say to Michael Dell, Hey! You want to make a commitment, motherfucker, go and buy some size, buy $5 billion worth of stock. Let your money speak for you and not these idiot paid shills and Wall St sycophants. – That is simply a better context for understanding the Dell purchase that too many people failed to see.

And that’s the kind of attitude that made its way into the blog. Here’s the bloody truth and if you don’t like it, well, too fucking bad.

M.N: And is it this approach that you find people respond to the most?

B.R: No, no, it was just the pebble in my shoe – I would get angry and vent. Now, the way the arc of that has changed over time is twofold.

When you blog for 10 years you start to develop your own philosophy, your own approach, your own belief system, and suddenly it’s less about pushing back against everything that’s wrong in the world – of which there is a never ending supply – and you start presenting a better approach. That includes everything from consuming media, to investing money, to thinking about the economy – you want more of what is rational and makes more sense and less meaningless noise. Merely digesting the NYT, WSJ, FT, Economist, LA Times, Forbes, Fortune, go down the whole list becomes worthless

What you discover after you’re a mass consumer of media is that there is a lot of really, really bad media.

I’m fond of quoting Sturgeons law. He was sci-fi writer in the 50’s and 60’s and someone asked him why so much science fiction is crap, he said that 95% of science fiction was crap but then again, 95% of everything is crap. So rather than consuming all of this stuff that has terribly low signal to noise ratio, which is mostly noise, just turn off CNBC on TV, lower the radio and sit and think for a change…

M.N: Blogs can be a great filter of information but might there be a risk of adding to the noise, in effect, contributing to the problem you’ve set out to address?

B.R: I have a post that addresses that exact issue, it’s called ‘The Price of Paying Attention’ which discusses that as an intelligent investor, you should be constantly looking for excuses to eliminate things from your media diet, meaning humans engage in all sorts of biases and cognitive errors and because of that, you should be looking for an excuse to reduce the content bias you have.  The last thing in the world you want is to be consuming media that makes you dumb, or less informed or misinformed.

M.N:There was a piece in the Guardian recently by Rolf Dobelli about why you should avoid the news

B.R: I wrote a piece back in ’05 for the street.com called ‘Lose the News’. It basically said that you read television and newspapers do so for entertainment, to become informed, but don’t read them to become a better investor. By the time it’s in the major newspapers it’s mostly reflected in the stock price. You know the old line, that it’s in the stock already, it’s true, so why are you reading it?

Typically you’re reading it because you want to have more information, and the reason you want to have more information is because it makes you more comfortable when you make a decision. As countless studies have shown, you only need a very small amount of information to make an intelligent risk/reward investment decision. So the real paradox is that more information leads to overconfidence, which ironically means more information leads to worse decision-making.

It’s really quite fascinating because what reading lots of news does is makes you more comfortable in your decision-making, but it doesn’t lead to better decision-making. It's an emotional salve.

M.N: You say you write to know what you think. How have your thoughts changed over time?

B.R: A couple of things have changed. I’ll give you three.

I remember about 10 years ago reading an article by someone, the subject is irrelevant, but I remember thinking to myself, man, that sonovabitch can write. 

It was a short piece, but it was so eloquently written, so articulately argued that it inspired me to do some homework -I always fancied myself a bit of a writer, I wrote a weekly commentary in the college paper – and I found that if you want to become a better writer there are two things you have to do.

One is to read really good writing and most of us try to do that. But the second thing is to write a lot, and so I made the commitment that day that I was going to write for an hour a day, every day for the rest of my life.

So I get up everyday between four thirty and five o’clock. I sit at the computer and write for an hour, and most of the time that’s what ends up in the blog.

I really committed myself. It’s like going to the gym, but instead of hitting the treadmill I go to the keyboard. What used to take me an hour or an hour and a half to bang out is like a 10-20 minute thing now.

I love when I walk into the office and a colleague says to me ‘dude, what you wrote in the morning just crushed it, that’s great, how long did it take you to write?’

There are two answers to that. The polite answer is, ‘well you know, I’ve been thinking about that subject for a while, it’s been in the back of my mind for weeks’, which nobody gets upset about. But if I give the honest answer, which was you know, ‘I was late and had to jump in the shower, ah it took about 10 minutes’, people get angry with you.

There is truth to both answers.  Because when you turn this into part of your process, when you elevate your game, writing constantly, every day putting a few hundred words on paper, the process becomes much more streamlined.

I’m walking around with a never-ending internal dialogue and most of my writing is excerpts of my internal dialogue. It's an old joke, it only takes 10 years to become an overnight sensation.

M.N: Ten thousand hours to become an expert.

B.R: Right, it’s taken over 25,000 posts to get here, I remember when it used to take me hours to put something together and now the thing that slows me down the most is the fact that I’m just an OK typist.

M.N: And the second change in your thinking.

B.R: So about 10 to 15 years ago I became interested in behavioural economics and that eventually led to neuro-finance and thinking about cognitive issues.

Normal human beings are filled with these wetware errors and cognitive deficits. Learning about that has very much impacted how I consume media, what I focus on. There is a real tendency – to steal the brilliant line from William James – for people to confuse thinking with simply re-arranging their prejudices.

There’s a reason why a quarter of the country reads Drudge, and a quarter reads the Huffington Post and neither of those groups read the other side. That sort of confirmation bias may be silly in politics but it is very, very expensive in investing.

Only reading things that agree with what you think is just brutal, it’ll just kill you, so I try weave behavioural thinking into my perspectives.  That means reading people I disagree with, painful though it may be.

M.N: And the third?

B.R: I had a really interesting experience when Bailout Nation was published. I was surprised that people still didn’t understand what had happened. It was like “Hey, I spent a year researching and writing this – those questions are resolved!” I realised I couldn’t educate the whole world, that all I can do is just carve out my little corner of the universe and say, here’s the Capital T truth, not a subjective truth as I see it, but a real attempt to get at the truth beneath the façade.

It doesn’t matter if you don’t like it or I don’t like it, but here it is.

That’s the reason I do a mea culpa every year – to keep the process honest. IF you cannot admit: ‘hey, here’s what I got wrong’ then you will never get to the truth.  Anybody that thinks they’re going to get everything right is kidding themselves. So I actually put it in print and it ends up on the blog and in the Washington Post.

M.N: Cardiff Garcia wrote recently on the future of finance blogging

B.R Yea, I keep on meaning to get back to it. Here’s what I think. Blogs will never replace the media, at least I don’t think they will, but they can supplement it.

Most journalists have to be generalists, even if you’re the theatre reporter or the economics reporter; you’re still a generalist because in area like economics you can drill down to such a specific subsector of a sub-genre of a sub group.

I linked to a guy the other day whose entire blog -- it’s entire raison d'existence, is critiquing movie previews – just previews! That’s fricking hilarious to me. It must be a labour of love, because you obviously don’t do that to respond to the massive market demand for reviews of previews; you obviously don’t think it’s going to make you any money.

You get experts in very specific areas and to me that’s the genius of the entire blogosphere.

That’s how I treat Twitter, I get to follow a thousand people who are absolutely brilliant experts in their area, and until you’re a brilliant expert in your area I’m probably not following you.

M.N: Yea, Garcia argued that the newsroom has been sufficiently blogified and so he doesn’t see further expansion in the professional blogosphere. But that on the non-professional side - so finance professionals who also write a blog—those experts that you said you find a lot of value in, there are signs of growth.

Continuing with the future of blogs thread, Andrew Sullivan made an interesting point regarding the evolution of blogs rather than their demise or their plateauing and compared it to magazines. Essentially blog-hubs are the new magazines

B.R: I put Andrew Sullivan into quarantine years ago. He demonstrated such a colossal lack of judgment during the Iraq war, I lost faith in his ability to perform basic analysis. I don’t care how good a writer you may be, once you reveal how horrific your judgement is – he accused people who disagreed with him of being traitors, “5th columnists,” and terrorists for not supporting the invasion of Iraq. I find that utterly appalling.

If his judgement was so bad about that, how can we ever trust anything else he ever says? I don’t care if he writes War and Peace, someone whose ability to evaluate events is that horrific he must be quarantined lest he lose me and my clients lots of money. 

This is a classic example of the attention economy, and the cost of paying attention.

The people I do read by and large have earned my trust because their judgement was so smart – I trust their ability to assess a situation, understand all the dynamics going on beneath the surface – and make an intelligent assessment of what’s actually going on. There are lots of phenomenal writers, analysts, strategists out there who are well worth your time to read. I don’t expect these people to get every call right – but I do expect them to have a process that is a least defendable.

Of course, there are circumstances where people make mistakes – everybody makes mistakes – but you can’t have a catastrophic failure like Dow 36,000 and expect people to continue to take you seriously. At least by those of us who understand how Human Judgement works.

Like I said, ‘I’m always looking for reasons not to read you’.


Also in the 'why I write' series : 

1. Tadas Viskanta, Abnormal Returns

2. Cullen Roche, Pragmatic Capitalism

3. Chris Dillow, Stumbling & Mumbling

4. Shaun Richards, Mindful Money


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