How to Argue About Money
You might have heard that Apple recently introduced a VR headset—we will get to that in a second…
But first, if you were to neatly summarize what I do for a living, it would be that I argue about money. I argue about money on Twitter; I argue about money in my newsletters—I am constantly trying to be persuasive when it comes to money decisions.
The Greeks practically invented arguing. This was an evolution from beating people over the head with a stick. When they debated, it typically took three forms:
- Logos, or arguing through logic. You might say that Apple (AAPL) is in the 95th percentile of its valuation throughout history and, therefore, is overvalued and should be sold short.
- Ethos, or arguing through credibility. You might say that you have 24 years of experience in the markets and used to be a tech analyst at Goldman Sachs—and therefore, you have a lot of credibility when it comes to AAPL.
- Pathos, or arguing through feeling. You might say that AAPL’s VR headset is at the forefront of a technological revolution. It is the future, and if you don’t participate in it, you will get left behind.
What I’ve found in the financial industry is that most people argue with logos. They are good with the numbers. They know the numbers and can blind you with science and statistics and beat you into submission with calculations.
I tend to do the opposite. I tend to argue with pathos, evoking strong feelings with my writing style that compels people to action. I also think that the financial markets basically run on pathos and that the numbers don’t matter much, except at the extremes.
Some people can argue through ethos. I can, a little bit—by this point, I have lots of experience. A guy like James Grant can go on a podcast and speak with lots of ethos because he has the most-respected newsletter in history.
We’re All Going to Have These Headsets
I said I would get back to the headset.
Someone recently posited to me a theory on AAPL’s headset… that this product development marks a sentiment top in the stock. Well, the stock is on the highs. But I’ve seen this before—I remember when the iPhone 5 launch was supposed to be the top in the stock. It was, for a while. And the market didn’t seem to be too impressed with the product launch the next day.
Let me put it this way: Zuckerberg bet his entire company and his entire fortune on the idea that VR would be the future. I remember when he bought Oculus VR for a billion or so—everyone thought that Zuckerberg was just an entertaining oddball. This is the same guy who made 500X on Instagram. I take these sorts of things seriously.
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You may find it hard to believe today, but in 5–10 years, we will all have these things. You may find that to be dystopian, that we should all go outside and touch grass instead, but we haven’t even scratched the surface of what this technology can do.
For example, when the iPhone was invented, did you think that you would be able to one day hail a cab with it? Here’s an application nobody thought of: I recently bought an app to tune the strings of my new guitar. I can’t even imagine the possibilities of these headsets, and I think that AAPL will be the leader in them. The reviews are pretty great.
Pathos
See, there I am again, arguing through pathos.
Logos tells you what is happening today. It looks at the data in a static fashion and tells you what is going on right now. When you are arguing with pathos, you are arguing about the future. And everyone loves to argue about the future.
People gravitate toward different styles. I have a lot of people tell me that The Daily Dirtnap is a bunch of fluff. They would rather be convinced by the data. And that’s fine. It’s not for everyone.
As you may know, I was a columnist at Bloomberg Opinion for over five years. I had a great run there. But Bloomberg Opinion typically argues through logos. All the writing is backed up by data-driven research. I would typically turn in a piece that was all pathos, have it shredded by my editor, and then spend the next four hours looking up numbers on the internet. Two completely different styles. Ironically, my biggest article of all time—the one about the CFA—was argued through pathos.
Speaking of the CFA, that’s logos right there. And my argument all along has been that that stuff rarely works. People buy stocks because they’re in a good mood or because they’re hopeful or inspired—not because they’re a single-digit P/E.
Jared Dillian
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