This post originally appeared at The Enterprising Investor blog hosted by the CFA Institute. The plan is to make this an ongoing series of posts exploring underavlued ideas in the financial blogosphere.
What I found is that I could not predict the good reactions or bad reactions based on the work I had done. – Scott Adams
Scott Adams the cartoonist behind Dilbert and author of How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life, in a podcast with James Altucher talked about how he finds little correlation between the amount of time put into a strip and the popular reaction to it. A strip he fussed over for hours oftentimes would fall flat while a strip dashed off in minutes could become a bit hit. Adams had to admit he had little ability to predict which strip would do well with readers.
This phenomenon is not unique to cartoonists. Bloggers experience this as well. I am constantly surprised which of my blog posts generate a positive reaction. I am also surprised which links my readers choose to click on and further share. Nor am I alone in this. Anil Dash a popular blogger who has been at it for 15 years has experienced the very same thing. Among the 15 lessons he has learned about blogging he includes this:
There is absolutely no pattern to which blog posts people will like. I’ve had pieces that I worked on for years that landed with a thud, ignored by even my close friends, and I’ve had dashed-off rants explode into huge conversations on the web. I’ve had short pieces or silly lists that people found meaningful, and lengthy, researched work that mostly earned a shrug. And of course, I’ve had pieces that I put my heart and soul into that did connect with people. If there’s a way to predict what response will be online, I sure don’t know it.
That is not to say that the financial blogosphere is a completely random walk. I have argued in the past that the financial blogosphere is a “imperfect meritocacy.” Barry Ritholtz who hangs his hat at the Big Picture and Bloomberg View who has been at this much longer, some 30,000 posts, says something very similar. Ritholtz writes:
Online publishing is (for the most part) a meritocracy. A number of bloggers in economics and the financial sector have risen to prominence through the sheer strength of their work. Note it was not their family connections nor ties to Ivy League schools or elite banks, but rather, the strength of their research, analysis and writing. That is the very definition of a meritocracy.
That anyone with a computer, writing chops and an Internet connection could achieve fame and fortune — or more realistically, a degree of wonky recognition from a narrow group of finance geeks — is pretty amazing.
All in all, I would argue that the financial blogosphere can be characterized as having a significant random component. But there is a real measure of upward drift for those participants who have insight into the financial markets and have the ability and willingness to share it with a broader audience. So, on a post-by-post basis, readership may seem random, but over time the cream truly does rise to the top.
The prior discussion was to provide some context for the purpose of this post. Periodically, I am going to review the financial blogosphere for posts that I think did not get the attention they deserved from the broader financial audience. There is, of course, plenty of room for disagreement about what posts are interesting (and important). My nearly nine years of blogging hopefully buys me some credibility in this regard. Below you can see the title of the post, the blog name, the author, and a brief explanation of why I liked the post.
Much has been made over the past year about how stock buybacks have been driving the US stock market higher. The typical reaction of a stock to a buyback announcement is for the stock to head higher. In this post Prof. Damodaran walks readers through the logic about when (and how) buybacks add to shareholder value. He also notes under what conditions buybacks actually detract from shareholder value. The important point being that buybacks are not an unalloyed good for shareholders. As with much in finance the answer often is: it depends.
A blog post need not be an exhaustive look at a particular topic, like the prior post on buybacks. Sometimes a single graph can tell an interesting story. In this post O’Shaughnessy looks at the percentage of stocks trading on US exchanges that can be characterized as “deep value” situations. The upshot being that at the time of the post there were historically few stocks trading cheaply by an admittedly subjective measure.
Some of the best blog posts have little to do with financial theory and quantitative research. Blog posts that relate an author’s personal story can have the biggest impact on a reader. In this post Carlson talks about his experience interviewing for a job with a firm involved in packaging CDOs at or near the peak of the real estate bubble. Carlson using his experience dodging this career bubble to impart some lessons on careers in the financial markets.
The world of investment management is undergoing a revolution. Echoing Marc Andreessen I noted in an earlier post how software is eating investment management. There are many great reasons to further automate portfolio management however one thing that these services can’t do is change some of our behavioral biases. In this post Seawright talks about our need to stay humble in the face of what is an increasingly unpredictable world. In that sort of setting simply avoiding big errors goes as long a way as any portfolio optimization program.
Not every you read needs to be about finance and economics. I argue in my book for idea that investing is the “last liberal art” and that investors benefit by reading as widely as possible. Warren Buffett and his business partner Charlie Munger are famous for being voracious readers. That being said more and more of our reading is occurring online or on e-readers. Konnikova in this article reviews the research showing how online reading differs from offline reading. She notes how we are in many ways we are losing the ability to do “deep reading.” If so, investors need to take heed of these findings.
One takeaway from this list is that blog posts are as diverse and unique as their authors. A blog post relevant for a financial audience need not be a wonky, technical take on a topic. Indeed the best blog posts do more to challenge our thinking as they do to detail a complex argument. I will check again soon hopefully with another batch of posts that do exactly that.