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Making Money by Agreeing to Disagree

"You can have comfort, or you can have value. You cannot have both." — Jim Grant, on CNBC

It is very comfortable and enjoyable to own a company everyone loves. You can brag about it to your neighbor, bring it up at social gatherings. But there is usually a significant price to pay for that comfort — the stock is fully valued. This is why value (cheap) stocks have historically beaten the bejesus out of growth stocks. The reason is very simple: Both love and discomfort are priced into stocks. Love is priced into fancy valuations, and the hated ones are cheap.

This instinctive comfort-seeking doesn’t stop with stocks; it spills over to the people we choose to share ideas with. As investors, we tend to look for people who share our views, but we should do the opposite. During the 2012 Berkshire Hathaway annual meeting, Warren Buffett said something that really resonated with me while answering a question about his political views’ impact on Berkshire: "If you are going to choose your friends and your investments by if they agree with you, you are going to have a very peculiar life."

Let me tell you a true story (as opposed to just lying to you). I have a dentist friend who was born in Russia and lived in Israel and Germany before moving to Denver about 13 years ago. He is extremely smart, very well-read and a thoughtful person. However, I have yet to meet anyone with whom I have disagreed more about politics. His arguments with me are passionate but also well thought-out and backed up with facts and his own theories. In the past, I used to get angry at him. After one of our regular debates, I’d sometimes go into avoidance mode for several months.

Three years ago my friend invited me to go skiing. Overall, he is a pleasant person, but I was a bit hesitant. It is a two-hour drive each direction from Denver to the mountains, and I did not think I could take four hours of arguing. But that day I felt extra masochistic, and I went along.

Instead of debating with him, I started to listen. I made an effort to keep emotions to a minimum; I tried to identify the specifics of our disagreements, what assumptions both of us were making. And then I attempted to focus the discussion on these more precise points of difference. In the end, we each learned from the other. Our views have not changed much (political views, like religious beliefs, are nearly impossible to shift). But we’ve been skiing almost every winter weekend since, and in the summer we bicycle together. Now I always look forward to our disagreements — and we are much closer friends than ever.

Leave a Comment    (4)

  • POST

The Devil's Advocate is a blessing, especially investing. Creating a culture the encourages constructive disagreement is a key to successful investing (and successful business). I wrote a similar blog not to long ago:

Sep 04 2014 at 7:58 PM EST

Cameron Hight

Your message resonates to me as true not just in stocks or life, but in the business world. In sales, your product is the best thing since sliced bread but if the customer doesn't agree with you, you will not be selling much. But you can make it the best product by listening to the customer's needs, Thanks for sharing.

Sep 03 2014 at 11:10 AM EST


I don't agree

Sep 02 2014 at 10:55 AM EST


I make my living as a private trader and one of the things that I use to keep myself sharp and fresh is to go into markets I have no knowledge in and trade until I make money. It is a challenge and completely refreshing, I am now entering my fourth decade of successful trading and this is one way that keeps my mind agile and open

Aug 31 2014 at 6:49 AM EST