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On June 23rd, 1810, German immigrant John Jacob Astor forms the Pacific American Fur Company in New York City.
John Jacob Astor, born in Waldorf, Germany, in 1763, immigrated to the United States in 1784, where he began his career selling musical instruments. He soon shifted to the fur trade, leveraging his connections and business acumen to dominate the industry. Astor's American Fur Company became the leading player in furs, establishing trading posts across North America. As the market waned, he wisely diversified into real estate, acquiring vast tracts of land in what would become prime areas of New York City. Astor's investments in real estate paid off handsomely as the city grew, making him the first multimillionaire in the United States. He left a lasting legacy through his philanthropic efforts, including the establishment of the Astor Library, which contributed to the foundation of the New York Public Library. Astor's life journey from a poor immigrant to a wealthy and influential businessman is a quintessential tale of American success. Astor’s journey from humble beginnings to becoming one of the richest men of his time offers enduring investment lessons. Here are some key takeaways from his life: 1. Have a clear goal but stay adaptable. Markets change, and the ability to pivot is crucial for long-term success.Astor's initial success came from the fur trade, a booming industry in the late 18th and early 19th centuries. He recognized the potential early on and adapted his strategies as the market evolved. His willingness to pivot—from pianos and flutes to furs and later to real estate—demonstrates the importance of having a clear vision but remaining flexible to adapt to new opportunities. 2. Diversify your investments to manage risk. Astor didn’t rely on a single industry for his wealth. After establishing himself in the fur trade, he diversified into real estate, buying vast amounts of land in New York City. This diversification helped him mitigate risks and capitalize on the burgeoning city’s growth. 3. Think long-term. Patience and strategic planning are vital. Astor’s real estate investments were made with the long term in mind. He purchased land in what was then the outskirts of New York City, anticipating the city’s expansion. This foresight allowed him to reap enormous profits as the city grew. 4. Identify and leverage your competitive advantages. In the fur trade, Astor leveraged his relationships and knowledge to secure exclusive deals with Native American tribes and European markets. His ability to navigate complex trade networks gave him a competitive edge. Your competitive advantage as a small investor is that you don’t have to report quarterly to a board overseeing your every move. This should make you less short-term focused. 5. Take calculated risks but manage them wisely. Understand the potential downsides and have strategies in place to mitigate them. Astor did. For instance, his venture into the fur trade involved significant risks due to its dependence on volatile factors like fashion trends and political relations. However, he mitigated these risks by establishing a vast network and he remained nimble. 6. Reinvest profits to compound growth. Reinvesting earnings can accelerate wealth accumulation and create a self-sustaining cycle of growth. Astor continually reinvested his profits back into his ventures. The profits from the fur trade were funneled into real estate, which then provided even greater returns. 7. Plan for the future beyond your lifetime. Effective estate planning can preserve and grow your wealth for future generations and contribute to lasting legacies. Astor was mindful of his legacy, establishing the Astor Library, which later became part of the New York Public Library. His careful estate planning ensured that his wealth continued to benefit future generations. John Jacob Astor’s life is a testament to the power of vision, adaptability, diversification, and long-term planning in building and sustaining wealth. His strategies and principles are timeless and the modern investor can learn a little something from the nation’s first millionaire.
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 One and done
Last week, we got word from the Federal Reserve that we might only get one rate cut before the end of 2024 and it will probably be in November or December. Consumer Price Index (CPI) and Producer Price Index (PPI) numbers were softer, adding to the narrative that the economy is slowing and prices are still rising, just not as quickly. The May jobs numbers were the only fly in the ointment as far as the recent data is concerned, especially if we are looking for the Fed to potentially put rate cuts on the table sooner than November. We have often discussed how expectations for rate cuts have declined from six or seven at the beginning of the year, to two or three and now to one. The market has been extremely optimistic every time we’ve had discouraging news on the rate cuts front (more on markets below). At some point, markets will have to realize that until we see an actual rate cut, talking about rate cuts is just that: talk. We were certain the Fed would be unable to keep rates higher for longer and would cave — whether from pressure in an election year or, more likely, due to economic decline — and initiate rate cuts. The fact is after considerable progress against inflation from mid-2022 to mid-2023, we have been stuck above 3% since then. The problem now for the Fed is how to get that final 1% of inflation down without wrecking an already anemic economy. The Fed waited too long to move as money flooded into the economy during and after the pandemic as the government spent money on things we did not need and called inflation “transitory” or blamed it on supply chains. The truth is all that money could have been used to shore up programs like Social Security and Medicare. Because the Fed waited too long and failed to account for all that extra money, it now has to play catch-up for longer. The longer rates stay where they are, the more likely the economy will stumble. Companies have gotten used to charging more because people were willing to pay more, and that’s why earnings have been decent. This can only continue for so long. Inflation has not budged for almost a year and looks a little better recently because fuel prices have declined in the past few months. Falling prices for gasoline accounted for nearly 60% of the decline in the cost of last month. That can just as quickly reverse due to energy policies and events in the Middle East. In the meantime, the consumer is being challenged by higher interest rates, housing costs continue to climb while mortgage rates still hover around 7% for a 30-year loan and the economy barely has a pulse. The Fed was widely split at last week’s meeting with some calling for cuts, staying put or raising rates in the months going forward. It finally settled on one cut as we approach year-end. However, the Fed may be forced to cut sooner because the economy, at its current pace, will begin to sputter and the Fed is way more afraid of driving us into a recession than it is of 3% inflation. No cuts? No problem. The S&P 500 and Nasdaq notched new records last week, buoyed by continued optimism around AI (led by the recent run-up of Nvidia and the excitement of its stock split), good earnings and wishful thinking that we’ll see more cuts than what the Fed is stating. The Dow, which pierced 40,000 back on May 17, has been slipping, thanks mostly to Boeing, Intel and McDonald’s. Please remember that the Dow 30 consists of, well, 30 stocks and is not a broad-based index, but it makes great news when it’s up or down 1,000 points because people like big, dramatic numbers. The S&P 500 is a far better measure of the markets; the market has indeed been very narrow this year and the inclusion of high flyers like Nvidia and all the surrounding hype have provided a lot of the lift and have made up for the rest of the names that are having a pretty bland year. In a way, it’s a strong argument for the power of diversification. The Nasdaq is more specialized and benefits from being skewed toward technology, and right now, technology is in favor (as it has been in recent years). So, three cheers for the S&P 500 and the Nasdaq on new records — and here’s to the rest of the stocks catching up to the Nvidias of the world! Coming this week
🗓️ On June 10th, 1916, the Great Arab Revolt against the Empire of the Ottoman Turks begins.
🐪 On the eve of World War I, the Ottoman Empire was a relic of centuries past, outdated and providing little value to its citizens. Revolutionaries stumbled upon an effective communicator who helped them create a grand strategy and kept their motivation up when things went wrong. His name was T.E. Lawrence, and he penned a quasi-autobiographical account, The Seven Pillars of Wisdom, about his service. After his death, it became the basis for the movie Lawrence of Arabia. To quote from the book: “All men dream, but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity, but the dreamers of the day are dangerous men, for they may act on their dreams with open eyes to make them possible.” 😴 Allow me to translate for investment purposes; don’t become a relic. Today, the shifting sands of the financial industry have many investors revolting against investment models that are likewise outdated and provide little value. Dreams are important. They give us a place to strive for, something to work toward. But they are meaningless unless we have the strategy and tactics to make them real. This is a time where the tactics are especially important. As you can see at this link , since bottoming in October of 2022, the recovery from the most recent bear market in stock and bond markets has been uneven, with more conservative options lagging more aggressive ones. Bonds (represented by the aggregate bond index or AGG) have had a terrible time as interest rates have risen and stayed higher for longer than expected. But opportunities abound with other instruments like T Bills. Making that shift in tactics is important for making your dreams possible. So, dream on.  Cool Summer?
With school out and families gearing up for slower times this summer, it looks like they are going to have some company. The economy may be looking to get some time off and is cooling pretty quickly as well. And consumers are finally beginning to buckle under the weight of interest rates and inflation. After the summer is done and the bills come due, the party may start coming to an end. Last week featured new record highs for the S&P 500 and Nasdaq (see next section), but signs of a softer economy were also apparent. Remember the other week when first-quarter gross domestic product (GDP) was revised downward from +1.6% to +1.3%? Last week, the Atlanta Fed — usually one of the more optimistic forecasters of GDP growth — revised its estimate of second-quarter GDP downward from +2.7% to +1.8%. Additionally, the Job Openings and Labor Turnover Survey (JOLTS) report, which shows how many job openings are available, dropped to about 8 million for the lowest level of job openings in three years. Please remember that the JOLTS is a delayed report; last week’s reading was for April and marked the second monthly decline in that number. Openings are declining, but we have not yet seen layoffs, which for now is keeping the hope going that we may be able to thread the needle by slowing the economy enough to tame inflation and avoid recession. The ADP employment report, which tracks corporate jobs, came in below expectations at +152,000 on Wednesday in yet another signal of slowing job growth. Plus jobless claims on Thursday were higher than consensus again. But on Friday, the Bureau of Labor Statistics (BLS) bucked the recent trend and reported that 272,000 jobs were created last month, well above the expected consensus reading of +188,000. However, the unemployment rate climbed to 4.0%, which is a psychological red line. Both March and April jobs numbers were revised downward, and this most recent jobs number may also follow the trend of being revised downward. Speaking of trends, the unemployment rate has been trending upward from its last low of 3.4% in April 2023 to the current 4.0% level. One-half of 1% may not seem like much, but when we start rubbing up against psychological barriers, it starts to wear on the psyche and markets. Finally, 250,000 workers left the labor force, showing the labor participation rate is declining. Let’s bring this full circle: We have higher interest rates, inflation is still far above the Federal Reserve’s stated target and now we see multiple signs of job growth slowing. The current danger now is the Fed potentially misreading the slowdown in jobs and economic activity and not acting soon enough. There is still time to pull out of this downward dive in an orderly manner, but if the Fed waits too long, they may course-correct too aggressively and create turbulence. This would panic the markets and probably drive us into a recessionary environment. Consumers are getting tapped out, and the longer rates remain where they are, the more pressure it will put on them. That last mile to tame inflation may end up being the killer. Just like the Fed waited too long to address inflation, it may wait too long to cut to avoid a recession. Maybe the rate cuts from the European Central Bank and Canada are a clue as to where things are headed. But then again, the Europeans and Canadians have always been a little more accepting of inflation. Markets plow ahead on hopes of rate cuts and a soft landing Yields declined prior to Friday’s jobs report, then rose again late in the week. Meanwhile, the S&P 500 and Nasdaq set more new records last week, driven by the rate-cut chatter that’s picked up again. With the European Central Bank, Canada, Sweden and Switzerland all beating the Fed to the punch, and this week’s mostly weaker jobs data coupled with lower first-quarter GDP in the U.S., the market began to buzz about the possibility of a rate cut in July. We saw records for the S&P 500 last Wednesday as the index surged well above 5,300 and for the Nasdaq, which pierced the psychological 17,000 barrier (17,187.90). The Dow lagged last week after it crested above 40,000 on May 17. Tech led the way, as usual. Nvidia surpassed Apple in market capitalization (stock outstanding x market price) and is only behind Microsoft for the No. 1 spot in the U.S. However, the idea of lower rates also helped drive the rest of the market. We eased back as the market started to get fidgety; after begging for rate cuts, the specter of those actually happening has sent a pang of worry through the market. Is the economy just slowing or is it slowly falling off a cliff? The debate will rage, and the data will be examined six ways from Sunday. Fed Chair Jerome Powell will have to walk a very fine line. If he signals the Fed will need to move unexpectedly to shore up the economy, the markets will panic. But if he ignores the recent data and says all is OK, it could be reminiscent of his “inflation is transitory” position before the Fed started raising rates. At the onset of rate cuts, the markets will likely be happy and then panic if the cuts start to look like the Fed is trying to goose a flagging economy. If Powell can engineer a “just right scenario,” the markets will likely be ecstatic, but the chance of that outcome isn’t looking great. We’re left with two more likely scenarios: 1) the Fed moves too soon or 2) the Fed waits too long to cut rates. Both would result in volatility and market turmoil. We’ve been saying for the past few months that you should make any adjustments in the first half of 2024. For those who listened, kudos. For those who did not: THE TIME IS NOW to readjust your portfolios and asset allocations to make sure they are aligned with your plans and goals and that your allocations have not been distorted in the recent run-up. The time to address a leaky roof is on a sunny day, and right now, the sun seems to be shining brightly for stocks. Coming this week
On June 6th, 1944, Operation Overlord begins as Allied forces cross the English Channel to attack "Fortress Europe."
In the pre-dawn hours, C47 Dakotas took to the sky in massive ‘V’ formations to carry the 101st and 82nd airborne divisions over the English Channel to landing zones behind German lines. Many pilots were disoriented during night-time evasive maneuvers as anti-aircraft fire erupted from the German coastal batteries. Airborne troops were scattered throughout the French countryside, often miles from their intended drop zones. Likewise, faced with heavier than expected artillery and mortar fire, landing craft dropped their troops off target and occasionally in water over their heads. It is an inauspicious beginning to the Day of Days and the largest amphibious assault the world had ever seen. And yet, the Allies prevailed. Not because of their plan (noun), which was shredded the instant the first shot was fired, but because of their planning (verb), which emphasized small unit tactics and included junior officer and senior enlisted troops in preparing for the D and D+1 objectives. This reliance on non-general officers to continually assess their situation and (to borrow a phrase) improvise, adapt, and overcome was in stark contrast to the strict hierarchy of the German military. Here are the two main lessons for investors from Operation Overlord: 1) The situation on D-Day was fluid and required rapid adjustments. Members of the Greatest Generation were up to the task, shifting lost troops and stray units to take crucial objectives.Thorough research and due diligence are crucial in investing before making any investment decisions. But your plan won’t win the day unless you are active, flexible, and decisive. 2) The D-Day operation relied on the collaboration of various experts and allied nations. Investors, too, can benefit from seeking advice and leveraging the expertise of professionals.  Weaker than expected
Last week was all about economic weakness. We saw it on two fronts: the revised first-quarter gross domestic product (GDP) number and several bond auctions. Although last week was a short one thanks to the Memorial Day holiday, there was enough going on to make up for the day we missed. Frankly, it would have been OK to miss more than one day of trading because the week in the markets was not a good one. First-quarter GDP was initially reported at 1.6%, but last week it was revised downward to 1.3%. Weak growth revised downward to an even weaker number, coupled with 3.4% inflation (more in the next section), and personal income not keeping up with spending led to a pretty glum mood. When adjusting for inflation, consumption declined, meaning consumers spent more on purchases in April but ended up buying less than they did in March. That just doesn’t add up to a healthy, robust economy and is a large reason why many feel left behind. There are also those experiencing an “emotional recession” — you have a job but aren’t confident in your future, fatigued with high prices and it’s taking more and more money just to keep up. With that backdrop in mind, we come to the second set of circumstances that we believe caused the market to be crabby and cranky last week. There was a series of bond auctions that were not well received. There wasn’t enough enthusiasm from buyers, which resulted in the government having to offer higher yields to entice buyers. This was the third weak treasury auction in a row. We’ve used the word “weak” a lot in this section: weak economic growth, weak wage growth and now weak demand for bonds. That sounds a lot like things aren’t as rosy as we would like them to be. Higher bond yields make equities less attractive, especially when you can get between 4.5% and 5.2% on U.S. treasuries maturing between two and seven years (the shorter the term, the higher the yield, thanks to the prolonged inversion of the yield curve). All of this led to a selloff in stocks last week. After hitting 40,000 on May 17, the Dow ended May at 38,706.98. The S&P 500 was off just under 25 points from its all-time high on May 20 (5,308.13) at 5,277.51. Despite last week’s drop, we are still close to all-time highs, and we will see the rally resume if the Federal Reserve signals a willingness to cut. Remember: We want the Fed to cut to keep the economy from stalling and not out of desperation to try and save us from a recession. The next few months will go a long way in deciding which direction we are headed. Why inflation isn’t dropping Elevated inflation has been around for over three years now, and the last time we saw a reading below 3% was in April 2021 (2.6%). Sure, 3% may not sound like much — but we were running between a 7% and 9.1% annual rate for a full 12 months (December 2021 through November 2022, with a high of 9.1% in June 2022). In all, we’ve seen a 17.37% increase in the consumer price index (CPI) since April 2021. Because the memory is so recent, we seem to rebel mentally to accept this. Instead, it can be filed under “I remember when (fill in the blank) cost (fill in the blank)” — because as recently as three years ago, we experienced lower prices from food to gas. As a result, we get mad and aren’t willing to accept the reality because we have seen things get better. We have become accustomed to a way of life, and as that way of life gets more expensive, we stretch ourselves to maintain it until we finally snap. That is what makes people feel like we’re in an “emotional recession” and why the Fed will not be able to tame inflation because if it continues to keep rates where they are or even raises them to lower inflation to its preferred 2% level, it will virtually guarantee an actual recession. That’s the only difference between a slow death and a sudden one; the results are the same. The cure for higher prices is higher prices. We will reach a point where we actually say, “No, I will not pay that.” Price increases may then slow, but they will not give up those increases without a painful recession. Right now, we are experiencing a slow death. Real wages are stagnating, the economy is barely growing, interest rates are high and inflation keeps gnawing at our wallets. We can’t seem to get past inflation because we know how it was and so desperately want it to be that way again. Coming this week
 Sizing things up
The week started slowly, as expected, with markets mulling over the inflation data from the previous week and letting off a bit of steam as we recorded new all-time highs. Things picked up on Wednesday following the release of the Federal Reserve’s latest meeting minutes and anticipation of earnings from NVIDIA, the darling of the AI boom. But not even blowout earnings from NVIDIA could stem the bleeding last Thursday, as we had the worst day for the Dow so far this year. The culprits? Lower-than-expected unemployment claims and a stronger-than-expected manufacturing reading. Both data points signaled that the jobs market is still robust and the economy may not be getting weaker as expected. The situation was made worse by the Fed minutes, which showed some of the voting members were open to keeping rates higher for longer and possibly open to further hikes. All of this was enough to send markets spiraling downward. The jobs and manufacturing readings pointed to inflation continuing to be sticky with no concrete signs of approaching the 2% level the Fed would like to see. The talk is that we may even see an uptick before inflation falls further; if we do, it would put any rate cuts in July out of reach unless we see inflation drop further. Markets modestly recouped some of their losses on Friday before we limped into the long weekend. It is also important to note that the Friday before a long weekend is notoriously plagued by lower volumes as traders generally take the day off. I would not say we are out of the woods until we see two or three solid sessions of gains, but with Personal Consumption Expenditures (PCE) data this week, we may have another bout of volatility. The 10-year Treasury is stubbornly clinging to the 4.5% yield level, and until it starts marching steadily downward. the markets will be nervous. The Feds’ own Greek epic Remember Homer’s Ulysses (aka Odysseus)? At one point in his journey, he and his crew had to sail through the Strait of Messina near current-day Calabria, Italy, to get home. In Greek mythology, that would involve running a gauntlet. On one side of the straight was Scylla, a six-headed monster that eats men passing on ships. On the other is Charybdis, a giant whirlpool that destroys everything in her reach three times per day. Let’s apply that dilemma to Fed Chair Jerome Powell and the Fed’s current situation. On one side, Powell has proven to be a little less independent than we would like. He seems very open to cutting rates to help spur the economy, which might be helpful to incumbents in the upcoming elections but would also increase inflation. However, this approach could mean less of the crew would get eaten by Scylla. On the other side, if the Fed keeps rates higher for longer or even raises them more to tame inflation, it might send the entire economy into recession. That would be the Charybdis option. How did Ulysses handle it? He sacrificed six of his crew to Scylla but saved the rest and his ship by avoiding Charybdis so they could continue on their journey home. If this situation sounds familiar to you, in today’s colloquialism we would say Powell is “between a rock and a hard place.” Cutting rates too soon may help the political fortunes of some, but cutting too soon will also keep inflation higher and hurt many in the long run. But keeping rates too high might suck everyone down into the whirlpool of recession. The entire economy and the whole country, politicians included, would suffer. That’s where Powell and the Fed find themselves. Will they sacrifice a few in the near term for the good of the many longer term? We have heard that Powell needs to channel his inner Paul Volcker, who famously tamed inflation back in the late ’70s and early ’80s. I would argue he may need to channel a little of his inner Ulysses this time around as well. Coming this week
On May 26th, 1896, Charles Henry Dow, publishes the first Dow Jones Industrial Average.
Editor of the nascent Wall Street Journal, he added twelve prices of leading companies together and divided by twelve to arrive at 62.76. The components of the index changed fifty-two times in coming years. In 1916, it expanded to include 20 stocks; in 1928, it grew again to 30 stocks, a composition that remains. The 1929 stock market crash led to the Great Depression, with the DJIA losing nearly 90% of its value from its high in 1929 to its low in 1932. During the mid-20th century, the DJIA reflected the post-WWII economic boom and industrial expansion in the United States, surpassing 500 points for the first time in 1956 and briefly hitting 1,000 points in 1966 before falling back. The DJIA continued weighting its components by their price per share, and the title “Industrial” remains despite a few modern components being involved in heavy industry. Little could Charles Henry Dow have imagined how his arbitrary index, now available with constant updates instead of once per day, would affect generations of future investors. Last week, during intraday trading, the DOW approached and briefly bypassed a milestone at the 40,000 level. Approaching a milestone of my own this summer (I turn 50 in June), I’m wary of giving arbitrary numbers too much attention. And a deeper dive into the DOW backs up the theory. First, given the history of the DOW, the composition has obviously changed dramatically throughout the decades. So, are you really comparing apples to apples? Or, in this case, Apple (AAPL) to Apple (AAPL)? And the price weighting leads to some oddities in calculating the index. For instance, can anyone name the largest component in the DOW right now? Apple? Microsoft? Goldman Sachs? All good guesses but incorrect. Right now, United Healthcare is the largest component in the DOW at just over 8.6%. The fact that a healthcare company is the largest component after a huge run-up in technology shares over the last year should tell you that for better or for worse, the old DOW is much less sensitive to change than its counterpart, the S&P 500. Indeed, those tech companies we listed with ties to the booming AI industry are 8th (MSFT) and 19th (AAPL) in weightings inside the index. The Dow's recent run past 40 (thousand) is no more significant than my own survival of the decade of my 40s. Longevity is preferable to the alternative. But let’s not make more of the story than it deserves.  New week, same concerns
Inflation isn’t budging. The producer price index (PPI) for March was revised downward from its original reading of 2.1% to 1.8%. Then, final demand (PPI minus food, energy and trade services) increased by 3.1% for the 12 months ending in April. It’s the largest increase since climbing 3.4% one year ago. Long story short: Inflation isn’t going anywhere. Despite some weakness from the initial first-quarter gross domestic product (GDP) reading and a soft April jobs report, all that did was take any potential rate increases off the table. Top-line consumer price index (CPI) ticked down a bit in April to 3.4%, but that was enough to drive markets to new highs (see next section). Markets are still banking on rate cuts, and with inflation stuck in the 3.5% range and showing no sign of further meaningful declines, the recent euphoria in U.S. stocks may be short-lived. Until we see consistent declines, we cannot expect any cuts. In fact, the Federal Reserve may be so preoccupied with watching inflation that it might be taking its eye off the slowing economy and job growth. If those deteriorate much more, we will see rate cuts — but only because the Fed will feel panic that we’re maybe sliding into recession. The markets grind higher Remember when the Dow was at 30,000? That was back in November 2020 — less than four short years ago. We dipped below 20,000 briefly in March that same year. Last Friday, the Dow closed above 40,000 for the first time in history. Meanwhile, the S&P 500 crested above 5,300 that same day, ending at 5,808 for another new record. Same story for the Nasdaq: It also hit a new record on Wednesday but slid a bit to end the week. Records are great, but they’re only mile markers. What markets are telling us is they are optimistic that we can still tame inflation, avoid recession and get rate cuts. That’s why a meager 0.1% decline in CPI was enough to boost us to new highs. The markets are in a good mood, and when markets are in a good mood, they want to go higher. How much higher is going to be a data-point-by-data-point process and will result in some volatility. However, until we see actual rate cuts, it’s wise to avoid getting overextended and exceeding your risk tolerance. Stay the course and maintain discipline. Enjoy the new highs, but be prepared for new challenges this year. Coming this week
On May 16th, 1860, a contentious Republican convention begins in Chicago.
Held in Chicago from May 16 to May 18, 1860, the convention marked the emergence of the Republican Party as a major force in national politics and set the stage for the election of Abraham Lincoln as the 16th President of the United States. William H. Seward, a prominent senator from New York, emerged as the front-runner, but his perceived radicalism made him a controversial choice. After two days of debate and on the third ballot, the Republicans selected the former Congressman and little-known lawyer from Illinois as their candidate for President of the United States. Elected later that year with less than 40% of the vote, Lincoln brought former rivals like Seward, Salmon P. Chase, and Edward Bates into his cabinet to shore up support. Instead of surrounding himself with like-minded individuals, Lincoln appointed rivals and political adversaries to his cabinet, aiming to create a diverse team that could help him navigate the challenges of leading the nation during the Civil War. In the words of historian Doris Kearns Goodwin, Lincoln created a “Team of Rivals.” This unique approach to leadership, where diversity and dissent were embraced, is a significant aspect of Lincoln's legacy. You see, Lincoln wasn’t just fighting the Civil War; he was fighting Confirmation bias, a term introduced by English psychologist Peter Wason, referring to the inclination of individuals to prioritize information that aligns with, reinforces, or validates their existing beliefs or values. Once established, confirmation bias becomes entrenched and challenging to dislodge, shaping how individuals perceive and interpret new information. Instead of succumbing to the allure of confirmation bias by surrounding himself with ideological clones, Lincoln embraced dissenting voices and conflicting viewpoints. Instead of retreating into ideological echo chambers, Lincoln and his cabinet engaged in rigorous discourse, challenging each other's assumptions and perspectives. Through this process, they arrived at more robust solutions to the nation's complex problems, particularly during the tumult of the Civil War. Today, thanks to social media and the algorithms that show you more of what you like and less of what you don’t, we are living in the golden age of confirmation bias. I’m not saying social media has no place in an investor’s life. Just be sure to recognize it is a rival to good decision-making when you add it to your team. |
Patrick HueyPatrick Huey is a small business owner and the author of two books on history and finance as well as the highly-rated recently-released fictional work Hell: A Novel. As owner of Victory Independent Planning, LLC, Patrick works with families and non-profit organizations. He is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Advisor in Philanthropy® and an Accredited Tax Preparer. He earned a Bachelor’s degree in History from the University of Pittsburgh, and a Master of Business Administration from Arizona State University. Archives
September 2024
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