As regular readers already know, I am deeply concerned about the deep polarization and dysfunctionality of our political process (see here, for example). I also expect that, irrespective of which candidate wins tomorrow, it will be extremely hard for him to govern. Moreover, the depth of our problems do not portend easy solutions anyway, even if the president really had as much power over things (and especially the economy) as people generally think and even if Congress cooperates. All that said, I strongly encourage you to vote. I generally resist writing about politics and I assume that you are as sick of people everywhere trying to tell you how to vote as I am. I won’t try to tell you how to vote but I will beg you to vote.
I also encourage you to pick-up some investing insights from the current political landscape.
The Project for Excellence in Journalism studied the slant of media coverage of the current presidential election and found that with “horse-race” stories removed (which would skew the results toward the candidate the polls show to be winning at any given moment), media news coverage of the presidential election was generally balanced. With respect to President Obama, 15 percent of campaign stories were positive, 32 percent were negative and 53 percent were mixed. With respect to Governor Romney it was 14 percent positive, 32 percent negative and 55 percent mixed (these numbers have been rounded).
The study also reveals the degree to which the advocacy media — predominantly MSNBC and Fox — stand out from other mainstream media outlets even when the so-called “opinion shows” (such is O’Reilly and Maddow) are not considered. On MSNBC, 71 percent of the “news” segments about Romney were negative in nature, compared with just 3 percent that were positive. That’s a ratio of roughly 23-to-1 negative. On Fox, 46 percent of the “news” segments about Obama were negative, compared with 6 percent that were positive. That’s a ratio of about 8-to-1 negative. These results make MSNBC and Fox unusual among outlets that identified themselves as news organizations. For example, CNN’s coverage was roughly balanced (after “horse race” stories were removed).
The obvious take-away is that MSNBC and Fox News are dreadfully biased organizations such that any use of “news” in connection with them probably requires scare quotes. But that’s hardly a surprise to anyone who has watched them. I’m struck, instead, by the extent to which the public at large is intentionally seeking out “news” sources that actively cater to their biases. All the evidence points to the idea that we want to stay within our chosen echo chambers where we won’t have to hear anything that threatens our preferred ideology. Fox is the clear leader in cable news ratings, but MSNBC crushes CNN (and all others) too. In the aggregate, the public rejects cable news coverage that purports (or even tries) to be impartial. I suspect that consumers of finance news and information, both professional and amateur alike, are prone to the same problem.
Our behavioral biases make it difficult for us to discover anything approaching objective reality even when we are consciously aware of them and are actively on the look-out for information that might question our preconceived notions. If we are going to succeed at investing, which necessarily focuses on what works rather than on an overarching ideology, aggressively seeking out data and viewpoints that conflict and contrast with our own is vital. The current environment provides a glut of media and investment outlets and sources. It’s easy to read/watch/interact only with those that agree with us and are on “our side.” However, to reiterate a point I make often, information is cheap but meaning is expensive. Staying within one’s bubble of comfort when it comes to understanding the markets — no matter how strongly we feel like doing so — is a recipe for disaster.
Finally, I am struck by how few people actually vote. Despite some controversy about how to measure who can vote, there is no dispute that roughly 40 percent or more of potential voters don’t bother to go to the polls in presidential election years. There is no reason to expect tomorrow to be significantly better. Far fewer people vote in “off-year” elections. That’s a national disgrace. Yet, if anything, we in the investment world are even worse when it comes to using our ownership clout to impact the governance and management of the businesses in which we have ownership interests.
American businesses do a number of stupid and even evil things to the detriment of their shareholders’ interests. To pick an easy example, take a look at executive pay. It has increased wildly over the past few decades with no evidence that the current obscene pay levels impact corporate performance positively. Yet the mutual funds, money managers and pension funds that are the primary holders of stocks (beyond a few notable exceptions) are complicit with this theft of shareholder value by refusing to be active contributors and voters at shareholder meetings and otherwise. Corporations and their executives have a fiduciary obligation to maximize shareholder value. Over-paying executives directly damages the company’s bottom line. Much of that money could be better used for investment in a new product line (for example) or simply by paying dividends to shareholders. That we don’t actively work to protect our interests in this regard is both dreadful and inexcusable.
As Jack Bogle points out, the move from ownership capitalism to management capitalism has had dramatic and deleterious effects on shareholders. Even so, Vanguard (Jack’s baby and a huge owner of corporate shares) has failed to institute positive corporate governance policies that could really help in this regard too. We need to vote and to take a more active interest in the process both with respect to politics and to corporate governance alike. Our future success (or simply our future) depends upon it.