Every investor dreams of “The Lead Pipe Cinch:”
The perfect trade that can not fail.
The sure thing.
Guaranteed to yield untold wealth, independence, acclaim and envy.
But has there ever been a True Lead Pipe Cinch?
Obviously there have been excellent investments, but were any, ever, a Lead Pipe Cinch—except in retrospect?
“Hindsight is always twenty-twenty.”—Billy Wilder
“In the business world, the rearview mirror is always clearer than the windshield.”—Warren E. Buffett
Every tradition acknowledges the folly of predictive certainty:
“There’s many a slip ‘twixt the cup and the lip.”—English Proverb
“Don’t count your chickens before they hatch.”—Aesop
“Everybody has a plan until they get punched in the mouth.”—Mike Tyson
And perhaps most artfully, from the pen of Scottish poet Robert Burns:
“The best laid plans o’ mice and men, gang aft a-gley, and lea’ us nought but grief and pain for promis’d joy.”
So is the Lead Pipe Cinch more an investment ideal, less an investment reality?
The Real Self and the Ideal Self
Psychiatrist Karen Horney, MD, hypothesized a real self and an ideal self: who you really are versus who you imagine yourself to be.
Or, what’s Photoshop for?
Dr. Horney believed we shrink the uncomfortable distance between our real and idealized selves through a “search for glory.”
Tragically, the search for glory neglects the real self for the idealized self.
Ideal and Real Investing
Do self-idealizing investors seek a Lead Pipe Cinch?
If so, how’s that working for them?
The New York Times reported the number of mutual funds that consistently beat S&P 500 Index Funds.
None!
Zero!
And what of elite stock pickers: the hedge funds?
Warren Buffett bet a million dollars, proceeds to charity, that no group of five hedge funds could beat the S&P 500 Index over a decade.
At year nine Warren won his bet.
After it was mathematically impossible for him to lose.
“What does that tell you?”—Lee Strasberg as Hyman Roth in “The Godfather II”
That the classic Lead Pipe Cinch is, for most investors, a vain search for glory.
And a plain vanilla Index Fund, so simple and so dull, is clearly the preferred vehicle for most investors.
“Don’t look for the needle in the haystack. Just buy the haystack.”—Jack Bogle
The Wisdom of Ted Williams
Warren Buffett has often analogized investment to a game of baseball where there are no called strikes. So the batter-investor can pass on a thousand pitched investments, ignoring the cry, “Swing, you bum!”
Warren completes the analogy invoking Ted Williams’ famed strike zone chart, divided into 77 distinct squares, each color-coded for the desirability of each pitch/investment. Both Warren and Ted want a pitch right in “the sweet spot,” for the next home run or great investment.
The Genius of Albert Einstein
The analogy invites an Einsteinian thought experiment:
Imagine a batter with no strike zone!
He can never be struck out!
He would always walk.
He could load the bases. Force in runs. Steal second. Even home.
An absolute, literal game-changer.
Fans would boo! Opposing teams would cry “Foul!”
The strike-zone-free batter would garner no admiration, no glory.
Branded a soulless cheater who ruined the game of baseball.
Behold the S&P 500 Index Fund
Think it through: the strike-zone-free batter of investment is an S&P 500 Index Fund!
No guts. No glory. Just effortless success while a booing crowd protests short-circuiting the investment game.
Just what the late, great Jack Bogle endured when introducing Index Fund investing.
But investment for the mass public should not be a gamble, a contest or a game, with many losers and few winners.
It should be a sturdy, reliable vehicle to build a retirement and an inheritance to improve the lives of the many.
Listen to Jack Bogle, the legend himself, on Index Fund investment:
The Munger Vindication
Now, after so many decades, Jack Bogle has been vindicated.
The late, great Charlie Munger, who once decried diversification as “deworsification,” because it dashed any hope of beating the indexes, voiced a very different opinion in his last appearance at the Daily Journal Corporation meeting in 2023.
Charlie proudly stated that all employees of the Daily Journal were duty-bound to invest their entire 401Ks in index funds.
Listen to Charlie’s final verdict on Index Funds:
The Legacy
Sadly, both Charlie Munger and Jack Bogle have left us, but the legacy of their common wisdom remains:
In the immortal words of Jack Bogle:
“Just buy the damn Index Fund!”
The One True Lead Pipe Cinch.
