Well, sure, John C. Bogle's advocacy of index funds is self-serving. And I do take that into account when I read what he's written. My personal judgement is that he is honest, he presents a lot of data to back up his opinions, and I think it is striking that he has consistently updated the data in his recent books through 2010 even when the updated data doesn't support his argument as well as the old data. But he has both a financial interest and a strong ego-involvement interest in index funds. So I leave my BS detector turned on when I read John C. Bogle. But in fact it never ticks. He is in my personal opinion more of a disinterested seeker of truth than certain academics who shall remain nameless.
As to the merchants of active funds, I do not know how to analyze their thinking and their motives. There isn't a good deal of interest in intellectual honesty among salespeople; in most cases it is probably not that they know better, but that truth or falsehood is just considered irrelevant. It's not to their advantage to know what is or isn't true.
There was a very interesting thread a few months back about registeredrep.com, a forum on which investment salespeople chat with each other. Discussions of whether it is more effective to appeal to the client's fear or his greed, for example, that sort of thing. Words are just a way of making the cash register ring; the idea that they might convey meanings, that the meanings might be testable, and that it might be worthwhile to know truth or falsity just doesn't come into it.
In "The Music Man," the con artist Harold Hill swindles small towns, pretending to be a professor of music who will organize and lead a boys' band, collecting money for instruments and uniforms and then leaving town. When little Winthrop, betrayed, asks him how he can do it, Hill says "I always believe there's a band, kid."
As long as a salesperson is not aware of telling a flat outright lie, he sees no problem. Telling a half-truth and believing it is not only not seen as dishonest, it is seen as a cornerstone of the salesman's art.
Last edited by nisiprius
on Sun Nov 21, 2010 11:50 am, edited 9 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.