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Monday, October 22nd, 2018
best and brightest

Last fall, I watched the Ken Burns film, The Vietnam War.Ken Burns | This documentary is well worth its eighteen-hour length.  In a discussion around the same time, David SalemEpsilon Theory | Salem has a distinguished background in the investment business and recently started writing an interesting series for Epsilon Theory. encouraged me to read The Best and the Brightest,Kirkus | This short review gets at the assumed brilliance of the players involved. David Halberstam’s account of the origins and early years of that war.  I did so, and went a step further by reading another book in tandem with it, Neil Sheehan’s A Bright Shining Lie.Wikipedia | This provides a good summary.  Halberstam won a Pulitzer for his reporting from Vietnam; Sheehan was awarded one (plus a National Book Award) for his book.

Halberstam looks primarily at the people and policy making in Washington, while Sheehan tells the story of the Vietnam conflict itself and of John Paul Vann’s legendary military and civilian involvement in it.  They fit together well to paint a picture of failure.

Both books are long, deeply detailed, and deserve something more than the brief attention that they’ll get here.  As I normally do when referencing readings outside of the investment world,the research puzzle | See, for example, the series on Zen and the Art of Motorcycle Maintenance that starts with this posting. I’ll try to draw lessons that I think apply within it.  [Those comments appear in brackets.]

The members of the cabinet selected by John F. Kennedy, and many of their underlings, were thought to be “the best and the brightest” that the country had to offer, even though by the time that Halberstam used that phrase for his title he intended it in an ironic sense.  All that promise had been lost in the morass of the Vietnam War.

In his introduction, he hit on the major issue (reflected repeatedly in Sheehan’s book as well):  There was an “immense difference between what people in the field thought was happening and what people in the Saigon command, responding to intense political pressure from Washington, wanted to think was happening.”

Some conclusions from reading the books and watching Burns’ film (all quotes are from Halberstam):

~ The lessons of history are easily misread, especially if the perspective is narrow and triumphal.  Despite the standoff in Korea, the United States was still basking in its showing in World War II.  The “arrogance and hubris of the era” carried over into Vietnam policy; we were dealing with the Cold War — big stuff — and no ragtag bunch of peasants was any match for American military might.  The tactics of the enemy weren’t understood and the history of Indochina was ignored; the belief was that massive power would win the day.  [An analogy could be drawn to a large investment organization fighting the last war with the tools that made it successful during that era.]

~ Everything gets interpreted according to the dominant narrative.  Vietnam was thought to be one in a series of potential dominoes.History | Here’s a review of “the domino theory.”  Fear of communism (and fear of being seen as soft on it) led to mistake after mistake.  A wrong narrative colors everything; “a bad war means a bad system.”  Distortions and waste abound.

~ Don’t automatically believe what the generals tell you; they may not really know, may be conflicted for some reason, or may be putting on a show for your benefit.  This advice should be obvious, but it was routinely ignored during the war.  [Similarly, much due diligence in the investment world is structured to ingest information from "the generals."  Securities analysts frame their work around the guidance given by management -- and "corporate access" is so prized that firms pay dearly for it.  Asset manager research is usually dominated by interactions with only a very few people at most firms being reviewed.]

~ Such access to perceived stars can distort your perceptions and impede the skepticism that is crucial; generals can be very persuasive.  Briefings became brainwashings, especially when members of the administration visited Vietnam; “what was created on those trips was not an insight about the country but an illusion of knowledge,” crafted to fit their “preconceptions and specifications.”  [While I'm an outspoken advocate of onsite visits for those doing due diligence, if you are unaware of how you are being manipulated and allow encounters to turn into "briefings," an in-person interaction is detrimental rather than helpful.]

~ The admission of problems is hard in front of others.  In 1962 (well before Vietnam was the focus of attention), Bobby Kennedy asked a group of U.S. advisors assigned there what problems they faced.  None would admit to there being any.  When he then invited them to talk to him one by one, it all came spilling out, “a brief and instructive lesson in what people would say for the record and what they would say in private.”  [If you're evaluating a management team or an investment team, remember that they are trying to project and protect their own images and prospects among each other, while burnishing the firm's story.]

~ Institutions that prize “loyalty” above the truth are not strong but weak.  Regarding Vietnam, a condition of “mass self-delusion” was built over time, as naysayers were culled and believers rewarded.  The official view on the ground was enforced by “sending home or drumming into line anyone who seemed to be predicting rain for the parade.”  The same thing was happening in Washington.  Reports from the field were modified or held back, statistics were cherry-picked, presentations from doubters were scuttled, and intelligence reports were edited, not presented, or buried under positive news.  The structures and processes were built to do something other than get at the facts.  Those not supporting the party line were considered to be “performing a disservice by being pessimistic,” resulting in a loss of “intellectual integrity” throughout the system.  [I think of organizations on a scale of "learning" to "defensive."  If loyalty is defined in the fashion described above, there's no doubt which end of the spectrum you are on.]

~ Stress changes people and processes.  President Lyndon Johnson “was, sadly, open-minded when things went well, and increasingly close-minded when things went poorly.”  [Personal and organizational behavior are not constant, and that pretty image of investment process gets even less accurate when under stress.]

~ Parties who put their own interest above the common good are poison.  The U.S. military used its muscle to overwhelm civilian authorities, creating “an inexorable pressure for more — more men, more hardware, more targets.”  It was a one-way street; every answer was to feed the military more, using information that it controlled.  U.S. commanders became better at public relations than at conducting a war.  At the same time, the South Vietnamese officials elevated corruption and self-interest to an art form.  [Focus Consulting Group has written about those individuals who are "red Xs" who pose a threat if left unchecked.Focus Consulting Group | This is one of its papers that has addressed the topic.  Even more dangerous are organizations where manipulative and political behavior is the cultural norm.]

~ Macho posturings lead to bad decisions.  Johnson favored men versus boys.  “Men were activists, doers, who conquered business empires, who acted instead of talked, who made it in the world of other men and had the respect of other men.  Boys were the talkers and the writers and the intellectuals, who sat around thinking and criticizing and doubting instead of doing.”  Of course, military men were the real doers in his mind.  And Johnson wasn’t afraid to characterize those who were not macho enough as thinking or being like a woman.  [The testosterone-fueled approach to decision making has been shown to fail time and again, which doesn't mean that it's been eliminated as a cultural underpinning of a number of investment organizations.]

~ There is a difference between intelligence and wisdom.  Johnson’s mentor, Sam Rayburn, in response to how enamored Johnson was with the “whiz kids” in the Kennedy cabinet (whom he inherited) said, “I’d feel a whole lot better about them if just one of them had run for sheriff once.”  Their smarts didn’t prevent a colossal failure.  [Long-Term Capital Management comes to mind.CFA Institute | Here's the LTCM story.  Also, from Rusty Guinn, "By and large, if you are hiring managers, advisers and staff by trying to find the smartest PM/FA/consultant/analyst you can find, this practice will lead you to constant surprise and disappointment."Epsilon Theory | The quote is from this recent piece.]

~ Beliefs are no substitute for facts and analysis.  That’s the bottom line.

During the critical early period of the Vietnam War, journalists like Sheehan and Halberstam were vilified as being anti-American and condemned by military and political leaders who said they were distorting what was actually happening.  But government documents and recordings subsequently showed that their reporting was sound and that others were doing the lying.

There’s a lesson worth learning.