Investing Is Ultimately An Exercise In Consequence Management
Inside Today's Issue
Essay: Making Money With Burnham’s Laws
Fear Is Winning Out
Little Housing Demand
Russell 3000 Losers
Chart Of The Day… Brazil
Today’s Mailbag
Editor’s note: Today, Porter turns the Journal over to editorial director Geoffrey Morris, who adapts lessons from a political philosopher into investment wisdom.
Who says A must say B…
Post-cold-war political philosopher James Burnham created his own list of “laws” – as political theory and as a guide to a moral life. Burnham’s Laws also have a very real-world application in investing. I’ll focus on one of those laws – “Who says A must say B” – but first here are some of Burnham’s other laws.
“Just as good as… isn’t”: “It’s just as good as a Macintosh.” No, it’s not.
“You cannot invest in retrospect”: Essentially, past performance is no guarantee of future success. Take lessons from the past – but only that. Don’t bank on them.
“Wherever there is prohibition, there’s a bootlegger”: needs no further explanation.
“You can’t divorce yourself”: You are you for your entire life. Make the best of that person.
“Every member must pay his dues”: And increasingly in today’s world, they don’t.
“If there’s no alternative, there’s no problem”: One of my favorites, which gets me through many situations…
Who Says A Must Say B…
A common cause of an investment gone wrong is rarely from a lack of data. It is usually a failure of logic, or better yet, intellectual infidelity – embracing an attractive premise while flatly refusing to accept its necessary consequences.
In a political context, Burnham’s “who says A must say B” meant that if you commit to a core principle ("A"), you are intellectually bound to accept the logical conclusions and actions ("B") that naturally flow from it. Tariffs will raise revenue and encourage buying American (“A”). Consumers will have fewer options for the goods they want and have to pay more for them (“B”).
When applied to investing, Burnham’s Law – first published in National Review magazine in the 1980s – transforms from a political tool into a ruthless, foundational law. It strips away emotions and forces an investor to confront a cold reality. To succeed over a long horizon, one must not only have the courage to say A. One must have the discipline to say B.
