May 27, 2009


Doubt has been a central theme of our firm for many years. I was first introduced to the philosophy of doubt by a friend of mine , sometime before 2003, (he actually introduced me to an essay on the concept.) He gave me the following essay several years ago, and the key takeaway for me was the phrase, “Doubt is Central to Understanding.” The power of doubt is so crucial. Doubt is a difficult concept for the typical person to embrace and explore. I have decided to transcribe the essay. It appears to have been written on page 123 of the “Doubter’s Dictionary.” I previously was not familiar with the author of the essay. Upon further research I believe the author to be, John Ralston Saul

Before I get to the essay below, I have linked several sections of our site, where we have previously discussed the concept of “doubt.”


“Prior to the crash of the NASDAQ, we were living in an era of corporate greed and governance without an emphasis on fiduciary responsibility. Well-known companies had been accused and have subsequently admitted to corporate fraud. A few of those names are Enron, Lucent, Waste Management, Sunbeam, Tyco, WorldCom, Global Crossing, Health South and Cendant. It is of our opinion that this list will grow as investors, analysts and Corporate Governance Groups gather more information. This corporate greed and lack of fiduciary responsibility most certainly should open up any investors eyes and give the investor the opportunity to exercise the power of doubt in their endeavors of investing.

For all of time, humans have been plagued with deceit and lack of fiduciary responsibility of a few. Governments and agencies attempt to place safeguards to minimize the occurrences of these disgusting events, but inevitably the curse of fraud and deceit exists. The U.S. financial system is based on trust of the system. I think it is important for all of us to recognize that inherent trust, but at the same time never fail to exercise the power of doubt and professional skepticism.

I have discussed the power of doubt with a friend of mine on several occasions (he actually introduced me to an essay on the concept.) He gave me an essay several years ago and the key takeaway for me was the phrase, “Doubt is Central to Understanding.” The power of doubt is so crucial. Doubt is a difficult concept for the typical person to embrace and explore.”

“Investors need to ask questions. If an investor doesn’t trust something, they need to exercise prudence and doubt to see if they can either prove their lack of trust or to conquer the fear of mistrust.”


“The key ingredient in our recipe for portfolio management is the ability to tolerate and investigate “doubt”. Doubt is central to understanding. By exercising doubt we get the opportunity to poke holes in either our research or in the research that we undertake to study.”

“Exercise doubt in all aspects of investing. Professional skepticism is not popular, yet we find it incredibly necessary in helping us research an investment. Ultimately we trust the markets and our financial system, but questioning that system until it makes sense is a vital step in investing. Peter Lynch wrote an excellent book called “Beating The Street”. You can read some notes on that book at this link Peter suggests that you should never invest in any idea you can’t illustrate with a crayon. He feels that you should be able to explain any investment to a 10 year old. If you can’t explain it to a 10 year old, then you should consider passing on the investment.”

Here is the text of the essay that my friend sent to me, many years ago:


“Doubt. The only human activity capable of controlling the use of power in a positive way. Doubt is central to understanding.

The elites of organized societies define leadership as knowing what to do. The citizenry is not so certain. Its response is to doubt, consider and deliberate. That is, to question, contemplate, and weigh carefully.

Most human activities are divided into three stages. The act of doubting is the second and is the only one that requires the conscious application of our intelligence.

The first stage consists of the reality by which we are faced. this is always a confuting mixture of situations out of our control, attitudes clouded by received wisdom, and a variety of cure-all solutions. The third stage is what we call decision making. In a rational society, this is supposed to be the result of having a solution produced by the correct answer. Decision making is, in fact, an overrated business, rarely more than mechanistic. It, in turn, is followed by a minor, passive business – the management of the decision taken. Given our obsessions with leadership and right answers and our fear of doubt, we have slipped into treating this managerial stage as if it were of primary importance.

Doubt is thus the space between reality and the application of an idea. It ought to be given over to the weighing of experience, intuition, creativity, ethics, common sense, reason, and, of course, knowledge, in balanced consideration of what is to be done. the longer this stage lasts, the more we take advantage of our intelligence.

Perhaps this is why elites move so quickly to limit doubt and consideration. those who gain power almost automatically seek to leap from reality to solution, from abstraction to application, from ideology to methodology. This is as true of contemporary rational society as it was of those dominated by religion or monarchies. Deliberation is mocked as weakness. Consideration is rushed through, if possible eliminated. The effect is to reduce the intelligence of the citizenry to received wisdom, unconscious or secretive procedures, and mechanistic actions.

Healthy democracies embrace doubt as a leisurely pleasure and so prosper. Sick democracies are obsessed by answers and management and so lose their reason for existence. But above all, doubt is the only activity that actively makes use of the human particularity.”