Edward Quince's Wisdom Bites: The Ascent to Wisdom – Beyond Mere Data

As we navigate an increasingly data-saturated world, today we ponder the ultimate goal: the ascent to wisdom.

In this blog, we've often referenced the DIKW (Data, Information, Knowledge, Wisdom) pyramid. While data is the base, and information provides meaning, and knowledge offers context, wisdom sits at the apex, representing the exercise of sound judgment and appropriate action. Unfortunately, as Simon Winchester warned, "today's all-too readily available stockpile of information will lead to a lowered need for the retention of knowledge, a lessening of thoughtfulness, and a consequent reduction in the appearance of wisdom in society".

The irony is that many seek answers from external sources, whether it's the daily barrage of economic updates or social media pundits. Yet, much of this is just "noise". As the esteemed Charlie Munger advised, "In my whole life, I have known no wise people who didn't read all the time — none, zero". 

But it's not just about reading; it's about how you read. As an XTOD emphasizes, "Re-reading is probably more important than reading. Seek to cognitively own a great book rather than just reading it". It's about deep understanding, not just consumption.

The journey to wisdom involves:

• Continuous Learning: "The game of life is the game of everlasting learning". This means constantly seeking to "get a little smarter every day".

• Critical Thinking: Being able to discern "signal from the noise" and challenging assumptions, even your own. As an XTOD reminds us, "Compelling writing requires clear thinking".

• Humility: Recognizing that "Nobody knows anything, and that's okay". Steve Kerr gained more respect as a leader by admitting he didn't know everything and letting others make decisions.

• Prioritization: Understanding that "Clarity comes from subtraction, not addition". An XTOD simply asks, "Is this truly necessary?” when looking at a to-do list. "If it won’t matter in 5 YEARS don’t give it more than 5 MINUTES attention".

• Action based on Principles, not Predictions: As Edward Quince notes, "Actions demonstrate competence and create value, whereas words, often in arguments, lead to negative emotions and resentment".

The "hard part is knowing what to apply and when". This "true learning is 'on the job'". It's about applying timeless principles and developing your own "right filter" to navigate the complexities of life and markets. Because ultimately, "Being smart and being wise are not correlated". The goal is to cultivate the kind of wisdom that allows you to "focus on controlling the things you can", and approach life with a clear mind and sound judgment

FOMC Recap: 6 7

 Maybe Edward, maybe not…if you know, you know

Six… Seven

The Fed held.

4.25%–4.50%.

No surprise there.

But two Governors dissented — the first time that’s happened since Jurassic Park debuted and Alanis dropped Jagged Little Pill. The headline writers scrambled. “Cracks in the façade,” they muttered. “Rising internal tension.” Okay.

Dot plot? Still penciling in one rate cut by the end of 2025?

The market responded with a casual scroll, maybe a sip of flat LaCroix. We’ve heard this song before — and we’re not dancing to it anymore.

Truth is, the Fed walked out like Powell always does:

🎶 Six… Seven… 🎶

Suit pressed, message tight, performance predictable.

But in the background, markets were already vibing to their own beat.

🎺 Doot doot doot da-doot doot…

Rate cuts aren’t coming because the Fed said so.

They’re coming because credit’s flowing, nominal’s cooling, and politics are heating up.

This isn’t a pivot. It’s a vibe shift.

And Powell’s still reading off the prompter while the music’s already changed.

– EQ

Edward Quince’s Wisdom Bites: Timeless Lessons For The Powell Rangers (and all of us)

Another FOMC day, another deluge of data, and another chorus of “experts” telling us exactly what the Fed did wrong, or right, or what they should do next. You know, the usual. While this blog famously believes that most of the daily financial commentary is “noise and false stimuli”, occasionally, amidst the cacophony, you stumble upon timeless wisdom. And who needs timeless wisdom more than the Federal Reserve, constantly navigating unexpected twists and turns? So, dear reader, grab your favorite beverage (mine’s a newly-tariffed tequila, if this blog’s GoFundMe ever takes off), and let's distill some enduring lessons for the FOMC, drawn from the wellspring of this very blog.

Here are 10 enduring and wise quotes that can serve as valuable advice to the Federal Reserve over time:

1. Independence is Paramount. Peter Stella nailed it: “I define central bank independence in one sentence, it's the ability to raise interest rates when the Treasury doesn't want you to. And the Treasury almost never wants you to, because of the cost of the debt.”. When politicians are clamoring for this or that, the Fed's ability to act without political interference is the bedrock of its credibility. Don't be swayed by the siren song of fiscal convenience.

2. Credibility Restores Stability. As Paul Volcker’s memoir reminds us, credibility is crucial "in restoring price stability and guarding against the ‘real danger [that] comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking…'". It’s about building trust, which, like good wine, takes time.

3. Say Less, Imply More. Robert Greene’s Law 4: “Always Say Less Than Necessary: When you speak, always say as little as possible. The more you speak, the more likely you are to say something foolish.”. In a world of constant Fedspeak and interpretations, perhaps fewer words mean more impact. As the "wise old owl" knows, "The more he saw the less he spoke, The less he spoke, the more he heard".

4. Guard Your Reputation. Greene’s Law 5: “So Much Depends on Reputation – Guard It With your Life: Reputation is the cornerstone of power. You can influence more people and gain more opportunities with a solid reputation. Therefore, it is essential to protect it fiercely.”. The Fed’s power isn't just in its balance sheet, but in the trust it commands.

5. Actions Speak Louder. Greene’s Law 9: “Win through your Actions, Never through Argument: Actions demonstrate competence and create value, whereas words, often in arguments, lead to negative emotions and resentment.”. The market, and the economy, ultimately respond to policy actions, not carefully crafted press conference narratives or veiled threats about future moves.

6. Prevent Crises, Don't Just Cure Them. Charlie Munger's wisdom applies universally: “Nobody survives open heart surgery better than the guy who didn't need the procedure in the first place.”. This is a potent reminder for the Fed to act prudently and prevent economic conditions from deteriorating to a point where drastic, "surgical" interventions become unavoidable.

7. Plan for the Unexpected, Not the Predicted. As Dwight D. Eisenhower sagely put it: “Plans are worthless, but planning is everything…” because an emergency “is unexpected, therefore it is not going to happen the way you are planning.”. The future is inherently uncertain. Flexibility, not rigid forecasts, is the superpower.

8. Embrace Humility, Not Perfection. “It is impossible to be perfect: … The odds that the Fed can steer the economy to perfection by moving an interest rate both gives the Fed too much credit and creates an illusion that something as complex as the economy is that controllable.”. The economy is a beast, not a tightly controlled machine. Intellectual humility is a virtue.

9. Trust Observable Data, Not Blurry Guideposts. As one XTOD advises on r-star, it’s "advisable to guide policy decisions based more firmly on observed inflation rather than on highly uncertain estimates of the natural rate.”. When models and theories get too "blurry", perhaps it’s time to focus on what you can actually see and measure. Less star-gazing, more data-gazing.

10. Expect the Unexpected. This blog’s core philosophy: “The primary lesson is one of learning that the future is uncertain, expect the unexpected and that anything can happen.”. No amount of forecasting, political pressure, or market "vibes" can change the fundamental truth that the economic road is unmapped. Remain adaptive.

So, there you have it, folks. Ten timeless lessons that apply to the Fed, and frankly, to us all. In a world drowning in data, forecasts, and fleeting narratives, the real wisdom lies in subtraction, in discipline over drama, and in the humble acknowledgment that “Nobody knows anything, and that's okay.”. Because ultimately, “Your behavior matters more than your forecast.

Edward Quince's Wisdom Bites: The Uncomfortable Mirror of Truth and Integrity – Or, Why We Prefer a Pleasant Lie

Today, a Fed Day, we endeavor to peel back the layers of illusion and gaze, however uncomfortably, upon what truly matters. Today, we confront two formidable, yet often neglected, pillars of sound living and sound finance: Truth and Integrity. In an age overflowing with data and pronouncements, the genuine article often feels drowned out by the clamor of the convenient.

The Allure of the Lie: Why We Get Fooled

The market, much like life, often presents us with a "noise to signal ratio" that obscures understanding. We are perpetually in search of certainty, which some call "the greatest disease the mind faces". This craving makes us susceptible to those who offer "vague, simple messages often wrapped in a well crafted veneer that is alluring".

Consider how easily we can be led astray:

• Mark Twain famously quipped, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so". This applies when "experts" offer forecasts that are "less reliable than the flip of a coin".

• The financial industry's incentives often involve "adding noise, complexity and a constant pressure to do something", even when "the more data you get, the less you know what’s going on".

• Some volatile assets are marketed in ways that obscure the "truth," making it "easier to stick with" them even if it means "not being told the truth" and potentially "lowers future returns". This "volatility laundering" is a subtle form of deception that prioritizes comfort over reality.

• As Niccolo Machiavelli observed, "Men are so simple of mind, and so much dominated by their immediate needs, that a deceitful man will always find plenty who are ready to be deceived".

Integrity: The Priceless Asset

In the cacophony, integrity stands as a bedrock. As Fed Chair Powell has previously stated, "Integrity is priceless" and "at the end, that's all you have". "No amount of money can buy you integrity". This applies to all aspects of financial life, from personal investment decisions to institutional credibility. Peter Stella's definition of central bank independence as "the ability to raise interest rates when the Treasury doesn't want you to" highlights integrity as a crucial element in sound monetary policy, even when politically inconvenient.

Leaders and individuals alike demonstrate integrity by prioritizing truth, however uncomfortable. Jim Leyland's blunt wisdom from baseball applies universally: "If you mislead a player, you lose them forever. If you tell them the truth, you lose them for about 24 hours". The long-term value of truth, even when it "sucks" in the short term, is undeniable.

The Consequences of Deception

Lacking truth and integrity has real, often catastrophic, financial consequences:

• Warren Buffett warns that "if you start fooling your shareholders, you will soon believe your own baloney and be fooling yourself as well". This self-deception can lead to disastrous outcomes.

• The "Idiot Lender Chronicles" illustrate how a "CEO (who lacks the requisite brain folds to walk my dog)" can demand underwriting decisions based on future rate reductions rather than current realities, leading to "fucking portfolio[s] upside down".

• Financial disasters often arise not from complex quantitative failures, but from simple operational problems or outright fraud, sometimes motivated by hiding earlier losses. Lax supervision, a failure to separate functions, or a culture that doesn't encourage owning up to mistakes contribute to these failures. Sometimes, the incentives for auditors or regulators are "not aligned with drawing out the truth".

• "Low interest rates breed greed, and greed breeds fraud". The "unrelenting selfish pursuit of profit setting aside the consequences on relationships" is the obvious consequence of avarice.

• When a business or financial experience undergoes "enshittification"—the degradation of a product in "the blind pursuit of profit"—it reveals a lack of integrity towards the customer.

Cultivating Clarity and Honesty in Financial Decision-Making

To make wise financial decisions, cultivate an unwavering commitment to truth and integrity:

• Embrace Intellectual Humility: Recognize that forecasting the future is a "fool's errand". As Jason Zweig noted on Ben Graham's "margin of safety," the investor should constantly ask: "Do I know what I think I know? How do I know what I think I know? What evidence is there that I might be wrong?". This humility is key to avoiding overconfidence, which can "breed hubris, complacency, and an inability to recognize and adapt to new circumstances".

• Prioritize Clarity through Subtraction: "Clarity comes from subtraction, not addition. Remove the noise, the distractions, and the unnecessary. What truly matters will emerge". This means choosing what to ignore, focusing on what will matter in 5 years, not 5 minutes.

• Practice Self-Awareness and Detachment: Our behavioral biases, such as loss aversion, can lead us to take bigger risks than we should. "It’s about managing our ego, our arrogance, our stubbornness, our mistakes". Learn to "detach yourself from the crowd" and from emotions like hope, fear, pride, and ego, as they cloud judgment.

• Seek Simplicity: "Simplicity is key to successful investing". "Clear writing and clear speaking are simply outputs of clear thinking". "When a simple explanation for the risk of a portfolio does not exist, it can be a sign of trouble".

• Focus on Character Over Reputation: "a good reputation is not about being adored by all. It’s about earning the respect of those who matter most". As Coach Wooden suggested, care about your character over your reputation, because "it’s what you really are".

• Act with Courage: "Without courage we cannot practice any other virtue with consistency. We can't be kind, true, merciful, generous, or honest". This includes the courage to admit when you don't know or when you need to change your mind.

Ultimately, true wisdom in finance, and in life, is built on a foundation of unyielding truth and unshakeable integrity. "Discipline wins over drama". By continually seeking reality over fantasy and choosing courage over comfortable deception, you position yourself not just for financial longevity, but for a life lived authentically and well

Edward Quince's Wisdom Bites: Compounding – The Quiet Force

In a world obsessed with instant gratification and rapid returns, let's rediscover the quiet, yet profound, power of compounding.

As we've discussed, much of the daily financial commentary is "noise and false stimuli", leading many to chase fleeting gains and "bonanzas" that could lead to "catastrophe". But the true path to wealth, as the titans of investing have consistently shown, lies elsewhere. The late Charlie Munger, often quoted here, succinctly put it: "The big money is not in the buying and selling, but in the waiting". He further emphasized, "Never interrupt compounding unnecessarily".

This wisdom isn't limited to financial assets. An XTOD reminds us that "All benefits in life come from compound interest". This applies to knowledge, relationships, habits, and skills. "You can compound knowledge faster than money". 

The "silent miracle of humanity’s march is this: step by step, year by year, the world is improving". It's about sustained, consistent effort over time, even "without seeing the result of their doing".

Consider Warren Buffett's sister, Bertie, who, after 1980, retained only a mutual fund and Berkshire, "made no new trades during the next 43 years," and consequently "became very rich". This is a powerful testament to the exponential force that time exerts on capital. It highlights that "The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference".

This patient approach requires a clear understanding of risk and a robust "margin of safety". Howard Marks' metaphor of the "six-foot-tall person who drowned crossing the stream that was five feet deep on average" serves as a stark reminder of the downside risk, especially when leverage is involved. The discipline to manage risk intelligently, rather than succumbing to the temptation of quick profits, is paramount for long-term survival. As another XTOD states, "Most people probably shouldn't do anything other than have index funds", a simple yet powerful strategy for harnessing compounding.

While "chaos is always loud" and "patience never trends on X", the message remains clear: "discipline wins over drama". The greatest returns are often built quietly, through unwavering commitment to the long haul.

Edward Quince's Wisdom Bites: The Hard Truth of Fiscal Discipline – Or, Why We Keep Kicking the Can

Welcome back to Edward Quince's Wisdom Bites, your daily reminder to cut through the noise and focus on what truly matters. Today, we're diving into a topic that feels perennially relevant, yet consistently misunderstood: fiscal discipline. While the market gyrates and pundits clamor, the wisdom of the past, and a dash of intellectual humility, might just offer the clearest path forward.

The Elephant in the Room: Mounting Debt and Deficits

It seems that every day brings fresh warnings about the U.S. fiscal situation. From Moody's putting U.S. sovereign debt on negative watch to calls about a "Minsky moment" from a fiscal situation deemed "impossible," the chatter is omnipresent. There's a persistent concern among investors about rising U.S. debt levels. Even Fed Chair Powell has acknowledged the national debt as unsustainable. We're talking trillions added to the debt, often with hundreds of billions more if expiring provisions are extended. It appears that policymakers sometimes act as if the answer to all problems is simply more government spending, as if there's no such thing as an uncovered deficit.

Historically, Alexander Hamilton warned Congress in 1790 that "the creation of public debt should always be accompanied with the means of extinguishment" as "the true secret for rendering public credit immortal". For the first 175 years of the nation, the U.S. largely adhered to this "Hamilton Norm," issuing large quantities of public debt only during emergencies. One can certainly wonder if we've violated that norm, and if it matters.

The Fiscal Theory of the Price Level (and Why it Matters)

While Modern Monetary Theory (MMT) might "diss" the idea of bond vigilantes and suggest governments can finance all spending without borrowing or taxes, other compelling theories offer a starkly different view. John Cochrane, a leading proponent of the Fiscal Theory of the Price Level (FTPL), suggests that if fiscal policy is undisciplined, the Fed's actions alone may not lower inflation. In fact, if the Fed raises interest rates, it raises interest costs on the debt, and if taxes don't rise or spending doesn't fall to pay those costs, there's "no reduction in inflation". He calls this "unpleasant interest rate arithmetic".

The FTPL posits that inflation occurs if debt exceeds faith in a country's long-run ability and will to repay it. This theory suggests that the Central Bank can only "move inflation around over time," and ultimately doesn't have full control if fiscal policy isn't consistent with price stability. It highlights the "real danger" that comes from "encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking".

The Fed's Dilemma: Independence vs. Politics

The Fed may believe a certain policy is correct but worry it will appear politically motivated. Peter Stella's definition of central bank independence is "the ability to raise interest rates when the Treasury doesn't want you to," which is almost always the case due to the cost of debt. Powell has stated the Fed "do not consider politics in our decisions. We never do. And we never will". However, the macroeconomic models themselves implicitly include some budget constraints and fiscal-monetary coordination. If fiscal policy is the major driver of inflation, how is the Fed supposed to fulfill its price stability mandate?

What's the Wise Play? Beyond the Headlines.

In a world loud with information, where everyone has a "take," the key is often to mute the unnecessary and discern what truly matters. As the wisdom from the blog frequently emphasizes, "Clarity comes from subtraction, not addition. Remove the noise, the distractions, and the unnecessary. What truly matters will emerge".

Here's some wisdom to help you navigate the fiscal noise:

• Embrace Intellectual Humility: Recognize that forecasting the future is a "fool's errand," and even "experts" are often wrong. As Morgan Housel wisely noted, "Real optimists don't believe that everything will be great...Optimism is a belief that the odds of a good outcome are in your favor over time, even when there will be setbacks along the way".

• Focus on What You Can Control: Your behavior matters more than any forecast. Instead of reacting to every headline, cultivate discipline and a robust process. As Charlie Munger advised, "It's waiting that helps you as an investor, and a lot of people just can't stand to wait".

• Prioritize a Margin of Safety: Benjamin Graham's concept of a "margin of safety" is about "rendering unnecessary an accurate forecast of the future". This means building flexibility, avoiding excessive leverage, and having a buffer to withstand unexpected events. "Know your goals, mitigate unwanted risk, prepare and position the best you can for when the unknown or unexpected occurs, because life is uncertain, but remember without risk there is no return".

• Learn from History, But Don't Over-predict: "History doesn't repeat, but human nature does". Studying past financial disasters can impart "invaluable lessons on what to do and what not to do at far lower cost than making the mistakes oneself". However, be wary of thinking "this time is different".

• Question the "Why": Understand the motivations and incentives of those providing information. As Charlie Munger said, "I never allow myself to have an opinion on anything that I don't know the other side's argument better than they do".

Ultimately, fiscal discipline—or the lack thereof—has profound consequences. While you can't control government policy, you can control your own approach to navigating an uncertain world. Remember, "The greatest shortcoming of the human race is our inability to understand the exponential function". This applies not just to compounding wealth, but also to compounding problems.