这是20190628的中文报告《
洪灝：
投票的艺术
》的英文原版。感谢您的阅读和支持。
The
2019 Asiamoney Investor Poll
has been out for two weeks. It is the season when sell-side analysts will demonstrate to investors why they deserve a vote. The misfires will be quietly casted aside - there is nothing wrong with it. In polls, we all must stand tall, and weakness may invite disdain. In light of inevitable incomplete disclosure, why exactly do we vote?
In 1992, Dr. Lee Kuan Yew, former Prime Minister of Singapore, attended a conference hosted by Chris Patten, then Governor of Hong Kong, at the University of Hong Kong. Patten invited Lee to comment on the British decolonization process. Lee responded with his usual candor, using India and Sri Lanka as examples.
“I have never believed the democracy brought progress. (But) I know it brought regression… the British never governed these countries with one-man-one-vote… western political scientists have not lived in these societies, and have not understood what is required is economic progress and development, and the final blossoming of a large educated middle class, which alone can sustain a democracy… when you have sixty to seventy percent of the society educated, only then one-man-one-vote makes sense.”
His candid answer received standing ovation. It was 1992.
Of course, voting is seldom about achieving the majority. Rather, it is more similar to an economic exchange. Voters vote in anticipation of favorable policies towards their constituents. Elected politicians amass power while working for the people. In a large population, there are various majorities on different issues, and the majorities are overlapping. As such, the final majority population on an amalgamation of the issues being debated can easily be a minority subset of each group for an individual issue. Simply put, if you fall for everything, you stand for nothing. As such, in a voting-based democracy, a winning candidate may not be the best candidate for the entire population - as demonstrated in the cases of the US election and Brexit.
Further, one individual vote is unlikely to tip the balance of the polling results: median margin of victory in the Congressional elections was 22%; in the state-legislature elections, it was 25%. Even in the closest elections, it is almost never the case that a single vote is pivotal. Of the more than 40,000 state elections comprising nearly 1 billion votes, only 7 elections were decided by a single vote, with 2 others tied. Of the more than 16,000 Congressional elections, in which many more people voted, only one election in the past 100 years was decided by a single vote (
Mulligan and Hunter
).
Given the infinitesimal marginal return, economists have long among them been jibing at voting. After all, the voting process extracts the cost of time for nothing. Swiss researchers even demonstrated that sending polling forms directly to voters in order to lower the cost of voting time actually produced lower turnout. Clearly, the decision to vote serves other underlying purposes. So again, why exactly do we vote?
Over the years, we have prided ourselves of being a contrarian. We believe that a good analyst must see what others don't see, and call a spade a spade. Only those non-consensus views at market inflection points consistently proven right will add value to investors. But with the methodology to tally the final votes in the Asiamoney Poll tilted towards the largest houses with global footprints, only one or two such brokers have shown up in the final ranking since last year. Such polling results have substantially less information contents about who the other houses are in the poll and how they have fared. These rankings reflect the state of increasing market concentration, but also bury other valuable views from the more niche houses that may have been disadvantaged.
Why vote for the disadvantaged in a skewed polling construct, although such a construct is a product of market reality? Voting theory generally concludes that all votes should go to effective candidates, and different parties should adopt a similar platform - in repeated elections where there is uncertainty on the position of a median voter and participants can be opportunistic - as in the broker polls.
In fact, it pays to vote for the “disadvantaged”. Such votes can induce the mainstream candidates (i.e. conforming analysts from major houses) to relocate towards contrarians. Consequently, to maximize their probability of being elected, the mainstream candidates may eventually not adopt mainstream platforms/ideas, but diverge to a certain extent instead (
Micael Castanheira 2003
). In short, voting for the “disadvantaged” increases the informational contents of the poll (i.e. who the other houses are and how they have fared), and promotes diversity of ideas in the market (i.e. the valuable contrarian ideas otherwise buried).
Another year, another hotly-contested poll. In the past year, we developed an economic cycle theory that appeared to have explained the confluences of the US and China’s short economic cycle well. It introduced a ground-breaking perspective on applying the economic cycle theory to practical investment analysis. Our report titled “
