Belly Flops, John McEnroe, “This is Water,” Dow 1,250

If Commencement speeches were judged like the Olympic sport of diving, the degree of difficulty would always be set to the maximum. Meaning that most efforts to impart actual wisdom to the graduates are almost certain to result in painful belly flops of tiresome clichés. So I admire any effort at Commencement rhetorical elegance no matter how ungainly the result.

Of course, the other path is to entertain through charisma, an option open to the celebrity speaker who is a practiced performer and can simply be their authentic, recognizable self.

This weekend I attended the Stanford Commencement to celebrate my son’s graduation from its business school. The speaker at the huge Sunday communal graduation in the stadium was John McEnroe whose comfort in commanding an audience was evident and who could entertain the vast crowd simply by being his authentic self: by owning his reputation as the “bad boy” genius of tennis. If quantity has a quality of its own, so, too, does authenticity. (By coincidence, I ran into McEnroe in the hotel washroom that afternoon and had a stranger’s chance to compliment him on the authenticity of his speech.)

Before the Sunday McEnroe speech, I heard the relatively more intimate Saturday speech addressed to the 500 or so graduates from the School of Business and their families.  I’m going to be spectacularly unfair to the Saturday speaker by comparing his speech to what may be the ultimate Commencement speech, i.e., using a scale of excellence and difficulty that only a thoroughly sadistic judge would impose.

Many people, including my late mother and me, would say that the best commencement speech ever given was by the late writer David Foster Wallace in 2005 at Kenyon. It’s known as the “This is Water” speech.  I hope you read it, and if you’re pressed for time, stop reading this post and go right to the link at the bottom.

Two snippets from DFW’s speech, the first from the very beginning:

“There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says "Morning, boys. How's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes ‘What the hell is water?’ "

“We rarely think about this sort of natural, basic self-centeredness because it's so socially repulsive. But it's pretty much the same for all of us. It is our default setting, hard-wired into our boards at birth. Think about it: there is no experience you have had that you are not the absolute center of. The world as you experience it is there in front of YOU or behind YOU, to the left or right of YOU, on YOUR TV or YOUR monitor. And so on. “

The Saturday speaker at the Business School Commencement was a Trustee with an admirable back story of overcoming tremendous adversity to achieve great business and financial success. His aim was to use his experience to impart some life lessons. Namely, be optimistic, work hard, embrace new things, take risks, learn from failure, and find a purpose well matched to your skills. Belly flop? Yes. Had there been a real pool, the graduates would have been drenched. If this sounds cruel, I’ll add that I probably would have done worse. Except in one respect.

As evidence of the speaker’s faith in optimism, he pointed out that in 1983 when he started out at the investment company that would make his reputation and his fortune, the Dow Jones Industrial Average was somewhere around 1,250. Or as he put it some “4% of where it is now.” Whether he also mentioned that ten year government interest rates were then at 12% I forget.

He was trying to get across the idea that the economy, real and financial, looked bad in 1983, but that his optimism carried him through those lean times. His takeaway for the grads was don’t allow doomsayers and bad news to make you pessimistic.

I’m going to pick on this point, because it reveals three flaws that can be mined for insight.

First flaw: math. The forty years from 1983 to 2023 were spectacular years for financial assets, driven by many factors, including the dominance of capital over labor and a steep decline in interest rates.  The ten year Treasury rate fell from 12% in 1983 to below 1% at one point last year, although now it’s back to about 4%.

If the grads on Saturday thought about the contrast of opportunities between graduating in 1983 vs. 2023, they would realize that the winds of politics and economics are almost certainly not going to be as favorable over the next forty years. For example, interest rates aren’t going to decline 11% from where they are today to become negative 7%. And the grads would realize that a decline in interest rates makes virtually all financial assets more valuable and is a great boost to the margins of companies who borrow and the household economics of individual borrowers as well. So, 1983 was a great time to graduate, despite what the speaker implied.

Second, this is an example of conflating the stock market with the economy. In the short term, stock prices are dominated by traders speculating on what prices will be next year, next month,  tomorrow, or sometimes even in a few milliseconds. Proof of a company’s success lies in its long term ability to generate earnings. That the Dow Jones Industrial Average is 25 times what it was 40 years ago does not mean that the economy is 25 times better than it was in 1983 and that good times are here to stay. It could mean the opposite. That we’re in a bubble that we cannot recognize from the inside.

(Similar to DFW’s observation that fish are unaware that they swim in water every day, and so too, we are unaware how hard wired we are to see every single thing from our flawed, individual POVs.)

Third and finally, with all due credit to the Saturday speaker’s skills and resilience, I did not hear him attribute the extent of his success to being in the right business at the right time. Luck plays a huge role in any success, business or personal. That he couldn’t step outside himself to fully embrace the role of luck in his success, at least in his speech, means that he might not be aware of the water he’s been swimming in.  

https://web.ics.purdue.edu/~drkelly/DFWKenyonAddress2005.pdf