You know the story:
Photo: Debaird. Source: Flikr. CC BY-SA 2.0
A grand prize is hidden behind doors number one, two, or three. Pick the right door, and you’re rich. Pick the wrong door, and you get the booby prize: a goat, or a llama, or maybe a can of tuna. The stage from “Let’s Make a Deal?”
No, this is the “casket scene” from Shakespeare’s Merchant of Venice. The heroine, Portia, has to get married. But her suitors are first required to choose one three different chests, made of gold, silver, or lead. Each has a small riddle written outside. If the suitor chooses correctly, he will find Portia’s portrait inside and can marry her, also controlling her quite substantial inheritance. If he guesses wrongly, he must promise to forswear marriage forever.
Source: Folger Shakespeare Library.
If we paid attention in our high-school English class, we know the ending: the hero chooses the leaden box and wins both Portia and her money. But only after two fruitless attempts by suitors who fail due to their vanity or arrogance. As he examines the outside of each container, the hero comments: “The world is still deceived by ornament,” or outward appearance. He lists examples from law, religion, war, and fashion. The lead casket has no ornamentation. That’s why he chooses it.
There are lessons here for investors. It’s not just a story of “Don’t judge a book by its cover.” The unsuccessful suitors fail precisely they see themselves in their choices. The arrogant prince chooses the gold box because he assumes he is worth more than gold; the vain suitor chooses silver because it reflects his own vain image
By contrast, the successful suitor gets outside himself and reflects on why someone might put forth such a test for their daughter. He looks at the underlying test, not at the outward display. Successful investors are able to get past their own expectations and desires, even as they acknowledge their own biases. We need to see the world as it is, without ornament or veil. Not necessarily the world we want to see.
The market is indifferent to our needs or fears. It moves according to its own logic and fundamentals. Shakespeare’s play gives us a clue on how to find reality: not by looking at the outward flash, but by testing the strength of the flesh behind the numbers.