Detecting Bulshytt

I’ve just been doing my annual teaching entrepreneurship gig. It’s always an amazingly positive experience—a mental recharge. This time, we had a guest speaker no-show, so we repurposed the time into a brainstorming session on detecting bulshytt.

That’s not a typo. Neal Stephenson defined the word in his terrific novel, Anathem:
 

Bulshytt:

(1) In Fluccish of the late Praxic Age and early Reconstitution, a derogatory term for false speech in general, esp. knowing and deliberate falsehood or obfuscation.

(2) In Orth, a more technical and clinical term denoting speech (typically but not necessarily commercial or political) that employs euphemism, convenient vagueness, numbing repetition, and other such rhetorical subterfuges to create the impression that something has been said.
 

Definition 1 is your regular BS.

Definition 2 accurately describes the BS I encounter as a due diligence guy.

So it was great to get a bunch of very bright minds together to build a bulshytt meter.

What we came up with was more of a toolkit—a set of signs or tells that someone is peddling bulshytt.

Here they are:

1. Assume bulshytt. It’s nice that if you assume everyone you encounter in the resource sector is going to try to bulshytt you, you won’t be disappointed as often. But the real value is in keeping on your guard. This isn’t just a matter of attitude. If you start with the assumption that CEOs, IR guys and gals, and even (or especially) newsletter writers are bulshytters, it’s up to them to prove they’re not. Until they do, discount everything they say, and you’ll lose less money. How do that prove this? Myriad are the ways, but you can start by asking hard questions to which you already know the answer. If a person is frank with me about such issues, I’m more inclined to believe other things they say.
   
   Believe it or not, there are a few—very few—people who’ve been so straight with me over the years that I now take what they say at face value. I love that this is even possible… but it takes decades to form such trust.
    
2. Unsolicited opinions. This isn’t a surefire BS detector. Some people just have a psychological need to spout unsolicited opinions. But the bulshytter has an agenda (a sale to make, of one kind or another), and that creates a need to keep conversation going to increase the chances of working in talking points. Besides, no one is an expert on everything, so anyone who acts like a know-it-all is likely a bulshytter. Being able to say, “I don’t know” and pipe down about things beyond one’s ken is a sign of good character.
    
3. Covert surveillance. Okay, not really. I’ve never hired a private detective. But you can go to PDAC, VRIC, NOIC, and other trade shows and do some polite but deliberate people-watching. The exhibition halls of such conventions are full of bulshytters. It’s educational and informative to watch them. How do they act when alone at their booth? How do they treat their coworkers when marks are not there to be sold shares or newsletters? How do their coworkers treat them? How do they talk about people, or what faces do they make when the marks leave the booth?
   
   It’s said that “character is demonstrated by what you do when no one is looking.” Well, a crowd can be a very isolating environment when no one is interacting with one directly. Use this to your advantage.
    
4. Body language. You don’t have to be an FBI profiler to notice when someone won’t meet your gaze. When you go from covert surveillance to direct interaction, how does the person’s behavior change? A friendly smile is okay, but nervous or shifty behavior is a definite red flag. If you ask a CEO basic questions like how much money her or his company has in the bank and they can’t answer promptly and without obfuscation, they are either lying or incompetent. Any member of senior management should know such numbers.
   
   There are sociopaths who’re very good at camouflage, but how many sincere people do you know who come across like used-car salesmen? If you get a suspicious vibe from someone trying to sell you something, you may be wrong, but you’ll lose money less often if you trust your gut about such people.
    
5. Limited-time offers. There are rare opportunities that happen fast, requiring immediate action. But they’re very rare. It’s almost never the case that you can’t take a breath or get a second opinion. Anyone who tries to pressure you with a limited-time offer is almost certainly bulshytting you—whether they know it or not—because the offer itself is bulshytt. How many times have you seen offers that “expire at midnight” (in whose time zone?) day after day? How many stores run “this week only, blowout” sales constantly? Okay, if it’s selling ripe bananas to move them before they go bad, that makes sense. But a newsletter? They don’t go bad… but they often start bad to begin with and require phony deadlines to pressure people into making emotional decisions they later regret.
   
   “Okay, Smartass,” one might object, “what about an exploration company? They could have blockbuster drill results pending!” Yes, that actually does happen. And yes, there’s a real-world time limit to buying in before the news comes out. But it’s extremely rare for game-changing results to come out before you can get back to your computer and do some minimal due diligence. (Or, if you’re a My Take subscriber, to at least look up my take on the company to check for red flags.) Usually, companies do everything they can to press release important results just before a trade show. That way, they have more talking points to wow the marks with.
    
6. Innocence by association. Bulshytters don’t like having their BS called out. They tend to avoid straight shooters. Find someone in the industry you trust—and then watch what others say about that person or how they act around that person. Those who go around criticizing people you know to have integrity may lack it—or judgment—themselves.
    
7. Contradictions. Being a good liar is hard. You have to remember what you told to whom. You must be ever vigilant in case some fact that contradicts your spiel enters the conversation. Over time, this juggling act gets more and more difficult. Contradictions and inconsistencies in the narrative you’re being pitched are key tells that the agenda is not sincere.
    
8. John Hancock. Putting your name on something in a large and visible way can be a sign of non-bulshytt. If I launch an exploration company called Amalgamated Moose Pasture (to use my friend Adrian Day’s favorite made-up name) that fails to find anything of value, I can roll the shares back, rename it Consolidated Bulshytt, and have another go. I can keep doing this as long as there are investors whose idea of due diligence is to buy whatever stock some guy on Twitter (or X, whatever) says is going to the moon. In other words, I can keep doing this until my larcenous heart gives out and puts me six feet under. But if I put my family name on my business… the consequences of failure are more painful and enduring. As it should be. (Before you ask, yes, there’s a family connection to my use of the name “Louis James.”)
    
9. Chatterboxes. This is not a reliable tell, but in my experience bulshytters are often chatterboxes. Remember: they have an agenda. They’re trying to sell you something. Until you say yes or walk away, they can’t stop trying to pitch you—which means talking.
    
10. Triangulation. My former colleague Marin Katusa once excused himself from a dinner we were having with a company, went to the bathroom, and called the company on his cellphone, disguising his voice. As I recall, he got one of the same people we were meeting with and asked him the same questions we were asking in slightly different ways—and got very different answers. (He could also drink almost anyone under the table back then, and he got amazing things out of CEOs, geologists, and drillers after a shared bottle of whiskey.) I’m not suggesting this as a due diligence tool, but you can triangulate by asking similar questions over time. You can also compare notes with other investors and see if there are inconsistencies and contradictions in the narrative.
     
11. Flattery. I remember shopping for a car back before my first child was born. My then-wife and I went to a dealer, and the first thing the guy did was compliment my shoes (or hers: I’m not sure of the detail, just that it happened). I’m not sure if I laughed out loud, but in my mind I did, because I had little money at the time and praise of our utterly ordinary attire revealed the bulshytter before us. More recently, I’ve had IR pros start a conversation by complimenting my writing. The “deer in headlights” look I get when I ask them which article they liked would be comical if it weren’t so depressingly common. In the interest of getting a positive write-up, some will go so far as to agree with my most extreme political opinions when it’s obvious they haven’t thought about the issues at all. This is particularly funny and sad when such people assume I must be a Republican, for instance (because I defend free markets) and say all sorts of things they imagine I agree with. Unless they make me laugh out loud, I usually leave them blissfully unaware of how deep a grave they have dug for themselves.
    
    Beware of those who ladle out compliments and agree with you about everything.
     

I’ll probably think of more things after I hit “Send” on this article, but I’m sure you get the idea.

There’s no perfect way to do this.

The main thing is to simply start with the first principle: assume bulshytt.

Do this, and I fully expect it to reduce the number of investment disasters in your portfolio… and perhaps in other walks of Life as well.

Caveat emptor,

 

 

P.S. For more ideas, guidance, and market analysis, there’s nothing like my weekly free, no-spam, no-hype Speculator’s Digest.