Articles by Editorial Staff - FinMasters

The Complete List Of Hedge Fund Letters To Investors Q4 2023

Editorial Staff — Mon, 14 Feb 2022 15:26:18 +0000

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Every quarter, FinMasters curates an archive of quarterly hedge fund letters from all over the web.

These letters are from the top hedge funds and the most successful investment firms in the world – learn about the stock market, the economy, the global geopolitical landscape, and investing strategies and philosophy from the very best in the business today.

Many of the letters are sourced from Reddit/r/SecurityAnalysis but also include other sources. If you have any more hedge fund letters or reports – especially ones with a value investing focus – please send them here.

Enjoy the archive!

2023 Hedge Fund Letters

Q4 2023 Hedge Fund Letters

Circular Reasoning: Definition and Examples

Editorial Staff — Sun, 29 Aug 2021 03:54:59 +0000

Circular reasoning, or circular argument, is a logical fallacy in which a person attempts to prove something using circular logic; they use the conclusion as evidence to show that the reasons for the very conclusion are true.

It’s closely related to the fallacy of begging the question, and the two work almost identically in practice. However, the latter is seen as a more specific type of the former.

Definition

Circular reasoning occurs when someone makes an argument in which both the premises and the conclusion have to rely on the truthfulness of the other.

As such, the logic of it goes:

A is true because B is true;
B is true because A is true.

Circular Reasoning: Definition and Examples

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For Example

“It’s important to argue logically because logic is an essential part of argumentation.”

Here, the point being made is backed up by what preceded it, which, in turn, is supported by the previous point; each part essentially tells us the same thing. Such reasoning creates an endless loop that fails to prove anything useful.

Circular arguments can be quite easy to identify when they are short, and it’s clear what the person is trying to convey. However, if the argument involves multiple, more complicated concepts, it becomes increasingly difficult to recognize them.

Furthermore, note that this can also be reasonable and useful when the circle contains a wide variety of relevant concepts, such as a dictionary. As explained here:

For example, a dictionary contains a large circle of definitions that use words which are defined in terms of other words that are also defined in the dictionary. Because the dictionary is so informative, it is not considered as a whole to be fallacious. However, a small circle of definitions is considered to be fallacious.
Fallacies, Internet Encyclopedia of Philosophy

Examples

“The best minds in physics have studied physics most of their lives, as it’s necessary to study physics extensively to become a top physicist.”
Andy: “What is the meaning of life?”.
Sarah: “Personal happiness, of course.”
Andy: “Why do you think so?”
Sarah: “Because nothing is as important as being happy!”
“If an expert says it’s true, it must be true; after all, if experts don’t know, then who does?”
“Fake news is harmful because it’s bad if the news isn’t real!”
“You should always do what you are being told because following the rules is important.”

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Glossary of Investing Terms

Editorial Staff — Tue, 24 Aug 2021 19:34:37 +0000

Finmasters’ glossary of investing terms lets you quickly look up clarification on a particular term and expand your stock market vocabulary. Our investment glossary lists a variety of commonly used stock market terms, investing terms, and definitions from the financial world.

10 Year PE: The 10 Year PE, or cyclically adjusted PE ratio (CAPE), is the price divided by the inflation adjusted average earnings over the previous 10 years. This ratio gives a better idea of the earnings multiple based on average earnings over an economic cycle. It is better suited to cyclical stocks which have periods of higher and lower earnings growth. For stocks with high earnings growth rates the average earnings tend to be understated.
Bar Chart: A bar chart uses vertical bars to display the open, high, low and closing price of a security during a series of trading sessions. The high and low price are represented by the high and low point of the bar, while the open and closing price are represented by horizontal lines on the left and right of the vertical bar.
Bear Market: The opposite of a bull market, a bear market is a downtrend or market that is decreasing in value.
Bonds: Bonds are debt contracts, or more simply loans. They can take a variety of forms in how they are paid out, if they can be prepaid, and more. Unbeknownst to most investors, the global bond market is astronomically larger than the equity market. Furthermore, bonds aren’t regularly traded in many cases, making the price arbitrage on them much higher.
Bull Market: This ubiquitous term describes when a market is in an uptrend or is increasing in value.
Candlestick Chart: A candlestick chart is similar to a bar chart, but includes a wider body between the open and closing price. The body is usually green or white if the close is higher than the open and red or black if the close is lower than the open. A “wick” connects the body to the high and low. Consecutive candles of the same color represent trends and long wicks often warn of trend reversals.
Close: The last traded price for a security during a trading session.
Compound Interest: Compound interest refers to the gains you receive from an investment that are then put back into the investment to generate higher returns. Mathematically, if you earn 5% on $100, you would have $105 at the end of the first year, but $110.25 at the end of the second year because you got 5% on your initial $100 plus 5% on the gained $5.
Common Stock: The most basic form of ownership in a company. They have shareholder rights, and are entitled to a proportionate share of company earnings. However, they are also last in line when a company goes bankrupt.
Earnings Per Share (EPS): The total profits of a company divided by the number of shares outstanding. This incorporates non-cash items such as depreciation.
Exchange Traded Funds: ETFs are basically mutual funds that are traded like stocks during the regular trading sessions. They generally offer exposure to indexes or subsectors of a larger index, such as technology or healthcare.
Exchange Traded Notes: ETNs look like ETFs but have a significant difference. ETNs don’t actually own the underlying assets while ETFs do. ETNs are essentially guarantee contracts by the issuing institution to follow a particular index or strategy. What most investors don’t realize is that there generally aren’t assets backing up the ETN, and thus they are exposed to additional risk.
Exponential Moving Average: An exponential moving average gives more weight to recent price levels.
Free Cash Flow: The amount of cash generated by a company after all operating and capital expenditures.
Hedge Fund: Although a hedge fund’s initial purpose was to provide lower risk ways to invest in the market, most hedge funds today are actively managed by a person or a group of individuals that engage in leveraged and high risk investing. These funds are usually more exclusive, less scrutinized than mutual funds, and less liquid.
HEPS: Headline earnings per share for a given time period for a company. HEPS excludes exceptional and one off items from the EPS number.
Index: An index refers to a basket of assets that are weighted in a particular way to give an overall value for those assets. Methods of weighting index constituents include equal weight, fundamental factors and price weighted. Common indexes include the FTSE, Dow Jones, S&P 500, Russell 2000, and more. As the price of the assets within the basket changes, so do the indexes themselves.
Margin: Made famous in the financial crisis, margin simply means investing that is backed up by borrowed funds. When you short a stock you must do so on margin because in theory the stock could go to infinity. Many hedge funds use margin, which is essentially a loan, to purchase more shares of a company than they can do so outright.
Moving Average: A moving average is the average price over the previous n number of time periods.
Mutual Funds: Mutual funds are pools of money managed by a group of individuals. They can utilize a simple strategy, such as following the S&P 500, or run entirely on the decisions of the management team. These funds can be open to new investors, or limited in their participation. They can only be purchased at the close of business.
OHLC: The open, high, low, and closing price of a security during a trading session.
PEG Ratio: The PEG ratio, or Price Earnings/Growth ratio is the price earnings ratio divided by the earnings growth rate. The PEG ratio tends toward 1 over time as the growth rate should keep up with the PE. If the growth rate is much lower than the PE there is little reason for the PE to remain at such high levels.
Preferred Stock: While preferred stocks don’t have voting rights, preferred stock holders receive a dividend from a company that is generally much higher than the regular dividend or bond payments, and usually guaranteed.
Price to Earnings Ratio (P/E): The PE ratio, or earnings multiple, is the price of a share divided by the earnings per share. The PE ratio reflects the multiple of earnings that investors are prepared to pay for a share. High or rising PEs indicate that investors are expecting higher earnings in the future. Low PE ratios indicate stocks are either undervalued or that investors expect lower earning in the future.
Real Estate Investment Trust (REIT): Investors who can’t afford to invest in real estate themselves often use REITs as an investment vehicle. REITs are pooled funds that invest in real estate, and generally receive special tax treatment. In many cases REITs have special governance structures that require them to pay out 90% or more of their profits continuously in the form of dividends.
Return on Investment: The rate of return (interest rate) that one receives on a defined period basis (usually annually).
Short Selling: Known as one of the few ways to bet against an asset, short selling involves borrowing an asset, such as stock or bond, and selling it with the intention of repurchasing that asset at a lower price at a future date. During that time the short seller is responsible for all dividend and coupon payments, and only makes money if the price of the asset goes down.
Trust Fund: Trusts are special types of funds, normally set up by families for their decedents, that hold assets or investments with the intention of giving those to another.
Volume: The number of shares traded during a trading session or during a given time period.

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Middle Ground Fallacy: Definition and Examples

Editorial Staff — Sun, 20 Jun 2021 05:35:15 +0000

Middle ground is a common type of logical fallacy — meaning an error in reasoning that weakens the argument — whereby a person argues that the correct conclusion must lie somewhere between two opposing arguments.

It is also known as the argument from moderation and the golden mean fallacy.

Definition

The fallacy of middle ground occurs when someone asserts that a compromise between two opposing positions must be the truth.

Its logical form goes as follows:

Person 1 argues A.
Person 2 argues C.
Therefore, B is correct.

This type of thinking is erroneous because it makes a conclusion solely based on the fact that something is the middle point of two sides. In terms of logic and argumentation, it doesn’t provide us with any valid reasons to believe its truthfulness; simply picking a point between two falses wouldn’t mean that it’s necessarily correct, and the middle of truth and false is also false.

As such, making compromises for the sake of compromise is not a proper way to reach conclusions — even if the middle sometimes is the safest bet.

Middle Ground Fallacy: Definition and Examples

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Examples

Jim says that ostriches cannot fly. Sarah, on the other hand, claims that ostriches can fly. Therefore, some ostriches will certainly be able to fly.
Brian, an atheist, claims that religions are purely the result of people’s imagination. Alice, who is an omnist, believes that all of the world’s religions contain truths. In response, their friend offers a compromise and says that some of the religions are true.
“My parents always told me that it’s never okay to steal, but my best friend says that you can always steal if you want to. So, considering both views, I think that it must sometimes be okay.”
Andy thinks that Michigan is south of Indiana, but Linda believes it is north of Indiana. Thus, it must be west of Indiana.
Person A says that his neighbor’s house is yellow, but Person B is certain that it is red. As a result, Person C says it’s orange.

Useful links:

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Gish Gallop (Logical Fallacy): Definition and Examples

Editorial Staff — Sun, 09 May 2021 00:36:35 +0000

Have you ever lost an argument even though the evidence and logic were clearly on your side? If so, it is likely that your opponent was – either unknowingly or on purpose – using logical fallacies to defeat you.

Gish gallop is a type of logical fallacy – meaning an error in reasoning – that occurs when someone throws at you a myriad of half-truths and misleading statements in hopes of making their stance stronger. It’s used commonly in many different situations and domains, from simple disagreements with friends to debates between politicians, and therefore is important to learn about it.

In this article, we will explain in more detail how this frequent offender works.

Definition

Gish gallop is a fallacious debate tactic in which a person uses as many arguments as possible against their opponent without any consideration into the strength of the arguments.

The arguer’s aim is to quickly back their position with a large amount of “evidence”, however, it is typically hastily put together, inaccurate, and even irrelevant to the issue at hand. In fact, the more arguments one can come up with, and the vaguer they are, the more effective the tactic becomes.

As such, the Gish gallop fallacy only focuses on the quantity of the arguments, not the quality, in order to achieve its objective: to make it too difficult for the opponent to respond. As a result, the person committing it seemingly gains an upper hand in the debate.

Origin of the Term

The term “Gish gallop” was coined by Eugenie Scott, an executive director of the National Center for Science Education in the 1990s. She named it after a creationist Duane Gish, but also described the tactic in association with other creationists:

Creationist debaters are masters at presenting these half-truth non-sequiturs that the audience misunderstands as relevant points. These can be very difficult to counter in a debate situation, unless you have a lot of time. And you never have enough time to deal with even a fraction of the half-truths or plain erroneous statements that creationists can come out with.
Eugenie Scott, Debates and the Globetrotters (1994).

Gish Gallop (Logical Fallacy): Definition and Examples

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Use of Gish Gallop

Why do people employ the Gish gallop tactic? One reason is that it is much easier to construct low-quality arguments (especially in large numbers) than valid, well-researched ones. And, since the evidence behind them is only vaguely mentioned, disproving such claims can be as difficult as disproving the strongest ones.

Also, people who aren’t experts in the field under discussion find simple arguments, such as anecdotes, more persuasive than arguments involving complex scientific ideas and technical jargon. Naturally, such people – from which a typical audience mostly consists of – are more drawn to claims that they can understand

Examples

Here are a few Gish gallop examples to further illustrate how it is used.

Politics

As so many other fallacies, this too can be effectively used in the political arena.

For instance, there are times when politicians conduct themselves inappropriately and end up getting caught. When such happens, they are questioned and accused by the media or fellow politicians. Now, to get themselves off the hook, they might resort to the gish gallop: he or she comes up with a large number of vague and misleading counter-arguments to simply make it too challenging to disprove all of them.

Everyday

Examples may be found in less formal settings, such as a disagreement between a married couple:

One of the partners does a misdeed and gets confronted by the other. However, rather than address the accusation directly, the wrongdoer denies it and attempts to prove it by presenting as many reasons as possible why they are right; his or her goal is not to win by using sound reasoning and valid evidence but to overwhelm the other party with the number of counter-claims.

Online

Gish gallop can also occur online when individuals wish to persuade others to adopt their beliefs and viewpoints.

For example, someone may publish their opinion on social media and back it up by citing a wide variety of sources that, in reality, are irrelevant to the topic or too unclear to be taken seriously. As such, the person may hope that the audience won’t take the time to verify the evidence and will simply assume that their claim is well justified.

Useful links:

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Whataboutism: When People Counter Accusations with Accusations

Editorial Staff — Sun, 02 May 2021 07:38:29 +0000

In day-to-day conversations, when we wish to articulate our ideas and beliefs to others, we often both commit and encounter errors that make our arguments easier to defeat. These mistakes are also called logical fallacies – errors in reasoning that weaken the argument.

Whataboutism is a type of logical fallacy that occurs when a person attempts to divert the focus away from the current issue by making a counter-accusation. It’s a specific form of the tu quoque fallacy in which someone’s claim is discredited due to alleged hypocrisy by the arguer.

Sometimes, we are aware of the fallacies, but more often than not, they end up flying under our radar. And consequently, we may be persuaded to believe in something for the wrong reasons and lose a debate even though the evidence was clearly on our side. As such, learning to identify and counter various fallacies can be extremely useful for almost anyone.

In this article, we will cover the whataboutism fallacy in detail, explaining when and how it is committed and illustrating it with examples from different situations.

Whataboutism: When People Counter Accusations with Accusations

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What Is Whataboutism?

Whataboutism, also called whataboutery, is a logical fallacy and rhetorical technique in which people respond to a difficult concern or question with a counter-accusation in order to divert attention to a different topic.

As the name suggests, it’s characterized by the phrase “What about…?”, which would be followed by an issue that may be only remotely related to the original one.

It’s typically used when one is charged with a harmful accusation regarding their past actions; one counters the charge by bringing up something negative about the opposing side and thus attempts to downplay the magnitude of their own actions.

It is classified as a variant of the tu quoque fallacy, but it’s also closely related to the red herring fallacy.

Origin of the Term

British journalist Edward Lucas is credited for popularizing the term in his 2007 blog post in which he wrote about the use of “whataboutism” during the Cold War “to match every Soviet crime with a real or imagined Western one”.

The term is perhaps most often used in association with the Soviet Union and Russian style of argumentation. Notably, Garry Kasparov, a Russian chess world champion and political activist, said that it was created to describe the oft-used technique by Soviet figures to counter various charges made against them.

Examples

This error in reasoning occurs in a wide variety of situations, from our everyday arguments with family members to quarrels between nations. As such, here are various examples, along with explanations, to better illustrate it.

Individuals

Whataboutism is a commonplace technique to justify or belittle one’s mistakes and wrongdoings. This is, perhaps, because we human beings tend to compare ourselves to other people in our surroundings; if another person has committed the same offense, it may, in some cases, appear as less unacceptable.

As an example, if a student gets caught cheating on an exam, their first course of action may be to point out that their fellow student also cheated. This can seem to them as a reasonable refuge, even though it doesn’t do anything to justify their behavior.

Politics

Politicians and state leaders use whataboutism to defend themselves from accusations of not solving certain problems by bringing up the existence of other problems or the shortcomings of other individuals and nations.

For example, we know that climate change is a global issue that requires international intervention. A president of one country may plainly refuse to take action to mitigate climate change in his country because some other countries are not doing it either.

Also, as in many other domains of high competition, it’s a popular tactic in the political arena to bring the mistakes of one’s opponents to the surface whenever faced with accusations. For instance, if a politician is caught off-guard lying, they may use a “what about him?”- ploy to divert the focus to someone else by reminding him that he has lied about something even more serious.

Nations

The tactic is frequently employed to counter criticism at the nation level: If a certain nation finds itself as a target of criticism, say, for violating human rights, they may note that the opposing side has practiced slavery in the past and therefore is not entitled to criticize other nations.

Business

It may also appear in the business context. One example: A business customer complains that a particular production company provided them with substandard products. However, when questioned regarding the incident, the production company claims that companies X and Y too have a history of producing and distributing defective products; therefore, the mistake is not quite as bad as it would be otherwise.

Useful links:

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Poisoning the Well (Logical Fallacy): Definition and Examples

Editorial Staff — Sat, 01 May 2021 03:06:42 +0000

We, as humans, make many errors when trying to articulate our reasoning in the best way possible, both in our personal and professional lives. These errors are often called logical fallacies – flaws in reasoning that weaken your argument.

Poisoning the well is one type of logical fallacy that occurs when negative information about a person is presented to an audience in an attempt to discredit the following arguments made by that person. It’s a variation of the ad hominem fallacy; it attacks directly the source of an argument instead of addressing the argument itself.

In this article, we will explain in more detail how this common offender works, as well as look at several examples of it.

Poisoning the Well (Logical Fallacy): Definition and Examples

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What Is Poisoning the Well?

Poisoning the well fallacy arises when adverse information about a target is presented preemptively in order to discredit or ridicule the target’s subsequent claims. As such, it’s mostly used to weaken or refute an opponent’s argument before they make them.

It is also known as a smear tactic; rather than having to counter a claim in legitimate ways, one resort to smearing their opponent’s reputation to take off from their credibility.

The name comes after the analogy of a well that’s water is poisoned. Imagine that you were thirsty and came across a well. As you reach out for the water to quench your thirst, your friend tells you that the well’s water is poisoned. As a result, that particular water doesn’t seem so appealing to you anymore, and you make an easy decision not to drink it – even though you can’t know for sure whether your friend is correct or not.

The same effect translates to argumentation: if someone has a tainted image (i.e. their “well is poisoned”), their words don’t seem so compelling and are more likely to get dismissed or ridiculed.

Examples

Poisoning the well is a commonplace fallacy in certain situations and domains. As such, every now and then we come across examples of it in our everyday lives, perhaps when watching a political debate or arguing with classmates.

Here are several examples to further illustrate it and help you identify it the next time you encounter it.

Business

In business, companies always strive to get ahead of their competitors. One strategy to achieve this is to taint the image of the competing companies.

For instance, one company may bring up another company’s past shortcomings in their advertisement campaign, which can make the claim that their products are superior in comparison to the other’s more believable. In other words, presenting the competitor in a bad light makes it easier for you to appear desirable.

As a real-life example, this is also the tactic that Microsoft used to gain an advantage over Google while introducing its email app, Outlook. Microsoft’s strategy was to taint Google’s image by raising the issue of privacy; Google’s employees claimed to have access to all emails people send through Gmail.

Politics

This tactic is a long-standing favorite among politicians. It is employed in almost every political debate where the candidates aim to discredit their opponent and present themselves in a better light. In fact, it is often the core of political campaigns along with the ad hominem abusive.

Rumors

More often than not, rumors are clear cases of poisoning the well.

For example, if you know that a new manager is starting soon at your workplace and you happen to hear a negative rumor about her, you are more likely to judge her words and actions – at least until this view is changed – more negatively than you would have without hearing the rumor. Due to her smeared reputation, you may suspect her skills and question her motives even when she something good and positive.

Courtroom

It may also occur in the courtroom. Imagine the scenario whereby a lawyer, who has the first opportunity to speak, deliberately constructs their statements in a way that evokes negative feelings towards the opposing side among the audience, thus making them more inclined to believe the plaintiff.

Useful links:

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Ad Hoc Fallacy: Definition and Examples

Editorial Staff — Mon, 26 Apr 2021 11:10:22 +0000

The Latin phrase “ad hoc” means literally translated “to this”. It refers to an idea or solution that is intended for a specific use, and not for any other uses.

Ad hoc fallacy, or ad hoc rescue, occurs when someone comes up with a rationale or explanation to dismiss the counter-evidence to their claim in a bid to protect it. 

Since the ad hoc rescue is not an actual argument, it technically cannot be a logical fallacy. However, it is often still classified as one because it’s used as a substitution for a proper argument.

What Is the Ad Hoc Fallacy?

Ad hoc fallacy is a fallacious rhetorical strategy in which a person presents a new explanation – that is unjustified or simply unreasonable – of why their original belief or hypothesis is correct after evidence that contradicts the previous explanation has emerged.

As such, it’s an attempt to protect one’s claim from any potential refutations and thus preserve their existing beliefs. Furthermore, the explanation is specifically constructed to be used in a particular case and is created hastily at the moment rather than being the result of deliberate, fact-based reasoning.

Examples

Here are a couple of examples of the ad hoc fallacy to better illustrate it:

Ad Hoc Fallacy: Definition and Examples

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Example 1

Student 1: “I really should have got an A for the exam.”
Student 2: “You got several questions wrong, though.”
Student 1: “Well yeah, but that must be because the teacher is a real a-hole.”
Student 2: “She is actually very nice.”
Student 1: “She should’ve considered how hard I studied for the exam. I really deserved an A.”

Student 1 doesn’t want to let go of her belief; instead, she comes up with a new explanation each time the previous one is seriously (and quite easily) challenged. In other words, Student 1 makes stuff up as he or she goes.

Example 2

Brad: “The new sales manager, Jim, is the worst ever; the sales revenue has been in a downtrend since he was appointed at the beginning of 2020.”
Angelina: “Perhaps it could be due to something else. I know Jim is an effective manager: He has significantly increased the sales of every company he’s previously worked for and has even received a few awards.”
Brad: “He’s still an awful manager because he’s too strict. That lowers people’s morale.”
Angelina: “I don’t think he is too strict.”
Brad: “Well, he’s always breathing on my neck and watching my every move.”

Here, after Angelina points out that Brad’s reason for the manager’s incompetence is unwarranted, Brad finds new “evidence” to preserve the justifiability of his view.

Useful links:

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Appeal to Nature Fallacy: Definition and Examples

Editorial Staff — Wed, 14 Apr 2021 00:04:13 +0000

Appeal to nature is a common type of logical fallacy — that is, a reasoning error that weakens your argument — which, in essence, states that natural things are either good or better than synthetic ones.

It’s often used in contexts involving medicine, food, genetics, as well as many other topics where nature and science collide.

Appeal to Nature Fallacy: Definition and Examples

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What Is Appeal to Nature?

Appeal to nature occurs when it is claimed that something must be good or true because it is “natural”, or conversely, if something is “unnatural,” it must be bad or untrue.

As such, it may be committed in four different ways:

Something is said to be good solely due to its virtue of being “natural.”
Something is said to be bad solely because it’s seen to be “unnatural.”
Something is said to be better than its alternative because it’s perceived as “more natural.”
Something is said to be worse than its alternative because it’s perceived as “less natural.”

These types of arguments are fallacious since the fact that a thing is “natural” cannot alone prove that it is somehow true or superior; it would be the factual evidence supporting the claim that makes it so. Moreover, it isn’t typically clearly stated or agreed upon what “natural” exactly means; it can differ from person to person.

It occurs, perhaps most frequently, in the domain of alternative medicine. For example, someone insists that a particular herbal medicine must be a better or healthier option for treatment than a synthetic one (the result of human intervention) simply due to it being natural.

Examples

“Vaccines are unnatural; therefore, they are bad for you.”
“How could something so natural as the sun cause skin cancer?”
“Genome editing must be stopped; it intervenes with the work of nature.”
“Mushrooms are healthy and safe to pick; after all, they are grown exactly as nature intended.”
“Animals have gone extinct all the time for millions of years; it is simply how evolution and nature works. Therefore, we shouldn’t make any effort to preserve endangered animal species.”
“You must refuse to take any man-made medicines, they’ll harm you more than anything else. Instead, you should take natural ones, such as herbal medicine.”

Useful links:

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Appeal to Consequences – Definition and Examples

Editorial Staff — Wed, 31 Mar 2021 01:30:28 +0000

Appeal to consequences is a type of logical fallacy, meaning a flaw in reasoning that weakens an argument or a trick of thought used as a debate tactic.

It occurs when the truthfulness of a statement or belief is decided by the consequences it would have. It’s used, perhaps most commonly, in attempts to either support or refute a particular belief, such as the existence of a higher being.

It is also known as argumentum ad convenientiam (Latin for “argument to the consequences”) and appeal to consequences of a belief.

Appeal to Consequences - Definition and Examples

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Definition

Appeal to consequences is a fallacy in which someone concludes that a statement, belief, or hypothesis must be true (or false) simply because it would lead to desirable (or undesirable) consequences if it were so.

It has two logical forms, a positive and negative one. The positive form goes:

If X is true, then Y will happen.
Y is desirable.
Therefore, X is true.

And the negative one:

If X is true, then Y will happen.
Y is undesirable.
Therefore, X is false.

This is fallacious because the truth value of a hypothesis or belief is not affected by the desirability of its consequences; the fact that a premise would have a positive outcome doesn’t make it more true. Moreover, the desirability of an outcome can be highly debatable because it is often based on a subjective point of view.

As such, this fallacy is seen as a type of emotional appeal: essentially, it makes inferences on the grounds of how people feel about something rather than based upon facts and logic.

Examples

An example of an appeal to consequences would be:

“I can’t accept the claim that people have evolved from apes: otherwise, my ancestors would be monkeys. Therefore, the theory of evolution is wrong.”

Here, the fallacy occurs because the theory of evolution is said to be incorrect since, if it were to be true, it would have unpleasant consequences. However, as explained above, the truthfulness of the theory is independent of its consequences and our perception of them; in terms of logic, our emotions about it don’t affect its truth-value.

Other Examples

“Determinism cannot be true, because if it were, it would basically mean that I’m not in full control of my own decisions!”
“If you don’t believe in God, you will suffer from a meaningless and unhappy life; therefore, God must exist.”
“The stock market will go up this year; a lot of people would lose money if it didn’t.”
“I don’t believe that climate change is caused by humans. If it were, it would mean that we people are responsible for destroying the planet.”

Useful links:

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