Open-Mind-to-Plant-Your-Feet Test
Challenge a high-conviction thesis first, then endure if it survives
- Difficulty
- Expert
- Time to result
- ~ongoing to results
- Steps
- 6
- Confidence
- 96%
This framework separates justified perseverance from blind stubbornness. The investor first writes down the thesis, identifies what would make it false, and actively seeks the strongest competing explanations. Those explanations are tested against fundamentals, model assumptions, market structure, and new evidence. Only when the thesis survives that process should conviction harden. The investor then maintains a survivable position through drawdowns without treating price pain as automatic disproof. Because losing periods feel much longer in real time than in a backtest, psychological endurance and stakeholder preparation are treated as equal partners to analytical intelligence. The process remains open to new evidence, but it does not repeatedly reopen a settled decision merely because current performance is uncomfortable.
Origin
Asness described this approach after AQR tested numerous explanations for unprecedented value spreads during the COVID-era drawdown and retained the position when those explanations failed. Extracted from Masters in Business.
Core principles
- 01Conviction must follow attempted falsification rather than precede it
- 02Being smart is insufficient without disciplined endurance
- 03Distinguish thesis failure from temporary price pain
- 04Expect valid strategies to experience prolonged hostile periods
- 05Hold firm only after credible contrary explanations have been tested
How to run it
- 1
Write the thesis
State why the opportunity should exist, what evidence supports it, and the expected horizon. Specify whether the return is believed to come from risk compensation, behavioral errors, or both.
Pro tip Make the thesis understandable without referring to recent performance.
Watch out A vague belief cannot be falsified and will encourage endless rationalization.
- 2
Define failure conditions
List observable developments that would show the model, data, implementation, or economic mechanism is wrong. Separate these from ordinary volatility.
Pro tip Choose failure conditions before the drawdown becomes emotionally intense.
Watch out Do not define every adverse return as failure or make the conditions impossible to satisfy.
- 3
Seek opposing explanations
Collect the strongest external and internal cases against the thesis. Include structural changes, accounting issues, execution changes, and rational fundamental explanations.
Pro tip Ask informed critics to present the best version of the opposing case.
Watch out Testing only weak counterarguments creates false confidence.
- 4
Test the stories
Compare each opposing explanation with relevant data and current fundamentals. Update the thesis wherever the evidence warrants it.
Pro tip Use out-of-sample evidence and alternative measurements where possible.
Watch out A backtest alone cannot establish that the current implementation remains valid.
- 5
Confirm survivability
Check leverage, liquidity, client constraints, time horizon, and personal tolerance. Reduce risk if the position cannot survive a plausible continuation of the drawdown.
Pro tip Treat endurance as a portfolio-design requirement, not merely a personality trait.
Watch out A correct long-term thesis is useless if forced liquidation occurs first.
- 6
Plant your feet
If the thesis survives and the position is survivable, maintain it despite discomfort and hostile narratives. Continue monitoring the predetermined failure conditions.
Pro tip Communicate the decision process repeatedly to stakeholders during long drawdowns.
Watch out Resolve must not become an excuse to ignore genuinely new evidence.
In the wild
As value spreads moved beyond technology-bubble records during COVID, AQR considered explanations from strategists, clients, consultants, pundits, and its own researchers. The firm examined whether expensive companies' fundamentals justified the gap. After rejecting those explanations and confirming that value-company fundamentals remained strong, it maintained and modestly increased the tilt.
→ The position survived the extreme drawdown and participated in the subsequent value recovery.
A founder sees three weak months after launching a carefully tested subscription product. Before abandoning it, the team checks retention, customer outcomes, acquisition economics, and competing explanations. Retention and customer value remain strong, while one temporary channel disruption explains the slowdown, so the founder preserves the strategy while diversifying acquisition.
→ The decision avoids emotional capitulation while retaining explicit evidence that would trigger a later change.
Common mistakes
Skipping attempted falsification
Declaring conviction before testing contrary evidence turns perseverance into stubbornness.
Treating pain as proof
A drawdown feels much longer while it is happening, but discomfort alone does not reveal whether a process is broken.
Ignoring position survivability
Even a sound thesis can fail operationally if leverage, liquidity, or stakeholder withdrawals force an exit.
Is it for you?
Best for
It is best for experienced decision-makers running evidence-based strategies through long periods of adverse outcomes.
Not ideal for
It is not ideal for untested ideas, unaffordable positions, or situations where new evidence has already disproved the thesis.
From the transcript
“you've got to keep a really open mind, consider why you might be wrong, test that story”
“you got to plant both feet and say I will not be moved.”
“an extremely ordinary sticktuitiveness to you is an equal partner to being smart”
From the episode
Cliff Asness on Quant Value Investing