When the Americans landed on Lubang in February 1945, Onoda and his comrades were no match for them. Some, including Onoda, fled deep into the jungle, while others chose to surrender to the Americans. At military school, Onoda had received specific training in military intelligence, in addition to learning guerrilla and sabotage tactics. He had sworn to defend the island at all costs. Surrendering to the Americans was never an option for him.
Isolated in the jungle, Onoda never learned of Japan’s surrender on August 15, 1945—and therefore, of the end of the war.
Onoda became a historical figure because he continued occupying Lubang until 1974. That’s right! For 30 years, Onoda believed the war had not ended and never surrendered, even though the war had concluded just months after his arrival!
Reading his book, No Surrender: My Thirty-Year War, we see that the Japanese tried everything to convince Onoda to give up his post. They dropped countless leaflets and newspaper articles announcing the end of the war. They left family photos with handwritten messages urging him to surrender. They broadcast traditional Japanese songs along with voice messages from his family asking him to come home. His own brother even traveled to the island to find him.
However, Onoda always believed it was a trick. He constantly found some detail that made him doubt. For instance, he recognized everyone in a family photo—except one person—so he concluded it was a fake. He spotted his brother from a distance during the visit, but the man’s voice grew higher-pitched and tense as he sang a song. Onoda concluded it was an imposter since he didn’t recognize his brother’s voice by the end of the song.
Hiroo Onoda’s behavior reminds me of that of some stock market investors. Some investors seem to focus only on the information that confirms their investment thesis, while disregarding any evidence to the contrary. In investing, we call this psychological tendency the confirmation bias.
This phenomenon arises in many situations. For example, an investor may anticipate the growth of a company in their portfolio without noticing signs of deterioration or rising competition. Or an investor may fail to perceive the disruptions and changes taking place in an industry that threaten the business models of the companies they own.
Several technological examples come to mind: the rise of e-commerce, the development of streaming platforms, the growth of social media and its impact on advertising. It was easy, early on, to dismiss their implications and downplay the consequences they would bring to existing industries. However, investors who continued to deny those consequences—despite their growing significance over the years—certainly paid the price.
Ignoring, downplaying, and rejecting—without ever questioning—the impacts of the energy transition, autonomous vehicles, artificial intelligence, gene editing (CRISPR), and decentralization through blockchain on portfolio holdings could prove costly. An investor must remain flexible and open to new information.
It was probably reasonable for Hiroo Onoda to be skeptical of pamphlets announcing the end of the war. The probability that they were a trick to capture him seemed high at the beginning. However, the accumulation of new information should have led Onoda to think differently and reconsider his position. His greatest mistake was his inability to adapt to new information.
A stock market investor should avoid putting on blinders as Onoda did. Otherwise, they might end up spending 30 years in the jungle for nothing.
Jean-Philippe Legault, CFA
Portfolio Manager at COTE 100
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