Like many Americans, I've spent a lot of time recently thinking, reading, and talking about the debate over Iraq and Saddam Hussein. In doing so, I've been struck by the similarities in how people think about this issue and investing. So, in this two-part column, I'll share some of my thoughts on how to make important, complex decisions and avoid common mental mistakes.

Before I begin, to save myself from a deluge of emails, I'd like to make two points: First, I am by no means attempting to equate the gravity of war with the relative irrelevance of investment decision making. Second, I will try my hardest not to reveal my own opinions about what actions the United States should or shouldn't take. That is not the point of this article.

Always keep an open mind
Whether in the area of investing or geopolitical matters, the first step to analyzing any complex situation is to collect information and seek out all points of view. This might sound obvious, but numerous studies have shown that humans tend to come to conclusions quickly, and then only collect reinforcing evidence. How often have you seen a person dismiss someone who disagrees with them as shortsighted, stupid, uninformed, or selfish?

In the case of the Iraq debate, how many articles have you read recently accusing President Bush of seeking war to benefit oil companies? Or that those who oppose the war are, to quote a recent article, "naïve multilateralists, petty partisans, or French-loving lefties"? It's so easy -- and generally so wrong-headed -- to dismiss critics in this way.

Similar lessons apply in investing. When I own or am considering buying a stock, I actively seek out the company's most vocal critics. In particular, I want to hear what short sellers are saying because they're often right, and have saved me from making bad investments. Contrast this with the typical reaction, which is to say: "I'm not even going to listen to that short seller's argument because he's just trying to drive the stock down to make a quick buck."

The lesson here is to welcome and carefully consider the arguments presented by those who disagree with you. It will likely help you understand the key issues and make a better-informed conclusion. Who knows? You might even change your opinion.

Keep in mind that the future is inherently uncertain, which means that rational people, presented with the same information and having the same motivations, can reach strongly held, yet totally opposite conclusions. Reasonable people can disagree about the right course of action regarding Iraq, just as they can disagree whether, say, McDonald's (NYSE:MCD) stock today is like Coca Cola's (NYSE:KO) circa 1988 (a mismanaged great brand, with a stock in the tank but about to go nuts for a decade) or Kodak's (NYSE:EK) circa mid-2001 (a mismanaged great brand, with a stock in the tank but with lots more downside to come).

Mental flexibility, the ability to see other perspectives, and an intellectual openness are common characteristics of most successful investors -- and statesmen.

Why we shouldn't attack now
In an effort to seek out and consider the arguments surrounding the Iraq debate, let's begin by presenting the most salient points for both sides. Here are some of the primary reasons I've heard for not attacking Iraq, at least not right away:

  • Attacking Iraq now, especially without broad international support, will stir up even more resentment/hatred in the Arab world and lead to more terrorist attacks against us in the future.
  • Saddam can successfully be disarmed and contained so that he will never be a serious threat to anyone.
  • The Bush administration has exaggerated evidence that Saddam is trying to develop nuclear weapons, and that he is linked to Al Qaeda or other terrorist organizations.
  • An attack could lead Saddam to unleash chemical or biological weapons that he might possess, with horrible consequences. Even worse, we might retaliate by using our own weapons of mass destruction (WMDs).
  • American soldiers -- and innocent Iraqi civilians -- are certain to die, even if everything goes as planned. And if the war progresses slowly and there is fighting in major cities, thousands could die.
  • The costs of the war and the occupation thereafter could be very high, which we can ill afford with our widening budget deficits and struggling economy.
  • We should not attack until our post-war plans are more fully formed. What is our plan for Iraq? How many troops need to remain there to carry it out? How long will it take and how much will it cost? Rebuilding Iraq could be a process that is long, expensive, dangerous and ultimately unsuccessful.
  • The war in Iraq and its aftermath might stretch our military too thin, leaving us vulnerable in other parts of the world. We should deal with the potentially greater threat of North Korea first.
  • Without international support, an attack would make us look like an aggressive, reckless bully and would damage relationships with other countries. This could cost us dearly in the future when we engage in trade negotiations, deal with other conflicts, etc.
  • Our aggression might trigger other countries such as North Korea and Iran to seek WMDs, when they otherwise would not have.

Why we should attack now

  • If Saddam is not removed from power now, he might eventually succeed in his efforts to obtain nuclear (or similarly destructive) weapons, which could then be used against us either directly or indirectly (via terrorists, for example). And even if WMDs are never used, by possessing them Saddam could blackmail us.
  • Even without WMDs, if left in power Saddam is likely to continue his long pattern of mischief, including threatening/attacking neighbors and destabilizing a critically important region. We must protect our allies and oil supply.
  • Saddam may have ties to Al Qaeda and/or terrorist organizations and, even if he doesn't now, might develop them in the future.
  • We have such overwhelming military superiority that we will likely achieve our objectives quickly and at relative low cost to us -- and perhaps even the Iraqis.
  • By demonstrating our willingness to go to war to prevent Iraq from developing WMDs, we will deter other countries from seeking them.
  • By taking over Iraq and maintaining troops there, we will have an additional base from which to launch anti-terrorist activities (as we have been doing in Afghanistan) and apply pressure to the many other countries in the region that are acting contrary to our interests.
  • We must act now because it is expensive to keep hundreds of thousands of troops on Iraq's borders, the morale and readiness of our forces will diminish over time, and the heat of the summer will soon make warfare difficult.
  • The longer we wait, the more time Iraq has to prepare and build its defenses and learn our attack plans.
  • We will liberate the long-suffering Iraqi people.

For most stocks, one could also come up with numerous persuasive arguments for both sides of the issue. So how is one supposed to make a good decision in the face of so many valid yet conflicting arguments? I will address this question on Monday, and share further thoughts on the similarities between thinking about Iraq and investing.

Whitney Tilson is a long-time guest columnist for The Motley Fool. He owned shares of McDonald's at press time, though positions may change at any time. Under no circumstances does this information represent a recommendation to buy, sell, or hold any securities. Mr. Tilson appreciates your feedback on the Fool on the Hill discussion board or at The Motley Fool is investors writing for investors.