... how about we look at the forest instead of all the trees?
If one were to use a 2% withdraw rate (let's say $30,000/year on $1.5MM) he/she would be able to withdraw the same amount of 50 years if the portfolio does nothing more than match inflation (i.e. 0% real growth). Even at -1% real growth (about what you'd get putting all $1.5MM into today's dismal savings accounts) it would still last you 41 years.
Essentially, using a 2% WR you are betting that real-adjusted returns will be 0 (or worse) for decades.
a 2% withdraw rate seems pretty stupid, doesn't it?
Your argument makes sense, but it oversimplifies the situation by ignoring sequence of returns risk. The problem with arguments like this is that whether someone runs out of money or not isn't purely determined by their starting money, spending, and
average real growth. The order that the individual returns come in matters, not just the average. Every investment with real growth on average also has years with losses and those portfolio losses hurt much worse in the early years after your retirement. For instance, if you withdraw at 2.5%, your money lasts 40 years if you get 0% real growth every year. If instead you lose 60% of your portfolio in the first year and then have 5% real growth for every year after that, you have around a 1% annualized real growth rate for a 28 year period, so you might think your money would last longer than 40 years. But in fact, this sequence of returns will leave you penniless at the end of those 28 years. The high returns in the successive years of retirement aren't enough to make up for the one terrible loss. In case you think that by using the first year, I'm just reducing the starting investment, you do just as poorly if the drop is in the 3rd year if it is a 65% loss with all other years getting 5%.
Of course, big drops in the US stock market have typically been followed by spectacular rebounds, so you won't find a year in US history where someone would have lost 60% of their investment in a single year (at least not if they are diversified). But the authors of this paper make the point that in other countries, the rebound hasn't always been a given, so it may be worthwhile to consider how your withdrawal rate would have fared in other countries (countries that haven't been on a spectacular rise to become a superpower over the last century). Even if someone thinks that they can avoid this risk by not investing in stocks, there have been other countries where runaway inflation would cause you to have a 60% real loss even if you were in "safe" investments like CDs. I'm not saying that these scenarios are likely for the US, but they are certainly possible, so I don't think a 2% withdrawal rate sounds stupid.
I'm not saying everyone (or even most people) should use a rate this low, but you do reduce your risk of outliving your money by reducing your withdrawal rate. Whether the risk reduction is worth the cost is a decision for each person to make themselves. I will probably still target a higher rate like 3.5%, but I do that knowing that if I have catastrophic losses early in my retirement, I may need to greatly reduce spending or return to work.