Behavioral Bias 101: #3 Curse of Knowledge

Know What?

We're often told that knowledge is power. However, in reality, knowledge may be unexploitable leading to the paradoxical situation that high quality goods get overpriced and low quality ones underpriced. Insiders, it turns out, are often burdened by the curse of knowing too much.

Part 3 of 101 Ways To Lose Money

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Behavioral Bias 101: #2 Wishful Thinking

Permanently High

Famously the economist Irving Fisher predicted that stocks had reached a "permanently high plateau", just before the Wall Street Crash. He was talking his own book, having loaded up heavily in stocks. Fisher was engaged in wishful thinking, a cognitive bias that's rife among investors, a notoriously optimistic bunch when it comes to expecting the downright improbable.

Part 2 of 101 Ways To Lose Money

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Behavioral Bias 101: #1 Illusory Pattern Recognition

The Man In The Moon

Pareidolia’s that odd moment where you perceive a familiar pattern where none actually exists: it’s the man-in-the-moon, the elephant in the clouds, a religious figure in a pastry. Pareidolia is a specific form of pattern recognition; the human brain is hard-wired to see faces in things, presumably to ensure that babies attend more to other people rather than random bits of plastic.  More generally, though, pattern recognition is critical to human functioning, but has a nasty tendency to go wrong.

Part 1 of 101 Ways To Lose Money

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