“Wisdom acquisition is a moral duty. It’s not something you do just to advance in life. As a corollary to that proposition which is very important, it means that you are hooked for lifetime learning. And without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know.”
"So it has come to this. The global biodiversity crisis is so severe that brilliant scientists, political leaders, eco-warriors, and religious gurus can no longer save us from ourselves. The military are powerless. But there may be one last hope for life on earth: accountants."
Back in the Thirteenth Century, when Venice ruled the waves, we can find the origins of modern capitalism. Back then the portents were vague, but the invention of bookkeeping and the introduction of Arabic numerals foreshadowed a revolution based on the stunningly original idea of being able to figure out whether or not your business was making a profit."Investing is hard. It is hard for everyone, including the most successful investors in the world. Nevertheless, investing is one of those adult responsibilities we all need to come to terms with.”
Trying to understand the amorphous creature that is the
financial blogosphere is an exercise as hopeless – and as pointless – as the
quest for the Holy Grail. We don’t know
what it is, we don’t know what it does and if we ever found it, we wouldn’t recognise
it."In physics there may one day be a Theory of Everything; in finance and the social sciences, you have to work hard to have a usable Theory of Anything."
Way back in ’76, when heels were high, flares were wide and hair was long (for the men, at least) a couple of dudes called Michael Jensen and William Meckling proposed a solution to a problem that had vexed even the founders of economics. They attempted to resolve a puzzle that started with Adam Smith and which has ended in the crash to end all crashes; and as ever we’re looking at a set of consequences which was unforeseeable in advance but seems inevitable in retrospect.
For those of us interested in how people manage to behave oddly in the face of anything to do with finance, these recent years have been good, as a range of intelligent books have been published on the topic. From Freakonomics and Predictably Irrational to The Undercover Economist and Nudge, plus a whole host of imitative single word follow-ons, we’ve been treated to real economists demonstrating a hitherto unforeseen talent for communicating with the unwashed masses. Nonetheless, despite this, there is still no better introduction to the subject of behavioral psychology than Irrationality, by Stuart Sutherland, even though it originally dates from 1992. “Well here, again, Cialdini does a magnificent job at this, and you’re all going to be given a copy of Cialdini’s book. And if you have half as much sense as I think you do, you will immediately order copies for all of your children and several of your friends. You will never make a better investment.”; Charlie Munger on The Psychology of Human Misjudgement.
A World Too Complex
Many of the great mistakes of history, including the problems financial markets have continualy re-experienced, have been caused by a basic error of judgement – the idea that it’s possible to define, plan and control the outcomes of the world around us despite the rampant uncertainty we daily take in our strides. So instead of relying on expert judgement and feeling our way carefully towards outcomes we’ve found ourselves traduced by people with tunnel vision and a strong but unjustified confidence in their ability to navigate unerringly to a correct solution, whatever that might be.
