It’s Not Different This Time

The Smoking Cigar of Behavioural Bias

Not all failures of investment logic are based in human psychological flaws but, to paraphrase Freud, although sometimes a cigar is just a cigar mostly it’s behavioural bias. The smoking gun is almost invariably linked to people doing predictably stupid things. Like building shacks on earthquake fault lines, thinking they can banish risk with a spreadsheet and regarding the lessons of history as too remote to be interesting.

Sadly the fact that these things are predictable doesn’t make them any less easy to deal with. Our current set of financial woes is a wonderful test bed for those inclined to point to the short-termist biases inherent in the human conditions. We’d do well to enshrine these lessons in our systems now, because it won’t be long before we’ll start to forget.

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Investing In The Rear View Mirror

Time’s Arrow

If we were granted the ability to reverse time’s arrow in order to replay history it’s highly unlikely that the world as we know it would recreate itself. The chances of humanity being here at all are so remote as to be infinitesimal. Our survival is a miracle, the chances of it happening again remote.

Basically, if we were to rewind and replay the video tape of history almost any prediction we might make would almost certainly not come true. And this process continues today – the world is too complex, too contingent, too damned unpredictable to allow for any trustworthy view of the future. Which is why people who think they can predict the course of macroeconomics are wishful thinkers, not serious investors.

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The Media, Fear and Stockmarket Manias

Breast Cancer

If I were to ask you at what age are women most at risk from breast cancer, what would you answer? Write down what you think. Or, at least remember carefully. We don’t trust our memories around here.

I’ll come back to that later.

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