While you might reasonably assume from the subject of this message that I am speaking of my perennial weight loss resolution, the suggestion may be more significant to you after you read further. As 2017 draws to a close and markets touch new highs, one of my favorite bloggers just posted an article addressing the greatest villain to investing – our human biases.
You can read the full article here.
Some of the highlights from Seawright’s article include:
- The general problem manifests itself most often in three ways, victimizing advisors and their clients alike. Oh, and it applies to life in general, too. We often do what we want to the detriment of what we need.
- We do what is easy instead of what is right.
- We feed our short-term impulses rather than our long-term interests.
- There are no easy remedies for our shortsightedness.
- Jason Zweig’s (another favorite writer) sage observation is the worst bias is the one you don’t know about.
- In the immortal words of Pogo, “we have met the enemy and he is us.” However we don’t seem very willing to try to do very much about it.
- Information may be cheap in that we can essentially carry around all of the world’s knowledge in our pockets, but it is information that fails to inform – instead, it is primarily weaponized for tribal conflict – making meaning expensive and elusive.
- Seawright points out that Yale’s Dan Kahan explains, “What people ‘believe’ … doesn’t reflect what they know. It expresses who they are.”
- We find what we’re looking for most of the time, but typically we’re not looking for the right things.
- Finally, as Nobel laureate Daniel Kahneman says, “You are going to be more accurate and produce more accuracy by leaning against the biases.”
Although, human nature and human behavior are not likely to change anytime soon, the first step in recovery is admitting you have a problem. Happy New Year.
Steve Lockshin, Principal