In times like these, when everyone is bullish and feeding on excesses (even Twitter decided to move towards excess of 240 chars), here is a set of some earlier 140 chars, which make one hell of a read. You see, the biggest enemy of your investments is…
…you. And it inflicts the damage by twisting your mind with biases in a way that you can’t think clearly and fail to make rational decisions.
I don’t need to expound on it. Some wonderful writers, authors and ‘giants’ have already done that. One of such beings is Jason Zweig, one of the most read financial columnists.
He also wrote a must read book “Your Money and Your Brain – How the new science of Neuroeconomics can make you rich“.
As I see it, the word “rich” is not just about material wealth but also the richness of being an individual.
While you get that book, I am sharing this wonderful set of retweets (of his own tweets) he did recently. All your biases in one sheet. Reproduced here:
Confirmation bias says people tune out evidence that they might be wrong. That’s so ridiculous I’m not even going to bother disproving it.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economists say people are bad at estimating probabilities. Haven’t they ever noticed somebody wins Powerball almost every week?
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economics says humans are overconfident. I’m 100% certain that’s true for everybody else; me, I’m not so sure about.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
I showed a lot of recency bias in the past few days, but not so much before that. So I don’t think I’ll be making that mistake again.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economics says ~80% of people are prone to anchoring. That sounds high to me; 75% to 78% seems about right.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
When I look back, I see myself committing hindsight bias all the time.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economics says people are impatient and myopic. I could explain that to you, but I gotta run.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economics says people are too optimistic. Ha! Just you wait till Facebook buys my great new scratch-n-sniff app for $10 billion.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economists say people are prone to status-quo bias. But all my investments are already perfect. Why would I want to change?
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Of course I ignore sunk costs. I’ll prove it to you after I finish the Ph.D dissertation I’ve been working on since 1982. I’m almost done.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economists say people overreact to fluctuations in the stock market. That’s nonsen–WHAT DO YOU MEAN, THE DOW IS DOWN 150 POINTS?
— Jason Zweig (@jasonzweigwsj) October 27, 2015
Behavioral economists say people rely too much on small data samples. Well, I know at least 3 people who’d never do that: me, myself and I.
— Jason Zweig (@jasonzweigwsj) October 27, 2015
How much of that sounds like you? Have a great day!
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