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« The Outcome Bias | Main | The Sector Update -- Current Recommendations »

September 12, 2007

Comments

TheDebtDarling

This is absolutely correct. A little knowledge, especially when it comes to investing your money, can be a huge mistake.

Genomik

When I saw John Stewart just roasting the bow tie host of Crossfire it reminded me of this (watch it on Youtube - hilareous). He said that Crossfire exemplified all that is wrong with Democracy cos they get two opposing viewpoints that each need to stake out a extreme position and argue for them whereas the true answer (in politics) is usually in the middle. Much business analysis seems similar - bull and bear. So where are the confidence limits set? That is hard to answer, some ranges should be narrow and other large. Maybe a goal should be for individuals to assess if the ranges on a topic should be narrow or broad. History is another topic that people often use that I think is useless. The future often does not follow from the past. Check out the Black Swan for some bias trippin.

Maybe there needs to be a comedy show like the Daily show for business. CNBC....Fox....others.... there's an idea.

John Bougearel

Your point is well taken about the reader's capacity for misinterpretation and the limits of the experts ability to communicate insights garnered from years of experience and study.

oldprof

I listen to NPR and I read the NYT and the Washington Post. I find myself increasingly distressed by the investment recommendations from these sources....

Jeff

Bill aka NO DooDahs!

Trusting expertise blindly is a good way to wind up paying for the replacement of your "muffler bearings."

I could also make a list of things that experts were wrong about throughout history - but I don't have enough time.

There is a balance that must be struck, not all expertise comes with designations, and not all designations come with expertise.

Tim

Jeff, you are on a streak this week. Another though provoking post. My background is in sales and as much as buyers think rationally about buying something, the final decision is primarily an emotional decision. I think most of our investment decisions are emotional and we look for information to back up our "feelings" on the securities we buy and sell. Then we factor in the fear and greed of the market as a whole and it is tough for any individual to stay rational about these decisions. Keep up the good work, I "feel" some good momentum starting here with the info you are putting out and I hope the blog reading investors are catching.

RB

Practically everyone is a climatologist too. The first time I did a test similar to this one
http://advisors.loringward.com/invEmotionsLit/OverconfidenceBias.pdf
I got all questions wrong. At least on this one, I answered six out of ten correctly.
On the next one, I think I will have calibrated myself further for confidence intervals :).

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