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jerryking : overconfidence   26

Can Trump Handle a Foreign Crisis?
Feb. 7, 2019 | WSJ | By Peggy Noonan.

He’ll face one eventually, and there’s good reason to worry the administration will be unprepared.

Someday this White House will face a sudden, immediate and severe foreign-policy crisis..... past and present officials of this administration are concerned on how the White House would handle a crisis......History resides in both the unexpected and the long-predicted. Russia moves against a U.S. ally, testing Washington’s commitment to Article 5 of the North Atlantic Treaty; a coordinated cyber action by our adversaries takes down the American grid; China, experiencing political unrest within a background of a slowing economy, decides this is a good time to move on Taiwan; someone bombs Iran’s missile sites; Venezuela explodes in violence during a military crackdown; there’s an accidental launch somewhere..... historian Margaret MacMillan said ....“I think we should never underestimate the sheer role of accident.”....Everything depends on personnel, process and planning. The president and his top advisers have to work closely, with trust and confidence, quickly comprehending the shape of the challenge and its implications. There must be people around him with wisdom, judgment, experience. They must know their jobs and be able to execute them under pressure. Clear lines of communication are key between both individuals and agencies.....keep their eyes on the million moving pieces, military and diplomatic, that comprise a strategy.......During the Berlin airlift, thought at the time to be the height of the Cold War, Secretary of State George C. Marshall, who’d been Army chief of staff during World War II, was asked how worried he was. “I’ve seen worse,” he replied. He had. ......“No administration is ready for its first crisis,” says Richard Haass, who was a member of George H.W. Bush’s NSC and is author of “A World in Disarray.” “What you learn is that the machinery isn’t adequate, or people aren’t ready.” First crises trigger reforms of procedures so that second ones are better handled. ......There is no way, really, to simulate a crisis, because you don’t know what’s coming, and key people are busy doing their regular jobs. And all administrations, up until the point they’re tested, tend to be overconfident. What can they do to be readier? Think, study, talk and plan.....For a modern example of good process, personnel and management, there is the Cuban missile crisis. .....the stakes couldn’t have been higher.......It might be good to have regular situation-room meetings on what-ifs, and how to handle what-ifs, and to have deep contingency planning with intelligence, military and civilian leaders discussing scenarios. “Put yourself in a position,” says Mr. Haass, “where you’re less unread when a crisis does occur.”.......Margaret MacMillan again: People not only get used to peace and think it’s “the normal state of affairs,” they get used to the idea that any crisis can be weathered, because they have been in the past. But that’s no guarantee of anything, is it?
adversaries  chance  contingency_planning  crisis  Donald_Trump  U.S.foreign_policy  JFK  Margaret_MacMillan  overconfidence  Richard_Haass  security_&_intelligence  unexpected  White_House  unprepared  accidents  Cuban_Missile_Crisis  luck  Peggy_Noonan  preparation  readiness  George_Marshall  normality  unforeseen 
february 2019 by jerryking
Ten Lessons from Michael Batnick’s Book ‘Big Mistakes’ – Ivanhoff Capital
The best way for investors to learn from mistakes is to let others make them, then read about it

In his first book, Michael Batnick outlines the big investing and trading mistakes of some of the most successful investors and brightest minds that are known to humankind. Most mistakes revolve around the same themes:
– being overleveraged and building too big positions in assets that were illiquid or suddenly became illiquid;
– venturing outside of expert zone when having to manage a much bigger amount of capital;
– overconfidence and hubris;
– normal mistakes that cannot really be prevented; they are part of the investing process;
– fear of missing out.
lessons_learned  mistakes  investing  investors  overconfidence  books  book_reviews  personal_finance 
june 2018 by jerryking
How to Spot and Overcome Your Hidden Weaknesses - The New York Times
By Tim Herrera
April 23, 2018

Dunning-Kruger effect: When people of low experience overestimate their own knowledge, qualities, and capabilities in relation to other people.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
So what can we do to stop embarrassing ourselves with, say, our awful French if we don’t know how awful it is? Research suggests two routes to enlightenment.

First, ask for feedback. It’s not easy, and it can sometimes be tough to hear, but outside input is crucial to shining a light on your blind spots. Here are some tips for getting and giving better feedback.

Second, keep learning. The more knowledgeable you are about something, the more you’re able to identify the gaps in your own understanding of it.....In a German study, eighty per cent of those surveyed described themselves as confident in their answers on a questionnaire, yet only forty-two per cent got even half the questions right. This is known as the Dunning-Kruger effect: people who don’t know much tend not to recognize their ignorance, and so fail to seek better information. No wonder, then, that the least knowledgeable people in the Atlanta Fed study were also the least likely to do research before getting a mortgage. By contrast, well-informed people are more likely to ask others for help. If financial education taught people only how little they actually know, it would accomplish quite a lot.......
blind_spots  continuous_learning  Dunning-Kruger_effect  feedback  hidden  ignorance  overconfidence  overestimation  self-awareness  tips  weaknesses 
may 2018 by jerryking
3 Ways to Improve Your Decision Making
Walter Frick
JANUARY 22, 2018

Rule #1: Be less certain.
Nobel-prize-winning psychologist Daniel Kahneman has said that overconfidence is the bias he’d eliminate first if he had a magic wand. It’s ubiquitous, particularly among men, the wealthy, and even experts. Overconfidence is not a universal phenomenon — it depends on factors including culture and personality — but the chances are good that you’re more confident about each step of the decision-making process than you ought to be.

So, the first rule of decision making is to just be less certain — about everything. Think choice A will lead to outcome B? It’s probably a bit less likely than you believe. Think outcome B is preferable to outcome C? You’re probably too confident about that as well.

Once you accept that you’re overconfident, you can revisit the logic of your decision. What else would you think about if you were less sure that A would cause B, or that B is preferable to C? Have you prepared for a dramatically different outcome than your expected one?

Rule #2: Ask “How often does that typically happen?”
....think about how long similar projects typically take....In general, research suggests, the best starting point for predictions ­— a key input into decision making — is to ask “How often does that typically happen?”
This rule, known as the base rate, comes up a lot in the research on prediction, but it might be helpful for the judgment side of decision making, too. If you think outcome B is preferable to outcome C, you might ask: How often has that historically been the case? ...The idea with both prediction and judgment is to get away from the “inside view,” where the specifics of the decision overwhelm your analysis. Instead, you want to take the “outside view,” where you start with similar cases before considering the specifics of your individual case.

Rule #3: Think probabilistically — and learn some basic probability.
The first two rules can be implemented right away; this one takes a bit of time. But it’s worth it. Research has shown that even relatively basic training in probability makes people better forecasters and helps them avoid certain cognitive biases....Improving your ability to think probabilistically will help you with the first two rules. You’ll be able to better express your uncertainty and to numerically think about “How often does this usually happen?” The three rules together are more powerful than any of them alone.

Even though these rules are all things you can start using relatively quickly, mastering them takes practice. In fact, after you use them for a little while, you may become overconfident about your ability to make decisions. Great decision makers don’t follow these rules only when facing a particularly difficult choice; they return to them all the time. They recognize that even seemingly easy decisions can be hard — and that they probably know less than they think
decision_making  pretense_of_knowledge  base_rates  probabilities  Daniel_Kahneman  overconfidence  biases  certainty 
january 2018 by jerryking
Navigating a Breathtaking Level of Global Economic Change
November 14, 2017 |The New York Times | by Andrew Ross Sorkin.
you’d think that any sense of “faith” in the global economy might be shaken, or at least, uncertain given events like North Korea, Russian interference in elections in the United States, post-Brexit Europe, and hurricane damage.

Not so.

In conversation after conversation with some of the nation’s top business leaders and chief executives last week, there is a stunning amount of genuine “confidence” in our economy here and, yes, even globally.

“I’m very surprised,” Laurence D. Fink, the founder of BlackRock, the largest money manager in the world overseeing some $6 trillion, said at The New York Times DealBook conference last Thursday, describing his new sense of optimism.......Mark Cuban, whose disdain for President Trump is so acute that he is considering running for president himself in 2020 as a Republican because it “means you get to go head-on with Trump right in the primaries — and so there’s nothing I’d have more fun doing.” Still, though, he said he believes the economy is in good enough shape that when it comes to investing in the stock market, “I just, you know, I just let it ride.”

Mr. Cuban, owner of the Dallas Mavericks, said he keeps a small amount of cash on hand as a precaution. “I keep a little bit, you know, as a hedge. I call it my ‘Trump hedge’ because you just never know.....Earlier in 2017, The Conference Board reported that chief executives’ confidence had reached 2008 pre-recession highs in the first quarter.....there are pockets of the economy that are causing anxiety. “The last two or three years have not been fun whatsoever,” Mickey Drexler, the chairman of J. Crew, said at the conference about the traditional retail business, which has been upended by Amazon and changes in consumer behavior. “It’s been miserable.” Those challenges are extending to mall owners and commercial real estate, too..... is the stock market a proxy for the economy of America?....“In the aftermath of corporate and public-sector disasters, it often emerges that participants fell prey to a collective form of willful blindness and overconfidence: mounting warning signals were systematically cast aside or met with denial, evidence avoided or selectively reinterpreted, dissenters shunned,” Roland Bénabou a professor at Princeton University wrote in a seminal work on confidence and groupthink. “Market bubbles and manias exhibit the same pattern of investors acting ’colorblind in a sea of red flags,’ followed by a crash.”
Amazon  Andrew_Sorkin  BlackRock  bubbles  CEOs  commercial_real_estate  consumer_behavior  confidence  denials  global_economy  groupthink  J._Crew  Laurence_Fink  manias  Mark_Cuban  market_crash  Mickey_Drexler  optimism  overconfidence  precaution  retailers  selection_bias  shifting_tastes  shopping_malls  warning_signs  willful_blindness 
november 2017 by jerryking
Why we find it hard to imagine and plan for worst-case scenarios
SEPTEMBER 14, 2017 | The Globe and Mail | WENCY LEUNG.

When it comes to facing the risks of large-scale disasters, whether it’s the threat of nuclear war, a terror attack, a hurricane or raging wildfire, many people have a hard time envisioning – let alone preparing for – worst-case scenarios.

"grab-and-go" bag:

water, space blankets, flashlights and batteries, a hand-crank radio with a charger for her cellphone, a stash of garbage bags ("They can be used for keeping people warm as well, by cutting holes for the heads," she says), first-aid kits, a spare pair of glasses, food packages, waterproof matches, an extra supply of her husband's medication, hygiene products (deodorant, wet wipes, hand sanitizer, toilet liners, dental floss, toothbrush, toothpaste), tissues and two decks of cards..... a rope, a shovel and two or three blankets in the car......When it comes to facing the risks of large-scale disasters, whether it's the threat of nuclear war, a terror attack, a hurricane or raging wildfire, many people have a hard time envisioning – let alone preparing for – worst-case scenarios......New Yorker journalist Kathryn Schulz writes in her Pulitzer Prize-winning feature on the likelihood of a large-scale Cascadia earthquake. "Where we stumble is in conjuring up grim futures in a way that helps to avert them." .....research on the evacuation of the World Trade Center in New York on Sept. 11, 2001....workers were concerned about leaving without the approval of their bosses.....delayed vacating the buildings to attend to last-minute tasks, such as gathering their personal items, making phone calls or shutting down their computers,.....people want to make a decision as a group, and then if some people can't join a group, they'll wait for that person, for example."......people can underestimate the danger they face and be overconfident in their ability to overcome it.......In their chapter of Risk Conundrums: Solving Unsolvable Problems...authors Howard Kunreuther, Paul Slovic and Kimberly Olson point out this kind of "availability bias" can make people underestimate the likelihood of a disaster before it occurs, and overestimate it afterward. Such thinking helps explain why people often buy insurance right after a disaster, but then cancel their policies after they've had several loss-free years. It's difficult to convince them that they should celebrate not having suffered any loss and still maintain insurance coverage......Socioeconomic or contextual factors, which include the level of an individual's trust in institutions, also play a role in how they perceive and react to risk..... there's no one-size-fits-all approach to encouraging the public to prepare for a disaster, he says. Warnings and preparedness efforts would be more effective if they were targeted to specific groups, based on the way they perceive risk.
worst-case  disasters  imagination  frequency_and_severity  9/11  denials  optimism_bias  availability_bias  books  one-size-fits-all  overconfidence  risk-perception  improbables  disaster_preparedness  conundrums  Pulitzer_Prize 
september 2017 by jerryking
From Michael Lewis, a Portrait of the Men Who Shaped ‘Moneyball’ - The New York Times
By ALEXANDRA ALTERDEC. 3, 2016
Lewis decided to explore how it started.

The inquiry led him to the work of two Israeli psychologists, Amos Tversky and Daniel Kahneman, whose discoveries challenged long-held beliefs about human nature and the way the mind works.

Mr. Lewis chronicles their unusual partnership in his new book, “The Undoing Project,” a story about two unconventional thinkers who saw the world differently from everyone around them. Their peculiar area of research — how humans make decisions, often irrationally — has had profound implications for an array of fields, like professional sports, the military, medicine, politics, finance and public health.....Tversky and Kahneman's research demonstrating how people behave in fundamentally irrational ways when making decisions, relying on their gut rather than available data, gave rise to the field of behavioral economics. That discipline attracted Paul DePodesta, a Harvard student, who later went into sports management and helped upend professional baseball when he went to work for Mr. Beane.....Unlike many nonfiction writers, Mr. Lewis declines to take advances, which he calls “corrupting,” even though he could easily earn seven figures. Instead, he splits the profits from the books, as well as the advertising and production costs, with Norton. The setup spurs him to work harder and to make more money if the books are successful, he says.

“You should have the risk and you should enjoy the reward,” he said. “It’s not healthy for an author not to have the risk.”
Amos_Tversky  Michael_Lewis  Moneyball  books  book_reviews  unconventional_thinking  biases  cognitive_skills  unknowns  information_gaps  humility  pretense_of_knowledge  overconfidence  conventional_wisdom  overestimation  metacognition  behavioural_economics  irrationality  decision_making  nonfiction  writers  self-awareness  self-analysis  self-reflective  proclivities  Daniel_Kahneman  psychologists  delusions  self-delusions  skin_in_the_game  gut_feelings  risk-taking  partnerships 
december 2016 by jerryking
The Dangers and Opportunities in a Crisis
October 7, 2012 | NYTimes.com | By HUGO DIXON, Hugo Dixon is the founder and editor of Reuters Breakingviews.

Wherever one turns — politics, business, medicine, ecology, psychology, virtually every field of human activity — people talk about crises. But what are they, how do they develop and what can people do to change their course?

The first thing to say is that a crisis is not just a bad situation. When the word is used that way, it is devalued. The etymology is from the ancient Greek: krisis, or judgment. The Greek Orthodox Church uses the term when it talks about the Final Judgment — when sinners go to hell, but the virtuous end up in heaven. The Chinese have a similar concept: The characters for crisis combine parts of those for danger and opportunity.

A crisis is a point when people have to make rapid choices under extreme pressure, normally after something unhealthy has been exposed in a system. To use two other Greek words, one path can lead to chaos; another to catharsis or purification.

A crisis is certainly a test of character. It can be scary. Think of wars; environmental collapses that destroy civilizations of the sort charted in Jared Diamond’s book “Collapse: How Societies Choose to Fail or Succeed”; mass unemployment; or individual depression that leads to suicide.

But the outcome can also be beneficial. This applies whether one is managing the aftermath of the Lehman Brothers bankruptcy, the current euro crisis, the destruction of an oil rig in the Gulf of Mexico or an individual’s midlife crisis. Much depends on how the protagonists act.

Students of crises are fond of dividing them into phases. For example, Charles Kindleberger’s “Manias, Panics, and Crashes: A History of Financial Crises” identifies five phases of a financial crisis: an exogenous, normally positive, shock to the system; a bubble in which people exaggerate the benefits of that shock; distress when some investors realize that the game cannot last; the crash; and finally a depression.

Although there is much to commend in Mr. Kindleberger’s system, it is too rigid to account for all crises in all fields. It also downplays the possibility that decision makers can change the course of a crisis. A more flexible scheme that leaves space for human agency to affect how events turn out has just two phases: the bubble and the crash......The bubble is typically characterized by mania and denial. Things are going well — or, at least, appear to be. Feedback loops end up magnifying confidence...............Manic individuals do not know their limitations and end up taking excessive risks — whether on a personal level or in managing an organization or an entire economy. As the ancient Greeks said, hubris comes before nemesis........But before that, there is denial. People do not wish to recognize that there is a fundamental sickness in a system, especially when they are doing so well........The ethical imperative in this phase is to *burst the bubble before it gets too big*. That, in turn, means both being able to spot a bubble and having the courage to stop the party before it gets out of hand [JCK: courage = "political will"] . Neither is easy. It is hard to recognize a sickness, given that there is usually some ideology that explains away the mania as a new normal. The few naysayers can be ridiculed by those who benefit from the continuation of the status quo.

What is more, politicians, business leaders and investors rarely have long-term horizons. So even if they have an inkling that things are not sustainable, they may still have an incentive to prolong the bubble.......The crash, by contrast, is characterized by panic and scapegoating. People fear that the system could collapse. Negative feedback loops are in operation: The loss of confidence breeds further losses in confidence. This is apparent on an individual level as much as on a macro one.

..Events move extremely fast, and decisions have to be made rapidly........The key challenge is to make effective decisions that avoid vicious spirals while not embracing short-term fixes that fail to address the fundamental issues. With the euro crisis, for example, it is important to improve competitiveness with structural reforms and not just rely on liquidity injections from the European Central Bank.[JCK: "structural change"]

In this phase, no one denies that there is a problem. But there is often no agreement over what has gone wrong. Protagonists are reluctant to accept their share of the responsibility but instead seek to blame others. Such scapegoating, though, prevents people from reforming a system fundamentally so that similar crises do not recur.[JCK: "systemic change"].....Crises will always be a feature of life. The best that humanity can do is to make sure it does not repeat the same ones. And the main way to evolve — both during a bubble and after a crash — is to strive to be honest about what is sick in a system. That way, crises will not go to waste.
blaming_fingerpointing  books  bubbles  catharsis  chaos  character_tests  clarity  crisis  dangers  decision_making  denials  economic_downturn  feedback_loops  Hugo_Dixon  individual_agency  Jared_Diamond  manias  market_crash  new_normal  opportunities  overconfidence  political_will  risks  scapegoating  short-sightedness  societal_choices  speed  structural_change  systemic_change  systemic_risks 
february 2015 by jerryking
Nokia a lesson for backers of Canada’s nanny state - The Globe and Mail
Oct. 17 2014 | The Globe and Mail | BRIAN LEE CROWLEY.

How did it all go so wrong? And what might Canada learn from Finland’s downfall?

One obvious conclusion is not to put all your eggs in one basket, but it goes well beyond that. There was a time when economic change worked slowly enough that you could get a generation or two’s employment out of an industry before it was overtaken by innovation. Detroit dominated automobile manufacturing for many decades before its own complacency and the innovativeness of European and Asian producers came into play. In a similar vein, Nokia allowed itself to believe in its own infallibility, and Finland meekly followed suit. But the forces of change are now so powerful and lightning fast that sometimes a single product release from a competitor can signal the death knell of a previously healthy company or industry....Canada is rife with industries with their heads stuck in the sand, almost invariably because they believe they can shelter behind a friendly bureaucrat with a rulebook.

Examples abound in fields as diverse as telecoms, dairy, airlines, broadcasting, taxis and transport. Could there have been a bigger farce than the CRTC’s attempt to manhandle online content provider Netflix?...The real lesson of Nokia’s demise was that there is no substitute for being driven by what customers want, which is quality products and service at the lowest possible price...Every deviation from this relentless focus on what customers actually want makes your market a tasty morsel for the disrupters.
concentration_risk  Nokia  Finland  mobile_phones  disruption  Netflix  Uber  CRTC  complacency  accelerated_lifecycles  protectionism  nanny_state  customer_focus  change_agents  Finnish  demand-driven  lessons_learned  automotive_industry  downfall  change  warning_signs  signals  customer-driven  infallibility  overconfidence  hubris  staying_hungry 
october 2014 by jerryking
Five questions to hone your business strategy - The Globe and Mail
HARVEY SCHACHTER
Special to The Globe and Mail
Published Sunday, Sep. 28 2014

1. Why does our business deserve to succeed?
2. What would a new CEO do?
3. Imagine it is three to six years in the future and the proposed strategy has been unsuccessful. Why did it fail?
4. What would have to be true for our strategy to succeed?
5. Would I put my own money into this?
strategy  business_planning  Harvey_Schachter  execution  effectiveness  assumptions  anticipating  questions  biases  overconfidence  self-delusions  skin_in_the_game 
september 2014 by jerryking
BlackRock’s Aladdin: genie not included - FT.com
July 11, 2014 | FT |By Tracy Alloway.
(Risk management technology is no substitute for investor instinct)
Aladdin is BlackRock's current, state of the art risk and order management system. Aladdin has been described as BlackRock’s “central nervous system” but what is less well-known is that the operating platform also acts as the brains at some 60 other financial firms which altogether handle a whopping $14tn worth of assets.

At banks, investment managers and trading outfits around the world, Aladdin’s genie is hard at work analysing portfolios, running stress test scenarios and generally employing BlackRock’s “collective intelligence” to perform a whole host of financial functions....the increasingly significant role that Aladdin and its 25m lines of code plays in the wider financial markets has, with notable exceptions, largely been overlooked....The role of these formulas or programs tends to go unnoticed but they often play two key roles in the build-ups to financial crises. Firstly they give investors and traders a potentially dangerous sense of control over risk. Second, as their use proliferates, they also encourage a build-up of “one-way” bets as investors increasingly come to rely on similar data and analysis.
BlackRock  Laurence_Fink  asset_management  pretense_of_knowledge  long-term  risk-management  Wall_Street  collective_intelligence  systemic_risks  order_management_system  algorithms  platforms  Aladdin  stress-tests  overconfidence  overlooked  false_confidence  scenario-planning  financial_crises 
july 2014 by jerryking
James Surowiecki: The Startup Mass Extinction : The New Yorker
BY JAMES SUROWIECKI
MAY 19, 2014

"Starting a company may be easier, but making it a success isn’t. Competition is fierce, profits are scarce, and venture capitalists aren’t generous when it comes to later stages of funding. As Gideon Lewis-Kraus shows in “No Exit,” a new Kindle Single about startup culture, the life of a new company is often brutish and short. Though we may be seeing a “Cambrian explosion” of new companies, as The Economist recently put it, there’s a mass extinction going on, too.

The fact that most new businesses fail is hardly a secret. So why are so many people gambling on ventures that are likely to end badly?
start_ups  biases  overconfidence  failure  James_Surowiecki  new_businesses  Cambrian_explosion 
june 2014 by jerryking
Finding Strength in Humility - NYTimes.com
November 15, 2013 | NYT | By TONY SCHWARTZ

When we identify with a particular strength, the opposite we’re avoiding is almost always negative. For confidence, it’s insecurity or self-doubt. But what happens when we overuse confidence? It turns into arrogance, hubris and even grandiosity. Any strength overused eventually becomes toxic. Excessive honesty becomes cruelty. Tenacity congeals into rigidity. Bias for action can overwhelm thoughtful reflection.

This is where positive opposites serve as a balancing and humanizing role. Humility comes from the Latin word “humilis,” which literally means “low.” It resides just a stone’s throw from “humiliation.” Sure enough, excessive humility eventually softens into obsequiousness and self-subjugation. False humility is even worse: a conscious manipulation covertly aimed at winning praise, often to compensate for unacknowledged feelings of inadequacy.

But genuine humility is a reflection of neither weakness nor insecurity. Instead, it implies a respectful appreciation of the strengths of others, a lack of personal pretension and a more relaxed sense of confidence that doesn’t require external recognition.

In a complex world that so plainly and painfully defies easy answers, humility is also an antidote to overconfidence. It gives leaders permission to accept and acknowledge their limitations, to learn from them and continue to grow and evolve.....I don’t need to say out loud that I value confidence and strength. I do need to demonstrate that I also value humility and vulnerability – to embrace these opposites. In the end, the less time we spend protecting our own value, the more time we can spend creating value in the world.
Managing_Your_Career  humility  opposing_actions  personality_types/traits  character_traits  strengths  contemplation  reflections  pairs  overconfidence  dual-consciousness  self-doubt  arrogance  hubris  grandiosity  confidence  insecurity  honesty  cruelty  tenacity  rigidity  toxic_behaviors 
november 2013 by jerryking
Tired of being dumb money? Here’s how to get smart fast
Mar. 29 2013 | The Globe and Mail | DAVID BERMAN.
First, ignore the herd. Retail investors get into trouble because they like to follow the market. They love stocks when they’re expensive and bull markets are in full swing, and loathe stocks when they’re cheap and the bear is growling. Do the opposite: As the saying goes, buy when there is blood in the streets.

Second, accept that you are not Mr. Buffett. Over-confident investors get themselves into trouble because they take on too much risk in the hope of scoring spectacular gains. Instead, diversify and aim for the unspectacular, perhaps with low-cost exchange-traded funds that track a basket of stocks.

Third, think long-term. Retail investors are prone to expect their investments to pay off in a big way immediately – and when they don’t, these investors switch tactics, often with dismal results.
investment_advice  personal_finance  contrarians  long-term  patience  Warren_Buffett  overconfidence  individual_initiative  smart_people  independent_viewpoints  bull_markets  ETFs  low-cost 
march 2013 by jerryking
Doug Saunders: Peak Oil? More like Peak Canada - The Globe and Mail
DOUG SAUNDERS

LETHBRIDGE, ALTA. — The Globe and Mail

Published Saturday, Nov. 17 2012
peak_oil  overconfidence  Doug_Saunders 
february 2013 by jerryking
Parting Shot - WSJ.com
September 25, 2000 | WSJ | By HAL LANCASTER.
Parting Shot
What's a recession? Perhaps it's time to remember
warning_signs  recessions  anticipating  checklists  overconfidence 
july 2012 by jerryking
Investing Ideas That Stand Test of Time
April 25, 2000 | WSJ | Jonathan Clements

These days I find I am left with just three core investment ideas:
(1) Financial Success is a Sense of Control
If you ask folks about their financial goals, they will likely offer a laundry list of goods they want to buy or announce they want to accumulate as much money as possible. But in reality,
both goals are a prescription for unhappiness.
Sure it might be nice to purchase everything that catches your fancy. But nobody has unlimited wealth, so a focus on endless consumption inevitably results not in happiness, but in frustration and financial stress. Yeah, it would also be great to have heaps of money. But if all you want is an even bigger pile of cash, you will never be satisfied, because you will never reach your goal. So what should you
shoot for? A far more worthy goal, I believe, is eliminating the anxiety that comes with managing money. You want to reach that sweet spot where you feel your finances are under control, no matter what your standard of living and level of wealth.

(2)Investing is Simple
No doubts about it, there are lots of investments and investment strategies that are mighty complicated. But complexity usually means investors are running the risk of rotten results and Wall Street is getting the chance to charge fat fees. Investing is best when it is simple. In fact, if you want to accumulate a healthy nest egg, there
isn’t much to it. First, you have to save a goodly amount, preferably at least ten percent of your pre-tax annual income. Second, you should consider investing at least half of your portfolio in stocks, even if you are approaching retirement. Third, you should diversify broadly, owning a decent mix of large, small and foreign stocks. Fourth, you should hold down investment costs, including
brokerage commissions, annual fund expenses and taxes. Finally, you should give it time. A little humility also helps. Don’t waste effort — and risk havoc — by trying to pick the next hot stock, identify the next superstar fund manager or guess the market’s next move. Instead, your best bet is to buy and hold a few well-run mutual funds.

(3) We are the enemy
If successful investing is so simple, why do so many people mess up? It isn’t the markets that are the problem, it is the investors.
We make all sorts of mistakes. We fret about the performance of each investment that we own, so we don’t enjoy the benefits of diversification. We are often overly self-confident, which
prompts us to trade too much and bet too heavily on a single stock or market sector. We
extrapolate recent results, leading to excessive exuberance when stocks are rising and unjustified
pessimism when markets decline. We lack self-control, so we don’t save enough.

[All the points made immediately above are analogous to Jason Zweig's article on personal finance & investing. From Benjamin Graham --investing is often portrayed as a battle between you and the markets. Instead, “the investor’s chief problem — and even his worst enemy — is likely to be himself.”

Similarly, Nobel Laureate Daniel Kahneman wrote in his book Thinking, Fast and Slow. [that]evaluating yourself honestly is at least as important as evaluating your investments accurately. If you don’t force yourself to learn your limits as an investor, then it doesn’t matter how much you learn about the markets: Your emotions will be your undoing.... ]

If you are going to truly be a successful and happy investor, it isn’t enough simply to devise
strategies that allow you to meet your investment goals. Your strategies also must give you a
sense of financial control and fit with your risk tolerance, so that you stick with them through the
inevitable market turmoil.
That may mean keeping more of your money in bonds and money-market funds. It could mean
paying for an investment advisor. It might mean scaling back your financial goals and accepting
that the kids won’t be heading to Harvard and that you won’t be able to retire early.
These sorts of choices aren’t foolish. What’s foolish is settling on investment strategies without
considering whether you can see them through.
personal_finance  investing  howto  ideas  goal-setting  Nobel_Prizes  money_management  Jonathan_Clements  financial_literacy  biases  humility  mistakes  self-awareness  self-control  proclivities  overconfidence  financial_planning  delusions  self-delusions  emotions  human_frailties  Jason_Zweig  extrapolations  risk-tolerance  recency  unhappiness  human_errors  bear_markets  sense_of_control  superstars  Daniel_Kahneman 
may 2012 by jerryking
How to Plan for a Successful Retirement: Think Slow - WSJ.com
April 9, 2012 | WSJ | By DIANE COLE
So Much for Snap Decisions
A Nobel Prize winner explains why one secret to a successful retirement is to think 'slow'

the message that Daniel Kahneman, psychologist and Nobel Prize winner, delivers in his new book, "Thinking, Fast and Slow."

Typically, he says, people rely on blink-of-an-eye judgments, driven by emotion and impulse, in navigating life—even when we should be thinking "slow," using reason, deliberation and logic to weigh our options.

WSJ: In your book, you discuss overconfidence as a common pitfall. What impact does that have?

MR. KAHNEMAN: Overconfidence is everywhere. We all have clear and certain beliefs, and our certainty is not impaired by the fact that other people hold contradictory beliefs. We just think they are biased.

When optimism and overconfidence come together, you get many mistakes. Optimistic estimates can in retrospect seem almost delusional. One example is that people end up paying about twice as much as they originally expected to pay for kitchen renovations.

DANIEL KAHNEMAN: 'We all have clear and certain beliefs, and our certainty is not impaired by the fact that other people hold contradictory beliefs.'
DANIEL KAHNEMAN: 'We all have clear and certain beliefs, and our certainty is not impaired by the fact that other people hold contradictory beliefs.' JON ROEMER
WSJ: Is there a way to keep our self-certainty from blocking out other evidence?

MR. KAHNEMAN: You can imagine yourself trying to make the case for your belief before a skeptical judge.

It is even better to try to construct the best possible case against your own position, because searching for arguments that support your position is unlikely to lead you to correct your mistakes.
book_reviews  decision_making  retirement  howto  personal_finance  planning  financial_planning  Daniel_Kahneman  gut_feelings  optimism  overconfidence  thinking_deliberatively  Nobel_Prizes  self-certainty 
may 2012 by jerryking
The rich make investing mistakes, too
March 21, 2011 | CTV News | THANE STENNER.

Overconfidence

Many wealthy investors overestimate their ability to understand the
markets. Some believe they can predict market movements; others think
they can beat the experts at stock picking. This can be an issue with
wealthy business owners, who sometimes assume business success
translates verbatim into investment success.

A young high-tech entrepreneur I met at a conference several years ago
is a case in point. Back in 2000, he sold his software company for over
$10-million. He subsequently made a substantial “angel” investment in a
single dot-com startup. He was confident he had a good read on the
company, its industry, and its management. Things did not work as
planned, and he lost a good chunk of the wealth he had built.
Thane_Stenner  high_net_worth  problems  investing  wealth_management  angels  start_ups  overconfidence  biases 
april 2011 by jerryking
Crovitz: Tsunamis of Information - WSJ.com
MAR. 21, 2011 |WSJ| L. GORDON CROVITZ. Hayek spoke of the
'pretense of knowledge,' and why disasters are worse than expected. In
this information-saturated era, we expect no surprises. Yet we are
constantly surprised. We have huge amounts of data, so we assume that
risks can be calculated & avoided. But we also have exceedingly
complex systems. Just as weather is too hard to predict more than a few
days out because of how many variables interact, it's hard to predict
other complex systems. Consider credit instruments during the financial
crisis, the global warming debate, or global epidemics. Thus an
earthquake & tsunami, even in technologically advanced Japan, can
kill tens of thousands, wipe out entire villages, & re-open
questions about nuclear power....some physical systems turn out to be so
complex that they resemble unpredictable social sciences more than the
certainties of simpler physical science....We need to learn how to live
with both new technologies & new uncertainties.
disasters  complexity  Friedrich_Hayek  L._Gordon_Crovtiz  natural_calamities  information_overload  data  uncertainty  surprises  overconfidence  pretense_of_knowledge  earthquakes  tsunamis  social_sciences  certainty  psychology  unpredictability  compounded  risk-assessment  physical_systems  CDOs 
march 2011 by jerryking
globeadvisor.com: Experts of wrong: Beware biases of people-in-the-know
August 11, 2010 | The Globe and Mail | HARVEY SCHACHTER
who reviews Wrong, By David H. Freedman,
Little Brown, 295 pages, $31.99. Wrong: is an all-out assault on
experts, and, perhaps more significantly, our mindsets, which give the
experts more licence than they deserve...." Freedman says, "expert
wisdom usually turns out to be at best highly contested and ephemeral
and at worst flat-out wrong."... " A key problem is what he calls the
certainty principle. Given an expert who equivocates on some approach
and an expert who is dramatically certain, we opt for the expert with
conviction. "... " We want advice that's simple, clear-cut, doubt-free,
universal in application, upbeat, actionable, and palatable, in the
sense of conforming to our predispositions rather than challenging those
biases. " " "We happen to be complex creatures living in a complex
world, so why would we expect answers to any questions to be simple?" "
book_reviews  David_Freedman  complexity  conformity  expertise  Harvey_Schachter  biases  pretense_of_knowledge  overconfidence  certainty  confirmation_bias  books  questions  predispositions 
august 2010 by jerryking
Op-Ed Columnist - Drilling for Certainty - NYTimes.com
May 27, 2010 | NYT | By DAVID BROOKS. "...the real issue has
to do with risk assessment. It has to do with the bloody crossroads where complex technical systems meet human psychology...we’ve come to depend on an ever-expanding array of intricate hi-tech systems. These h/w & s/w sys. are the guts of financial markets, energy exploration, space exploration, air travel, defense programs and modern production plants. These sys. which allow us to live as well as we do, are too complex for any single person to understand. (1) people can't
imagine how small failings can compound into catastrophic disasters. (2) people acclimate to risk (3) overconfidence in backup sys. and safety devices. (4) people match complicated technical sys. with complicated governing structures. (5) people tend to spread good news and hide bad news.(6) people in the same field suffer groupthink...Overlooks incentives that distort choices.
David_Brooks  oil_spills  complexity  risk-assessment  cognitive_skills  biases  Malcolm_Gladwell  certainty  overconfidence  psychology  incentives  catastrophes  groupthink  compounded  financial_markets  energy_exploration  space_exploration  air_travel  multiplicative  risk-perception  optimism_bias  risk-acclimatization  Richard_Feynman  cumulative  bad_news 
may 2010 by jerryking
Israeli Spy Had Snares Like 'Honey Trap' - WSJ.com
JULY 22, 2009 | Wall Street Journal | By STEPHEN MILLER. Obit
for Meir Amit 1921 - 2009. And to Mr. Amit, success could breed failure.
He believed the 1967 victory, for example, spawned a dangerous
complacency. "After the war we succumbed to the disease of arrogance, of
'We know better, we are the best, far above the others,'" he once said.
Shai Tsur, Mr. Amit's grandson, says his grandfather believed "the
failure of the 1973 war, especially on the part of military
intelligence, was a direct product of this 'konseptziya,'" the idea that
Israel was so strong that its neighbors would never attack.
Israeli  Mossad  security_&_intelligence  1967  obituaries  spymasters  spycraft  Six-Day_War  complacency  overconfidence 
november 2009 by jerryking
Five Things I've Learned From Andy Grove - America's Business (usnews.com)
November 06, 2006 01:00 PM ET | Rick Newman

(1) The most enduring power comes from knowledge, not from status.
(2) Knowledge helps you know when it's time to change.
(3) Certainty is deadly.
(4) Fear is highly motivating
(5) Even geniuses make mistakes.
profile  lessons_learned  Intel  Andy_Grove  overconfidence  life_skills  fear  mistakes  uncertainty  pretense_of_knowledge  certainty 
april 2009 by jerryking

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