MICHEL PIREU: Humanity’s universal tendencies hold lessons for Homo investicus
Our shared tendencies and aversions can dictate how we approach money and markets
Although we exhibit lots of individual and cultural variations, humans are animals. Like all animals, we have idiosyncrasies, quirks and characteristics that distinguish us as a species. Anthropologists have identified many "human universals" — ways of thinking, feeling and acting that are shared by all people everywhere. Here are a few investors might want to remember: High achievers tend to underestimate their talents, while underachievers overestimate theirs. David Dunning at Cornell University and his graduate student Justin Kruger wanted to know why some people mistakenly assess their abilities as being much higher than they actually are. In one study, they asked undergraduate students a series of questions about grammar, logic and jokes, and then asked each student to estimate his or her score overall, as well as their relative rank compared with the other students. Students who scored the lowest in these cognitive tasks always overestimated how well they did — by a lot. This ...
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