MICHEL PIREU: Fear of the human mind’s foibles can keep investors awake at night
Self-interest, tribal identity and ignoring the past are some of the biases that afflict investment
There are several things that analysts and experts have said over the years that sometimes keep me awake at night: There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. — Jesse Livermore Everything’s been done before. Circumstances change, characters change, the theories and the tools might change but the outcomes remain pretty much the same. As historian Niall Ferguson likes to point out: "The dead outnumber the living 14 to 1, and we ignore the accumulated experience of such a huge majority of mankind at our peril." That applies to investors. The biggest lesson from those who’ve come and gone is that they tried everything we’re trying today. They tried to catch the top. They swung from pessimism to optimism at the wrong time. They battled unsuccessfully against reversion to the mean. They learned that following the crowd can turn out to be the most danger...
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