MICHEL PIREU: Fortune will favour the cool heads
Fear of the unknown post-Covid-19 may lead many investors into ‘probability neglect’ — and make them fail to see the silver lining of the cloud
As Daniel Kahneman explains: “To compute probabilities you need to keep several possibilities in your mind at once. It’s difficult for most people. Typically, we have a single story with a theme. People have a sense of propensity, that the system is more likely to do one thing than the other, but it’s quite different from the probabilities where you have to think of two possibilities and weigh their relative chances of happening.”
Which might explain why so much investment advice feels inadequate, especially with respect to markets, when the possibilities are almost infinite; and why, when we find ourselves in an investment milieu that is as unfamiliar as the one we’re in now, we simply feel lost, unsure of what to do next...
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