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2021/5/21 Why you shouldn't buy Bitcoin when you're hungry - Texas News Today
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Why you shouldn’t buy Bitcoin when you’re hungry � johnpaul • 4 hours ago
You are not an investor. You include a large number of investors.
Losing money is not the same as making money. Ask the people who beat
Bitcoin this week. It s̓ also calm, restful, well-nourished, and doesnʼt invest
as much as if youʼre upset, tired, hungry, or bored. You can also make
different investment decisions in the evening and in the morning.
SHOP NOW
Business
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An important new book by Daniel Kahneman, Olivier Siboney and Cass
Sunstein, “Noise: Imperfections in Human Judgment,” makes decisions by
people and organizations far more inconsistent and volatile than we think. It
shows that. All investors need to take that into account. Otherwise, your
long-term consequences will always be hostage to short-term whims and
situations.
How does this book define noise? It is a deviation of judgment that must be
the same. Noise is mainly present in people. You and I can see the same
facts and interpret them differently. It also exists in each of us. Stocks that
you think are at risk on Thursday can rest assured on Friday, even if prices
donʼt change.
You may also not notice it.
“Noise is a statistical phenomenon,” Kahneman tells me. “To see it, you need
to use the same information to make multiple decisions about the same
case, and such situations are extremely rare.”
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Screening time
The frequency with which doctors request cancer screening and the likelihood that patients will follow up will vary depending on the time of day.
Breast cancer screening *
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Doctors are 15 percentage points more likely to order breast cancer
screening for patients who see it first thing in the morning than just before
lunch.
Although consistent explanations have been given for fictitious crimes, 208
federal judges differed in their recommended length of imprisonment by an
average of more than 3.5 years.
These experts rarely understand how noisy their decisions are unless
someone measures them. The investment is equally full of unwanted,
undetected fluctuations.
In a recent survey in South Africa, 200 financial planners saw fictitious
customer descriptions. Various advisors recommended “very low” or “very
high” levels of risk for the same person, with equity exposures ranging from
0% to 100%.
Previous studies have also found that there are embarrassingly wide
variations of financial advice for the same client. Even experts who claim to
follow the rules for choosing stocks may not know how far they deviate from
their own guidelines and often deviate from them.
The idea that the judgment of the same information depends on the
individual, the passage of time, and the situation is not new. It has been
documented by psychologists in dozens of studies dating back to the 1960s,
with venerable people such as “in the eyes of the viewer,” “measure twice,
cut once,” and “sleep on it.” It is the basis of the wisdom of.
What s̓ new here is a deeper discussion of where the noise comes from.
Newsletter registration
Intelligent Investor
Jason Zweig writes about investment strategies and thinking about money.
Some analysts and investors are more optimistic because of their
temperament, training, or both. Others, more pessimistic. They will draw
dramatically different conclusions. This is what the author calls “level” noise,
or a permanent deviation from the average opinion of many.
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Individuals may also differ from their own typical view. You may tend to be
more bullish than average, but there is a pattern that gets particularly
enthusiastic every time a company announces a new product or Elon Musk
tweets. That s̓ what Professor Kaneman and his colleagues call “pattern”
noise.
Finally, there comes the “occasional” noise caused by the random changes
in mood, situation, and what happened to get your attention. Reading about
natural disasters increases your chances of temporarily avoiding risk. As with
many GameStop owners, being angry may lead to more purchases of falling
assets. Co., Ltd.
Stocks and Dogecoin will tell you.
Professor Kahneman, a psychologist, received the Nobel Prize in Economics
in 2002. (Before joining the Wall Street Journal, he helped research, write,
and edit his previous book, Thinking, Fast and Slow, for two years. Mr. Sibony
teaches at the HEC Paris Business School. Former management consultant,
Sunstein is a professor at Harvard Draw School.
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A new book, co-authored by psychologist Daniel Kahneman, shows that decisions made by people and organizations are far more inconsistent and volatile than we think.
Photo:
Benedict Evans of The Wall Street Journal
Ask Professor Kahneman if the opposition to noise is quiet, he says no. “The
opposite of noise is discipline. It s̓ about doing things in a rational way and
organizing your thoughts as deliberately as possible.”
Method is as follows.
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•• The first impression is dangerous. Later information will be interpreted in
a way that is consistent with what you happened to learn at the beginning,
distorting your final decision. To counter this, use a checklist to organize the
questions and the evidence to answer them in the same order each time.
Share your thoughts
What process do you use to improve your decision making? Join the
conversation below.
•• Divide the decision into components. Suppose you value your stock
based on innovation, financial strength, customer loyalty, and quality of
management. Rank each dimension independently of the other dimensions
using a numeric scale from 0 to 5. Whenever possible, compare with
industry average and long-term historical data. It helps prevent one good
quality from casting the halo over everything else.
•• Get multiple opinions. You can ask different people the same question, or
you can ask the same question at different times. The average response
definitely reduces noise, says Kanemann.
Donʼt tell the person giving the second opinion what the first opinion was.
Just present the facts. Are you sleeping on it? Then wait as long as possible
(a few weeks if possible) and run the checklist again without looking at the
original answer.
In a noisy world, discipline is your greatest asset.
Write to Jason Zweig (intelligentinvestor@wsj.com)
More from Intelligent Investors
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