Tuesday, May 10, 2011

Invest Wisely

Sunday evening I finished reading Why We Make Mistakes by Joseph T. Hallinan.  It is a study of human behavioral patterns involving decision making and judgmental errors.  While it is a short read Mr. Hallinan packs in tons of information based on surveys and clinical research.  I have to say it was a fascinating read.

One area that Hallinan shines a light is stock market investing.  Researchers discovered that moderately informed novices are no worse at forecasting price trends than seasoned and highly trained experts.  Even the prospect of higher commissions did not improve the success rate for the professional stock brokers.  This is not to say that the hotshot traders were unmotivated by increased income potential.  After all, cash is the name of that game and the measure of success. 

The research illustrated that an overload of information can lead to overconfidence and an overestimation of self.  We trick ourselves into believing we are smarter than we actually are.  We believe we are capable of more than our abilities.  Overconfidence instills a sense of bravado.  All this creates an additional inflated sense of value.  This is where we falter.

Hallinan's summation is that the only commodity we truly possess is time.  Information is flawed.  Perspective is skewed.  The value of information is based upon the intent of the deliverer and the perspective of the receiver.  It is impossible to know everything.  We see as they want us to see.  The person providing the information knows this and presents the information as it best suits his purposes.  We can only judge a situation or course of action based on what we are allowed to know.

There is a tipping point in the information overload.  At some point you can ease off the pedal or back away before enough becomes too much.  This is true in athletic training.  

It is also true with relationships.

Invest your time wisely, or your losses may be costly.

1 comment:

  1. Awesome. Now I need to put that book on my kindle. :-)