Daniel Kahneman: the day Saddam Hussein was captured, the same news "explained" both the bond market going up and going down.
Treasuries rose - Bloomberg's headline said the capture made the world safer. Half an hour later treasuries fell -the new headline said the capture boosted appetite for risk.
Same event, opposite stories. The market moved first; the pundits reverse-engineered a reason. That, he says, is how financial commentary actually works.
"Our confidence comes from the coherence of the story - not the evidence behind it."
"The conclusion comes first. Then we believe the arguments that support it."
"System 1 is largely indifferent to the quality and amount of evidence."
~55 min, free. why the market's "explanations" are stories told after the fact ↓
Daniel Kahneman - the psychologist who won a Nobel in economics - spent his life proving one thing: your confidence is lying to you
A bat and a ball cost $1.10. The bat costs $1 more than the ball. The answer "10 cents" jumps to mind instantly. It's wrong (it's 5 cents) - and ~50% of students at Harvard, MIT and Princeton say it without checking.
That gap is his whole point: the fast, intuitive mind builds a clean story from almost nothing, and the feeling of certainty has nothing to do with being right.
"Confidence is a feeling, not a judgment."
"Stock pickers can't develop intuition - there isn't enough regularity for it to form."
"You can build a very coherent story out of very little information."
~45 min, free. how your mind fools you - from a man who studied it for 50 years ↓