Thinking Fast and Slow
We have recently been enjoying ‘Thinking Fast and Slow’, a book by Daniel Kahneman. The book attempts to synthesise how humans make decisions. Of particular interest was the way in which the author used his vast experience to study how humans make financial decisions. Daniel talks about a variety of problems: overconfidence when making financial decisions; that financial markets are largely random; and that optimism is fine but only if you do think in a probabilistic way. At MASECO, we consider investment decisions in a probabilistically, and rely on that framework to make good quality investment decisions. This means we minimise the behavioural biases that affect all of us. We have included a link to an interview with Daniel Kahneman recently published in the CFA Institute magazine and an article by Michael Lewis in Vanity fair to give you an insight into the concepts.