{"id":2535,"date":"2007-10-19T16:15:00","date_gmt":"2007-10-19T16:15:00","guid":{"rendered":"http:\/\/127.0.0.1\/site\/2017\/2\/1985\/was_it_a_black_swan_day\/"},"modified":"2007-10-19T16:15:00","modified_gmt":"2007-10-19T16:15:00","slug":"was_it_a_black_swan_day","status":"publish","type":"post","link":"https:\/\/kendallharmon.net\/?p=2535","title":{"rendered":"Was it a Black Swan Day?"},"content":{"rendered":"

Today is the 20th Anniversary of Black Monday<\/a>. Joe Nocera had some interesting thoughts on this here<\/a>, including this:<\/p>\n

Having watched the way investors have behaved since the Crash of ’87, I’ve come to believe that most human beings are simply not hard-wired to be good investors. In the 1990s, a new kind of economics arose, called behavioral economics, which tried to show that investors weren’t so rational after all. So I can’t deny that one of the reasons I like Mr. Zweig’s book so much is he provides, at last, a scientific basis for this theory. It turns out that there is a new discipline called neuroeconomics, which combines biology, psychology and economics and tries to understand why we make the often foolish financial decisions we make.<\/p>\n

The central finding, as Mr. Zweig put it, is that ”the brain is not an optimal tool for making financial decisions.” The part of our brain that tells us to act like rational investors tends to be completely overtaken by much more powerful emotional impulses — impulses, Mr. Zweig writes, ”that make us human.”<\/p>\n

He’s got a million examples. ”Humans,” he writes, ”have a phenomenal ability to detect and interpret simple patterns. That’s what helped our ancestors survive the hazardous primeval world, enabling them to evade predators, find food and shelter and eventually to plant crops in the right place at the right time of year.” But, he adds, ”when it comes to investing, our incorrigible search for patterns leads us to assume that order exists where it often doesn’t.”<\/p><\/blockquote>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Today is the 20th Anniversary of Black Monday. Joe Nocera had some interesting thoughts on this here, including this: Having watched the way investors have behaved since the Crash of ’87, I’ve come to believe that most human beings are…<\/span><\/p>\n

Read more ›<\/a><\/div>\n

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