"Cognitive Biases Tricking Your Brain" (The Atlantic, Sept 2018)

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
ResearchMed
Posts: 7494
Joined: Fri Dec 26, 2008 11:25 pm

"Cognitive Biases Tricking Your Brain" (The Atlantic, Sept 2018)

Post by ResearchMed » Sun Aug 19, 2018 12:56 pm

I just came across this, and it starts with a financial example:

https://www.theatlantic.com/magazine/ar ... as/565775/

It seems to be available without a paywall.

RM
This signature is a placebo. You are in the control group.

HEDGEFUNDIE
Posts: 1000
Joined: Sun Oct 22, 2017 2:06 pm

Re: "Cognitive Biases Tricking Your Brain" (The Atlantic, Sept 2018)

Post by HEDGEFUNDIE » Sun Aug 19, 2018 1:01 pm

I’m not sure if that experiment is a great example of present bias. Perhaps people know that waiting a month provides the higher return, but maybe they are cash strapped and need that money now.

Would be better if they did the experiment only with rich people.

ResearchMed
Posts: 7494
Joined: Fri Dec 26, 2008 11:25 pm

Re: "Cognitive Biases Tricking Your Brain" (The Atlantic, Sept 2018)

Post by ResearchMed » Sun Aug 19, 2018 1:05 pm

HEDGEFUNDIE wrote:
Sun Aug 19, 2018 1:01 pm
I’m not sure if that experiment is a great example of present bias. Perhaps people know that waiting a month provides the higher return, but maybe they are cash strapped and need that money now.

Would be better if they did the experiment only with rich people.
Also, that $30 in the first example isn't all that much for most people.
At least for us, if it was enough of a difference to, well, make a difference... we'd no doubt react, er, differently.
(Isn't that what most of us do with retirement savings? That delay is certainly hoped to make a major difference.)

But the issue of "cognitive biases" is important to recognize.

RM
This signature is a placebo. You are in the control group.

Fallible
Posts: 6540
Joined: Fri Nov 27, 2009 4:44 pm
Contact:

Re: "Cognitive Biases Tricking Your Brain" (The Atlantic, Sept 2018)

Post by Fallible » Sun Aug 19, 2018 5:46 pm

Thanks for an interesting article on a fascinating topic. Daniel Kahneman and others have said that awareness of our biases is a first and key step in dealing with them. This article shows some of those possible steps and the author seems to feel that after "immersing" himself in the field he has "noticed a few changes in my behavior." Yet his immediate example of this change - paying another $2 for a bottle of water after the first bottle failed to exit the vending machine - seemed weak. Unrelatedly, or maybe not, I also thought the author, putting a mere $2 ahead of obvious thirst, might be a Boglehead. :-)
Bogleheads® wiki | Investing Advice Inspired by Jack Bogle

User avatar
arcticpineapplecorp.
Posts: 3368
Joined: Tue Mar 06, 2012 9:22 pm

Re: "Cognitive Biases Tricking Your Brain" (The Atlantic, Sept 2018)

Post by arcticpineapplecorp. » Sun Aug 19, 2018 6:33 pm

thanks. nice article.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Post Reply