Tyler Cowen: Story is the Enemy

The economist/foodie/pundit Tyler Cowen did a TED talk recently and since I’d rather have my manhood ripped from my body by a wolverine than sit through one of those videos, I was really glad to see that someone had transcribed it over at Less Wrong.

The whole thing is worth reading, and as I talk about in my book, I truly believe that stories can be the enemy of most investors so I really loved this paragraph in particular:

One interesting thing about cognitive biases – they’re the subject of so many books these days. There’s the Nudge book, the Sway book, the Blink book, like the one-title book, all about the ways in which we screw up. And there are so many ways, but what I find interesting is that none of these books identify what, to me, is the single, central, most important way we screw up, and that is, we tell ourselves too many stories, or we are too easily seduced by stories. And why don’t these books tell us that? It’s because the books themselves are all about stories. The more of these books you read, you’re learning about some of your biases, but you’re making some of your other biases essentially worse. So the books themselves are part of your cognitive bias. Often, people buy them as a kind of talisman, like “I bought this book. I won’t be Predictably Irrational.” It’s like people want to hear the worst, so psychologically, they can prepare for it or defend against it. It’s why there’s such a market for pessimism. But to think that buying the book gets you somewhere, that’s maybe the bigger fallacy. It’s just like the evidence that shows the most dangerous people are those that have been taught some financial literacy. They’re the ones who go out and make the worst mistakes. It’s the people that realize, “I don’t know anything at all,” that end up doing pretty well.

The rest is great, head over below:

TRANSCRIPT – Tyler Cowen on Stories (Less Wrong)

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Losing Money with Metaphors (Interloper)

 

 

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