Psychology of Misjudgment Bonus Bias: The Dangers of Ideology (Last one!)

[Guest cherzeca]

At the end of the day I think the big picture point is to not be so sure that one is right that one cannot even listen or consider evidence that is different.

I think Munger said something about putting it in percentages - For example - I think I am 80% sure of this vs acting like one is 100% sure.

 

I agree with this, but consider its effect on conviction.  ideologies support conviction.  If I am always questioning, then I may never get to "pulling the trigger" on an investment...I may always be some % below "trigger pulling" threshold.  now some would argue that is good, that it is good to have a punchcard and say no a lot, and swing only at fat pitches.  but I think our mental maps are such that if you are always questioning then you wont recognize the fat pitch as such.  if on the other hand I have an ideology (set of investing filters and rules) that I can fit a prospective investment into, then the trigger pulling threshold is lowered in effect.  again, I see Buffett as being a master ideologue. he waits for investment opportunities to call him, which right there is a huge ideological filter.  he has hurdles and filters that eliminate many opportunities. but when an investment opportunity comes to him that satisfies his filter framework, he is very capable of pulling trigger.  one of his most prominent filters is deal terms.  the OXY investment was made not because he understands oil and gas, but because the preferred terms were so favorable. so while I understand the term has a lot of baggage, I think we investors all have ideologies that we work from, otherwise investing would be a cacophony of potential targets...which it is for most people, who haven't developed their investing ideology into a workable framework, which is why indexing makes so much sense for most people

[rb]

  Change is required always.

 

I disagree if you are talking about value investing theories and practices. Change is required periodically maybe, but not always. If it were always required the framework would be useless since you would be reevaluating it everyday, instead of using it for evaluating companies.

I was referring to change from a continuous improvement stand point. Not changing the current framework but constantly trying to develop other frameworks. Adding arrows to your quiver so to speak.

 

The business world is continuously changing as investors we have to adapt.

 

[DooDiligence]

  Change is required always.

 

I disagree if you are talking about value investing theories and practices. Change is required periodically maybe, but not always. If it were always required the framework would be useless since you would be reevaluating it everyday, instead of using it for evaluating companies.

I was referring to change from a continuous improvement stand point. Not changing the current framework but constantly trying to develop other frameworks. Adding arrows to your quiver so to speak.

 

The business world is continuously changing as investors we have to adapt.

 

Change frequently makes us uncomfortable,

but it's happening to everything,

every single moment.

 

That's the only thing that will never change.

[SharperDingaan]

Just for a twist .....

There is little difference between an ideology and a computer algorithm - the algorithm just codes it as a set of instructions, and executes it faster, consistently, and more reliably. In the crypto world the ideologue is a Decentralized Autonomous Organization (DAO), or basically a robot! https://www.investopedia.com/tech/what-dao/

 

Love algo's ;) they go reliably batshit when you 'gas' them with tainted data.

Same thing happens with the people version - a little wind up, and watch them go!

 

SD