4 ms·

I had a chance to talk to Danny about two years ago in Berkeley. I had randomly run into him at an event a friend hosted. We chatted briefly and I asked him on

I had a chance to talk to Danny about two years ago in Berkeley. I had randomly run into him at an event a friend hosted. We chatted briefly and I asked him one question: "Your research deconstructed the way I think, both instinctually and logically, leaving me with very little basis to make judgements. How would you propose we make decisions." He responded after sighing a bit empathetically, "I'm not sure, but I think you should just constantly ask your friends and keep talking with people about your decisions." I thought this was a great bit of wisdom that I keep at heart. I've noticed that people who isolate their decision making, esp in critical scenarios, more often than not make bad choices. He highlighted that diversity of friends, constant networked thinking, and the humility to take feedback are the real keys to overcoming the pitfalls his work highlights. He didn't say you had to take their feedback exactly, or always change your mind -- just keep talking about it though.

dharmon 10y ago
This is a useful insight, but with caveats. As an investor, my livelihood depends on my ability to consistently make sound decisions. And fortunately, decisions are not set in stone, so I have opportunities to negate poor ones. I have thought a lot about how to improve my decision-making. One is what you are talking about, sharing my decisions and thought processes with others. An obvious conclusion (to me) is that doing so on the internet is horrible, as there is no real ability to filter opinions on my part, with no background knowledge of those giving feedback. Yet they can still sow seeds of self-doubt. But even talking with friends can be tricky, as you have to account for their backgrounds and biases. Sometimes it's easy. For example, if I'm looking at real estate, something I know little about, I would heavily count the thoughts of my friend who is a REIT analyst. Other times it is not clear how much to weight their opinion. A Bayesian approach seems to work here. Another idea which I find as effective, if not more, is constantly turning the decision over in my own mind. I am not the same person I was yesterday. My thought processes in the morning, after a cup of coffee, are different than Friday evening, after a few beers. It is definitely different after a period where the market is up ("I'm an invincible genius!") vs. down ("I'm a moron! Maybe I should go back to writing code...") By revisiting over a span of time, you can gather new insights solely based on where your head is at any given time. And at the end of the day, you have to honestly evaluate the results of your decisions. If I discount the opinions of others and follow my own intuition, but consistently lose money, then well, I should revisit some part of the process. Surprisingly many are unable (unwilling?) to do this.
- qznc 10y ago
  Kahneman in "Thinking Fast and Slo" has a section on when experts can trust their intuitions. For example, fire fighters can. Investment does not fit the criteria because the payout is inconsistent. You sometimes win although your decision was bad and sometimes you lose although your decision was sound. Your intuition gets fucked up by the weird outcomes.
  - barry-cotter 10y ago
    Does this imply expertise in investment doesn't exist? Because the payout in poker is inconsistent but expertise clearly exists. The people who end up at the top table are much more consistent than would be expected by chance. There is also a relatively clear skill ranking. If two people play casino poker and consistently profit but one plays at 1-2 tables and the other at 10-20 the second is definitely better.
    - tsunamifury 10y ago
      He lables them "wicked markets" and essentially describes them as any market where any winning strategy is almost instantly mitigated and results in a loss. So not every poker market is wicked, which is why you see good players always seeking tables of suckers.
    - dharmon 10y ago
      No, he means it "fucks with your intuition" in the same way as poker, but potentially more confusing because the probabilities are not known. For example, in poker you may call with pocket Kings and lose, yet with hindsight it is still clear that you made the right decision. The probabilities say so. In investing, even after you lose money, it can sometimes be quite difficult to determine if you made a mistake or not, since the probabilities are never known. For example, did Mohnish Pabrai and Guy Spier make a mistake with Horsehead Holdings? The only clear mistake I can see is Pabrai's position sizing, but it is not clear to me whether the investment itself was a mistake or not.
    - qznc 10y ago
      There are poker experts, but they do not use their intuition (very much). Poker teaches you to make rational decisions while your intuition screams something different.
mc32 10y ago
How does asking your friends and others help if they make decisions the old way, ie. instinctually, etc? Does spreading decision-making enable some kind of reversion to mean? Or do you mean that the new learned process only invalidated or disabled your thinking decision-making process but not that in others?

dharmon 10y ago

This is a useful insight, but with caveats. As an investor, my livelihood depends on my ability to consistently make sound decisions. And fortunately, decisions are not set in stone, so I have opportunities to negate poor ones. I have thought a lot about how to improve my decision-making. One is what you are talking about, sharing my decisions and thought processes with others. An obvious conclusion (to me) is that doing so on the internet is horrible, as there is no real ability to filter opinions on my part, with no background knowledge of those giving feedback. Yet they can still sow seeds of self-doubt. But even talking with friends can be tricky, as you have to account for their backgrounds and biases. Sometimes it's easy. For example, if I'm looking at real estate, something I know little about, I would heavily count the thoughts of my friend who is a REIT analyst. Other times it is not clear how much to weight their opinion. A Bayesian approach seems to work here. Another idea which I find as effective, if not more, is constantly turning the decision over in my own mind. I am not the same person I was yesterday. My thought processes in the morning, after a cup of coffee, are different than Friday evening, after a few beers. It is definitely different after a period where the market is up ("I'm an invincible genius!") vs. down ("I'm a moron! Maybe I should go back to writing code...") By revisiting over a span of time, you can gather new insights solely based on where your head is at any given time. And at the end of the day, you have to honestly evaluate the results of your decisions. If I discount the opinions of others and follow my own intuition, but consistently lose money, then well, I should revisit some part of the process. Surprisingly many are unable (unwilling?) to do this.

qznc 10y ago
Kahneman in "Thinking Fast and Slo" has a section on when experts can trust their intuitions. For example, fire fighters can. Investment does not fit the criteria because the payout is inconsistent. You sometimes win although your decision was bad and sometimes you lose although your decision was sound. Your intuition gets fucked up by the weird outcomes.
- barry-cotter 10y ago
  Does this imply expertise in investment doesn't exist? Because the payout in poker is inconsistent but expertise clearly exists. The people who end up at the top table are much more consistent than would be expected by chance. There is also a relatively clear skill ranking. If two people play casino poker and consistently profit but one plays at 1-2 tables and the other at 10-20 the second is definitely better.
  - tsunamifury 10y ago
    He lables them "wicked markets" and essentially describes them as any market where any winning strategy is almost instantly mitigated and results in a loss. So not every poker market is wicked, which is why you see good players always seeking tables of suckers.
  - dharmon 10y ago
    No, he means it "fucks with your intuition" in the same way as poker, but potentially more confusing because the probabilities are not known. For example, in poker you may call with pocket Kings and lose, yet with hindsight it is still clear that you made the right decision. The probabilities say so. In investing, even after you lose money, it can sometimes be quite difficult to determine if you made a mistake or not, since the probabilities are never known. For example, did Mohnish Pabrai and Guy Spier make a mistake with Horsehead Holdings? The only clear mistake I can see is Pabrai's position sizing, but it is not clear to me whether the investment itself was a mistake or not.
  - qznc 10y ago
    There are poker experts, but they do not use their intuition (very much). Poker teaches you to make rational decisions while your intuition screams something different.

mc32 10y ago

How does asking your friends and others help if they make decisions the old way, ie. instinctually, etc? Does spreading decision-making enable some kind of reversion to mean? Or do you mean that the new learned process only invalidated or disabled your thinking decision-making process but not that in others?