We had Michael Mauboussin on TechTicker this morning.
Michael’s one of the smartest Wall Street strategists anywhere, in part because he doesn’t waste his time (or his clients’ time) trying to forecast the market. He has written several books and done a ton of great work on the psychology of investing. Michael’s latest book explains how our brains trick us into falling for every boneheaded investment mistake there is.
From TT: What can horse racing teach us about investing?
A lot, according to Michael Mauboussin, author of More Than You Know and chief investment strategist at Legg Mason.
In his latest book, Think Twice: Harnessing the Power of Counterintuition, Mauboussin cites the hype over 2008 Triple Crown contender Big Brown as evidence of some of the common mistakes investors make, including:
- Succumbing to tunnel vision.
- Being overly reliant on experts.
- Not realising how much we’re influenced by peer pressure.
In the case of Big Brown, big wins in the Kentucky Derby and Preakness made him the overwhelming favourite to win the Belmont Stakes and complete the Triple Crown. In the accompanying video, Mauboussin explains why Big Brown (who finished dead last at Belmont) was a “bad bet” and what investors can learn from the failings of that “unbeatable” horse.