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Barry Ritholtz

Our Inner Investing World Doesn't Reflect Reality

We tell ourselves stories about how things work that may be at odds with how they really do.
We haven't come all that far.

We haven't come all that far.

Photographer: Markus Matzel/Ullstein Bild/Getty Images

If the events of recent weeks (or years) have you asking yourself, What is wrong with these people?, the answer is: not very much. They simply suffer from a small but crucial error in the way their brains create models of the world around them.

That is the conclusion of “The Unpersuadables: Adventures with the Enemies of Science,”  a 2014 book I reread this weekend. The insights of author Will Storr are applicable not only to the current political mayhem but to traders and investors. Indeed, anyone who makes important decisions based on their subjective understandings of the universe stands to learn something about themselves and their decision-making processes.