- Christian Armbruester
We have written several posts on investment themes recently, much to do with all the many happenings in the financial markets and geo-political events. But, we aim to cover all facets of wealth in our blog and that includes the many behavioural risks that are associated with personal ownership of large sums of money. As such, we thought it the right time to come back on topic and leave aside the many cumbersome technical or mechanical aspects of managing investment capital. In this post, we shall write about us, what it means to be human and the decisions we make.
And before all the hardcore investment professionals now turn off and look away, remember that emotions drive our actions and are part of what we call “instincts”. We sometimes simply don’t know why we do things. Nature sort of goes on autopilot and it happens more often than not and most often when we are under heavy duress. We release chemicals into the body so that we are okay with going on standby. If it’s a matter of life and death, then let us run on adrenaline, release the dopamine, and make it fast please. Fact is, more than 99% of our actions are driven by our subconscious, and at times, that number simply goes to 100%.
We seem to be absolutely fine with that, but doesn’t it all seem somewhat random? And lest you gave up hope that there wouldn’t be any investment tangent in this morning’s musings, isn’t it also what scares most of us in the systematic investment styles of many CTAs or statistical arbitrage strategies? Man trusts machines, but only to a point. We still want to be seemingly in charge of our own destiny, even it that means it’s only 1%. We want final oversight, a courtesy call if you will, when it gets really important. So, where does that leave impulsive, totally reactionary and the very sudden onslaught of instincts? And why do we only take a few seconds when meeting someone to decide whether we like them or not?
Which brings me to the point and all we really have to remember is that there are always two sides to everything. For every human there is another human being. All of us programmed to the same tune (DNA et al), yet we behave very differently, given the same set of criteria. It’s irrational, doesn’t make sense and definitely can have an adverse effect on those that are ill prepared on the other end. Managing expectations is the only game we can play. “I expect nothing to work out, which means there can only be positive surprises when it goes as planned”, is what my father used to say. Well, there is that and have a great day ahead.