Human Behavior

Don’t Invest in What You Know

It’s common market wisdom that non-professional investors should “invest in what you know.” This makes intuitive sense, since we obviously have an informational edge in sectors that we work in. Furthermore, it’s scary and requires extra effort to investigate areas of the market in which we have no experience. Imagine, for example, a lawyer who […]

How to Waste a Ton of Time on Unimportant Decisions, Part 2

Wasting time is the bane of our existence.  We’re not talking about laziness or procrastination; that’s a completely different thing.  What we’re talking about is Fredkin’s Paradox and the human condition that requires decisions be “informed” even in circumstances where: Information is difficult to acquire or analyze, and The marginal consequences of one decision versus another […]

How to Waste a Ton of Time on Unimportant Decisions, Part 1

I spent an hour this week trying to decide whether to start Brian Quick or Jay Cutler in my fantasy football league.  If you don’t know who those players are, that’s fine because it doesn’t matter.  What matters is that Quick was projected to score 12.38 points and Cutler was projected to score 12.41 points. […]

Repeated Games & Airline TV

Pricing models are something that have long fascinated us.  So compelling is the topic that it’s a well known form of entertainment amongst economists to try and decipher how businesses set prices.  This is especially fun when there’s a good reason to think that there might be something unintuitive and more interesting than simple supply […]

Ratio of Value to Fear

In investment management we often use information gleaned from ratios to try and establish (within the limits of probability) where we are in a given market cycle.  Most of the time these ratios are financial in nature, comparing price to some other metric that, over long periods of time, should normalize around an average value.  […]