Legendary Investor Richard Feynman
As far as I know, Richard Feynman never bought a stock in his life. If he did, he never talked about it or about his “investment acumen.” But he should have...
Feynman was not only a great physicist, he was also a great teacher.
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Does it not bother you that one of the greatest men of science that the world has seen is quite happy to accept uncertainty (“I have approximate answers, and possible beliefs, and different degrees of certainty about different things, but I’m not absolutely sure of anything, and there are many things I don’t know anything about.”), while you are studying how to use the DCF model to value businesses? That’s a model which requires you to predict cash flows more than thirty years out requiring “degrees of certainty” that Feynman would have laughed at.
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Does it not bother you that a man of science can dare to say “I don’t know” while investment analysts almost never say that?
Feynman once said, “The first principle is that you must not fool yourself — and you are the easiest person to fool.”
How true! How we analysts fool ourselves so often! How often we just believe what we are told by companies and their self-interested agents and convert that nonsense into very nice-looking reports with plenty of pie charts and tables which make the whole thing look so believable!
In one of his famous lectures, Feynman was talking about the scientific method of inquiry. He said, “Looking back at the worst times, it always seems that they were times in which there were people who believed with absolute faith and absolute dogmatism in something. And they were so serious in this matter that they insisted that the rest of the world agree with them. And then they would do things that were directly inconsistent with their own beliefs in order to maintain that what they said was true.”
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The quote just above relates to cognitive dissonance. In the previous post, I listed Professor Bakshi’s advice from one of his lectures: "Learn to promptly resolve cognitive dissonance and you will acquire one of the greatest mental habits."
The Wikipedia definition:
“In psychology, cognitive dissonance is an uncomfortable feeling or stress caused by holding two contradictory ideas simultaneously. The theory of cognitive dissonance proposes that people have a fundamental cognitive drive to reduce this dissonance by modifying an existing belief, or rejecting one of the contradictory ideas.
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As far as I know, Richard Feynman never bought a stock in his life. If he did, he never talked about it or about his “investment acumen.” But he should have...
Feynman was not only a great physicist, he was also a great teacher.
…
Does it not bother you that one of the greatest men of science that the world has seen is quite happy to accept uncertainty (“I have approximate answers, and possible beliefs, and different degrees of certainty about different things, but I’m not absolutely sure of anything, and there are many things I don’t know anything about.”), while you are studying how to use the DCF model to value businesses? That’s a model which requires you to predict cash flows more than thirty years out requiring “degrees of certainty” that Feynman would have laughed at.
…
Does it not bother you that a man of science can dare to say “I don’t know” while investment analysts almost never say that?
Feynman once said, “The first principle is that you must not fool yourself — and you are the easiest person to fool.”
How true! How we analysts fool ourselves so often! How often we just believe what we are told by companies and their self-interested agents and convert that nonsense into very nice-looking reports with plenty of pie charts and tables which make the whole thing look so believable!
In one of his famous lectures, Feynman was talking about the scientific method of inquiry. He said, “Looking back at the worst times, it always seems that they were times in which there were people who believed with absolute faith and absolute dogmatism in something. And they were so serious in this matter that they insisted that the rest of the world agree with them. And then they would do things that were directly inconsistent with their own beliefs in order to maintain that what they said was true.”
….......
The quote just above relates to cognitive dissonance. In the previous post, I listed Professor Bakshi’s advice from one of his lectures: "Learn to promptly resolve cognitive dissonance and you will acquire one of the greatest mental habits."
The Wikipedia definition:
“In psychology, cognitive dissonance is an uncomfortable feeling or stress caused by holding two contradictory ideas simultaneously. The theory of cognitive dissonance proposes that people have a fundamental cognitive drive to reduce this dissonance by modifying an existing belief, or rejecting one of the contradictory ideas.
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Often one of the ideas is a fundamental element of ego, like "I am a good person" or "I made the right decision." This can result in rationalization when a person is presented with evidence of a bad choice, or in other cases. Prevention of cognitive dissonance may also contribute to confirmation bias or denial of discomforting evidence.”
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For a discussion on negotiating cognitive dissonance, see: Cognitive Dissonance
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