The aim of investment is, in the words of John Maynard Keynes, to “defeat the dark forces of time and ignorance”. Today, those forces appear as dark as at any time in our history. Rather than despairing, it is time to consider how we make decisions under conditions of uncertainty.
The good news is that Daniel Kahneman, the Nobel laureate and founder of the behavioural school of economics, has recently published a magnificent compendium of his research. The bad news, as Mr Kahneman reminds us over nearly 500 pages of Thinking, Fast and Slow, is that our brains are not well designed to exercise sound judgment.
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