Why are investors better at buying stocks than they are at selling? This question and more were on my mind while reading Michael Lewis’ new book The Undoing Project. At the heart of it, the book is a love story (platonic) between two men, Israeli psychologists Daniel Kahneman and Amos Tversky, and their incredible work on how the mind alters our perception of reality. I won’t tell you more than that. But if you’ve read Moneyball by Lewis, you know the mind can play tricks on you. Reality isn’t an obvious thing. This book, as a continuation of the thinking in Moneyball, is about why it plays those tricks.
The takeaway for me from The Undoing Project is that I have spent hours upon hours actually speaking and working with investors in real life, not through questionnaires or studies. If conversations were class credits, I’d have a PhD. One of the most valuable gifts I’m able to give my clients is to make non-emotional decisions about their money. Being non-emotional doesn’t mean I don’t care about them. Each one of them knows I care. But I can do what they can’t do—look at their situation from a distance and act accordingly. It’s my job to help them see reality. And to use that clarity to make them much better investors.