Thoughts on investing, artificial intelligece, luck, regrets and more by Nobel Laureate Daniel Kahneman

Daniel Kahneman is a nobel laureate is an eponymous name in the field of behavioral economics. He was a pyschologist by trade and won the Nobel Prize for his insights on cognitive psychology, and in particular behavior under uncertainty. He also had a immense influence on Richard Thaler another founding father of the field of behavioral economics and last year’s Nobel Prize winner for economics.

Kahneman was speaking at the Morningstar Investment Conferenceand here are some nuggets of wisdom curated from Twitterverse.

On investing

“Admitting that you don’t know is a very healthy step” -Daniel Kahneman. Talking about what a stock or the market is going to do. #MICUS

— Ryan Weichman, CFA, CFP® (@RyanWeichman) June 12, 2018

Daniel Kahneman says unsystematic “noise” in making an investment decision could be more important than systematic (market) risk. Algorithms give the same answers to the same inputs; people don’t. We should put more weight on reducing the noise in decision making. #MICUS pic.twitter.com/3j9MBdDk6D

— Mike Barad (@MikeBarad) June 12, 2018

“We don’t put enough weight on noise reduction.” Daniel Kahneman #MICUS

— Bob Seawright (@RPSeawright) June 12, 2018

Algorithms give you the same response. People don’t. - Daniel Kahneman #MICUS

— Nadine Youssef (@nadinenyoussef) June 12, 2018

1. Don’t Trust People, Trust Algorithms
Whether it’s predicting parole violators and bail jumpers or who will succeed as a research analyst, algorithms tend to be preferable to independent human judgment.

— TraderJanie aka Jane Fox (@Quantitrader) June 12, 2018

2. Take the Broad View
Don’t view each problem in isolation.
“The single best advice we have in framing is broad framing,” he said. “See the decision as a member of a class of decisions that you’ll probably have to take.”

— TraderJanie aka Jane Fox (@Quantitrader) June 12, 2018

3. Test for Regret
“Regret is probably the greatest enemy of good decision making in personal finance,” Kahneman said.

— TraderJanie aka Jane Fox (@Quantitrader) June 12, 2018

4. Seek Out Good Advice
Part of getting a wide-ranging perspective is to cultivate curiosity and to seek out guidance.
So who is the ideal adviser? “A person who likes you and doesn’t care about your feelings,” Kahneman said.

— TraderJanie aka Jane Fox (@Quantitrader) June 12, 2018

On artifical intellignece

They asked Nobel laureate Daniel Kahneman about artificial intelligence and wealth management at the Morningstar conference this morning...

“Soft contact is essential. Financial advisors will be around long after the last radiologist is replaced"

— Downtown Josh Brown (@ReformedBroker) June 12, 2018

On the financial advice industry

“Financial advice is a profession that will be around for along time after artificial intelligence replaces fields like radiology” Daniel Kahneman #MICUS @finance_therapy @MorningstarInc

— Rob Pinkerton (@rpinkerton) June 12, 2018

For #DanielKahneman the field that most resembles #FinancialAdvice is #nutrition where there is no fixed way to do it but many fads and many ways of translation. #MICUS @CitywireUSA

— Vicky Ge Huang (@Vlajournaliste) June 12, 2018

“I think that the conversation between the advisor and the client is an educational opportunity...so that client can make an informed commitment about what might happen...it’s like a vaccine,” Nobel Laureate #DanielKahneman on advisor & client relationship #MICUS @CitywireUSA

— Vicky Ge Huang (@Vlajournaliste) June 12, 2018

On optimism and pessimism

I believe optimism is something you’re born with. It’s good to be an optimist. 🌈 @Daniel_Kahneman #MICUS

— Jacqueline Fuller (@fullerjac) June 12, 2018

“I am a pessimist and tend to focus on loss aversion. [Amos Tversky] was an optimist who focused on lost opportunity.” Daniel Kahneman #MICUS

— Bob Seawright (@RPSeawright) June 12, 2018
Amos Tversky was his lifelong friend and partner in crime.

On regrets

“Regret itself is not a rational emotion to me but it’s a good question/criterion for ppl to consider how to minimize it...For most ppl, even if they know what the wealth maximizing solution is, that might not be the best solution for them,” #DanielKahneman #MICUS @CitywireUSA

— Vicky Ge Huang (@Vlajournaliste) June 12, 2018

Daniel Kahneman says, “I speak a lot about regret.” So does my mother! #MICUS

— Mike Barad (@MikeBarad) June 12, 2018

On psychology

“Psychology has been addicted to showy one-liners.” Daniel Kahneman #MICUS

— Bob Seawright (@RPSeawright) June 12, 2018

On experiences

"Experience increases the #confidence with which people hold their ideas, but not necessarily the accuracy of those ideas. #Expertise requires a particular kind of experience, one that exists in a context that gives regular feedback, that is effectively testable." Daniel Kahneman

— Abhijit Bhaduri (@AbhijitBhaduri) June 12, 2018

Recommended read

Ya… Psychology my favourite subject.

Thinking fast and slow - By Daniel Kahneman &
Super forecasting: The Art and Science of Prediction by Philip E. Tetlock & Dan Gardner

  • are two important books. Authors of both book has spend life time researching their respective subjects. Daniel says we can’t predict future, its just random. The second book says there are super forecasters who can predict better than others.
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