"There is a burning desire to think of finance as a science like physics or engineering...
We want to think it can be measured cleanly, with precision, in ways that make sense. If you think finance is like physics, you assume there are smart prople out there who can read the data, crunch the numbers, and tell us exactly where the S&P 500 will be on Dec 31, just as a physicist can tell us exactly how bright the moon will be on the last day of the year.
But Finance isn't like physics. Or, to borrow an analogy from investor Dean Williams, it's not like classical physics, which analyzes the world in clean, measurable ways. It's more like quantum physics, which tells us that - at the particle level - the world works in messy, disorderly ways, and you can't measure anything precisely because the act of measuring something will affect the thing you are trying to measure (Heisenberg's uncertainty principle). The belief that finance is something precise and measurable is why we listen to strategists. And I don't think that will ever go away.
Finance is much closer to something like sociology. It's barely a science, and driven by irrational, uninformed, emotional, veneful, gullible, and hormonal human brains."
Hat tip ~ Morgan Housel, The Motley Fool
No comments:
Post a Comment