Posts filed under “Cognitive Foibles”

What I learned after 30,000 posts . . .

After 30,000 posts, Big Picture blogger has figured a few things out
Barry Ritholtz
Washington Post, September 19, 2014



Sometime last week, I published my 30,000th blog post. This was no small accomplishment — I started the Big Picture blog back in 2003.

30000Since then, I have published a stream of charts, investing articles, links, videos and financial analysis, about five to 10 times a day, every day. It has become part of my routine, a healthy outlet for an OCD-inflicted media junkie.

After more than a decade of getting up before the crack of dawn to write a daily journal about all things financial, here is what I’ve learned:

Writing is a good way to figure out what you think. To quote Daniel Boorstin, the former librarian of Congress, “I write to discover what I think . . . After all, the bars aren’t open that early.”

The act of putting pen to paper, or in my case, spilling pixels on a screen, requires thought. Thinking about context and working out how different elements interact in a complex system like the markets is a contemplative process.

Often, I have no idea what I thought about a subject until I begin to write about. Once you research an idea, you begin to develop a perspective. Writing about anything in public, often in real time, has helped fashion my views.

(Note: It also helps if you have something of interest to say).

Writing is a good way to become a better writer (so is reading). When I started the blog, one goal was to become a better writer. After more than a dozen years spending an hour a day writing — and another hour a day reading outstanding writing from others — your skills begin to improve. It is an old joke that it only takes a decade or so to become an overnight sensation.

You discover the advantages of economy. Anyone can make an article longer, the skill is keeping it tight and lean. Understanding where another set of eyes is advantageous, how to lean on someone else’s judgment — and when to pushback when they are destroying your precious prose — is also a worthwhile skill set.

I also became a much faster writer. It takes me about a third as long to write something today as it used to. That leaves time for rewrites, and as any editor will tell you, the difference between good and great takes place in the rewrites.

Mainstream media ignored blogs, occasionally stole from, then adopted the format wholesale.

Today, the blog format — short, pithy posts focused on a single subject, published irregularly — has been widely adopted by the mainstream media. The New York Times, Wall Street Journal, Financial Times and The Washington Post all make extensive use of blogs — many of which are excellent.

But it was not always that way. In the early days, mainstream journalists were comfortable “borrowing” freely from blogs without attribution — not so much as a quote or a link to the original piece.

An effective response was needed to embarrass journalists to end their plagiarism: Read-it-here-first was just the trick. Publish both pieces, the original dated blog, and the pilfered piece. If that didn’t work, a stern e-mail to the editor and publisher usually worked. For the most part, that stopped the plagiarism — but for a while it was a problem.

Online publishing is (for the most part) a meritocracy. A number of bloggers in economics and the financial sector have risen to prominence through the sheer strength of their work. Note it was not their family connections nor ties to Ivy League schools or elite banks, but rather, the strength of their research, analysis and writing. That is the very definition of a meritocracy.

That anyone with a computer, writing chops and an Internet connection could achieve fame and fortune — or more realistically, a degree of wonky recognition from a narrow group of finance geeks — is pretty amazing.

Content: creativity, criticism and curation. Content is king. When you are asking people to read you several times a day, you better have some fine content.

Mixing original content, intelligent criticism and curation (a.k.a. reading linkfests) has been a successful formula for me.

I would describe it more like this: “First, here is something I CREATED which I think is worthwhile; second, THAT OVER THERE is wrong and not especially compelling and here’s why; and third, you should see ALL OF THESE. They are excellent.”

I am oversimplifying, but that’s the basic three-part content structure of a good blog. When done well, creativity, criticism and curation each gives the reader a reason to pay attention. Original research and analysis that teaches about a subject or identifies something new or unknown is always welcome. Criticism of errors, myths and simple falsehoods helps the reader learn about the arguments of the day, and which claims should be looked at askance. When done right, it can help investors to avoid losing money. Curation is the application of intelligence and judgment to the immense universe of content, using an insider’s keen eye to select only the most interesting and worthwhile items to read.

Reader comments have become useless. Trolls, paid hacks and loosely organized interest groups have turned them into a vast wasteland. My own comment policy has evolved into a 3,000-word screed against the destructive work of the Internet’s trolls.

This is a shame. At one time, commenters had tremendous value within given communities. I wrote most of “Bailout Nation” online, 500 words at a time. The feedback and suggestions from readers were invaluable. Having a research staff of thousands was inordinately helpful. The resulting book was all the better for it. It is difficult to see that occurring again. And that’s a shame.

Advertising is a terrible business model (unless you are Google). Online advertising is growing, but it has also become a race to the bottom. Web sites have proliferated, advertising payments have gotten much cheaper, and the ability for any site to generate enough for someone to make a living on advertising alone is minimal. It’s only the top few percent of blogs that actually throw off enough income to give anyone motivation to do this for financial reasons.

Yes, there are many non-monetary reasons why I blog, but if you are in this for the money, you are wasting your time.

Authors vs. publishers. People read publications less than they do authors. I discovered this little fact as I followed several of my favorite writers — such as Jesse Eisinger and Dan Gross — as they bounced from various publications such as, Daily Beast and Yahoo to Newsweek and New York Times. Where they published did not matter; the only thing that was significant was what they had to say.

There is a caveat to this: Any powerful platform will potentially expose a writer to a wider audience. That has been my experience here at The Washington Post as well as on Bloomberg View.

People lie to themselves. When confronted with facts that directly disagree with their beliefs, most people prefer to disregard the facts. Psychologists even have a name for this sort of perception error: cognitive dissonance.

For a data guy like me, this is both utterly fascinating and somewhat disturbing. I have repeatedly admonished readers about letting things like politics and narrative divert them from reality-based, data-driven investing.

Whenever I encounter someone who refuses to accept reality, all I can do is shrug and remind myself that someone has to be on the losing side of the trade. It might as well be him.

It can be difficult for readers to distinguish between good information and distracting nonsense. Despite a tremendous amount of information online, readers are still mired in lots of bad thinking and disproven memes.


Ritholtz is chief investment officer of Ritholtz Wealth Management. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture. Twitter: @Ritholtz.

Category: Apprenticed Investor, Cognitive Foibles, Weblogs

Mauboussin: Untangling Skill and Luck

Michael Mauboussin is our Masters in Business interview this weekend.


What role, exactly, do skill and luck play in our successes and failures? Some games, like roulette and the lottery, are pure luck. Others, like chess, exist at the other end of the spectrum, relying almost wholly on players’ skill.

In his provocative book, Michael Mauboussin untangles the intricate strands of skill and luck, defines them, and provides useful frameworks for analyzing their relative contributions. He offers concrete suggestions for how to put these insights to work to your advantage in business and other dimensions of life.

About the author:
Michael J. Mauboussin is a Managing Director and Head of Global Financial Strategies at Credit Suisse. Prior to rejoining CS in 2013, he was Chief Investment Strategist at Legg Mason Capital Management. He is also the author of three books, including More Than You Know: Finding Financial Wisdom in Unconventional Places, named in the The 100 Best Business Books of All Time by 800-CEO-Read. Michael has been an adjunct professor of finance at Columbia Business School since 1993, and received the Dean’s Award for Teaching Excellence in 2009. He is also chairman of the board of trustees of the Santa Fe Institute, a leading center for mulch-disciplinary research in complex systems theory.

Category: Cognitive Foibles, Video

Smarter and Less Smart As We Age

Academic Eric Johnson explains the impact of intelligence on finances at an Atlanta Fed Public Affairs Forum



Via Federal Reserve Bank of Atlanta


Category: Cognitive Foibles, Psychology, Video

Last month, I spilled a considerable number of pixels explaining why Rupert Murdoch’s Time Warner bid had no significance to whether or not this is a market top. My short list included complaints of cherry picked data that somehow ignored most of Murdoch’s M&A activity over the past half century; a laughably small sample size…Read More

Category: Cognitive Foibles, Investing, Markets, Psychology, Really, really bad calls, Trading

Masters in Business: Michael Mauboussin

Michael Mauboussin began his career at Drexel Burnham Lambert in the 1980s through what he describes as a random stroke of good luck. He worked closely with Bill Miller, former chairman of Legg Mason Capital Management, and is now head of global financial strategies at Credit Suisse. He is also an adjunct at Columbia University…Read More

Category: Cognitive Foibles, Media

Cognitive Dissonance Is Hurting Your Returns

Regular readers know I enjoy discussing behavioral aspects of investing. The reasons for this are twofold: First, we can’t control the markets, but we can control our own reactions to it (at least we can try). And second, many studies have shown that investors suffer from a behavior gap between what they should garner in…Read More

Category: Cognitive Foibles, Investing, Psychology

Rupert Murdoch and The Dumbest Chart in the World

Yesterday morning, we learned of Rupert Murdoch’s bid for Time Warner for as much as $85 dollar a share, or more than $75 billion. Soon after, the annotated chart below showing the Standard & Poor’s 500 Index began circulating on trading desks and websites, suggesting Murdoch’s offer signaled a market top. Source: Financial Insyghts LLC…Read More

Category: Cognitive Foibles, Investing, M&A, UnGuru

It’s a Bubble! It’s a Recession! It’s a Crash!

When was the last time anyone got good investing advice from the front page of a newspaper or magazine or from a television pundit? That is the question I have been pondering during this market cycle. Whether it is the price of equities or the state of the economy, I have grave reservations about relying…Read More

Category: Cognitive Foibles, Financial Press, Markets, Psychology, UnGuru

What to Do in a Market Correction

Things to try in a market correction: • Respond emotionally, giving in to your lizard brain. It does a good job of keeping you alive, so you might as well hand over management of your portfolio to it. • Rely on your gut instinct to lead you out of trouble. After all, your instincts helped…Read More

Category: Cognitive Foibles, Investing, Markets, Psychology

How Not to Beat the Market

Hat tip Josh Brown   Today’s chart comes to us from Patrick O’Shaughnessy, author of the forthcoming book, “Millennial Money: How Young Investors Can Build a Fortune.” O’Shaughnessy makes the observation that investing is “almost free” and investor behavior tends to matter more than their actual investments. As an example, he cites this chart.  Continues…Read More

Category: Cognitive Foibles, Investing