Risky Business
Here’s an ironic twist – research shows it is easier for the human mind to comprehend and leverage probabilities and logic IF the question is posed in terms of people versus cards, numbers or objects. Yet research also shows that we continue to build arsenals of data in the form of numbers and that in fact we also feel much more comforted when we believe we understand the numerical probabilities of a future event.
Does anyone else see the irony here? The latter is called “the ambiguity aversion” and the former the Wason Selection test and it seems to me that the ultimate question of consistent trading or investing success is the ability to bridge the gap – i.e. know the numbers but know them in the right context – the context of predicting other people’s future perceptions and behavior.
Try it sometime – in a situation where you don’t know what to do or specifically in a trading/investing decision. Ask yourself – how will the others react?
Yes I know – it seems too nebulous a question. I am fairly certain however that if you can put the anxiety about not knowing who the others are or what their motivations might be into words (therefore dissipating the discomfort of “nebulous”) and then think about this question, your answer will help you be more accurate in whatever you are attempting to predict.
(Oh yeah – one more thing… if you think you are NOT attempting to predict when you are trading, think again.)