Humans are not wired to be good investors. To survive in the wild, we developed a tendency to rely on mental shortcuts to process information quickly, which is helpful for avoiding danger and taking advantage of fleeting opportunities. But this can be a hindrance to the unnatural act of investing.
Psychologist and Nobel laureate Daniel Kahneman explores how people process information and the biases that mental shortcuts can create in his book, “Thinking Fast and Slow.” While the book isn’t specifically about investing, it explains why we often do dumb things as investors, and is well worth a read. Here, I’ll share some of the key insights from the book and how we can learn from them to become better investors.
A Two-Track Mind
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