What is Big Think?  

We are Big Idea Hunters…

We live in a time of information abundance, which far too many of us see as information overload. With the sum total of human knowledge, past and present, at our fingertips, we’re faced with a crisis of attention: which ideas should we engage with, and why? Big Think is an evolving roadmap to the best thinking on the planet — the ideas that can help you think flexibly and act decisively in a multivariate world.

A word about Big Ideas and Themes — The architecture of Big Think

Big ideas are lenses for envisioning the future. Every article and video on bigthink.com and on our learning platforms is based on an emerging “big idea” that is significant, widely relevant, and actionable. We’re sifting the noise for the questions and insights that have the power to change all of our lives, for decades to come. For example, reverse-engineering is a big idea in that the concept is increasingly useful across multiple disciplines, from education to nanotechnology.

Themes are the seven broad umbrellas under which we organize the hundreds of big ideas that populate Big Think. They include New World Order, Earth and Beyond, 21st Century Living, Going Mental, Extreme Biology, Power and Influence, and Inventing the Future.

Big Think Features:

12,000+ Expert Videos

1

Browse videos featuring experts across a wide range of disciplines, from personal health to business leadership to neuroscience.

Watch videos

World Renowned Bloggers

2

Big Think’s contributors offer expert analysis of the big ideas behind the news.

Go to blogs

Big Think Edge

3

Big Think’s Edge learning platform for career mentorship and professional development provides engaging and actionable courses delivered by the people who are shaping our future.

Find out more
Close

Michael Mauboussin on the Psychology of Investing

June 30, 2010, 6:00 AM
3367543094_470e356692
Humans are hard-wired to make bad investment decisions, says Legg Mason Capital Management's chief investment strategist, Michael Mauboussin. It's in our nature to follow along with a bearish or bullish trend, even though history has shown that the best investors sell when everyone's buying and buy when everyone's selling.

In his Big Think interview, Mauboussin talks a lot about the "inside view," and why it's not always wise to rely on conventional wisdom when investing. The inside view says that when we face a problem we should gather lots of information about it, combine that information with our own inputs, and then forecast into the future. The "outside view," by contrast, tries to view each "problem" as an instance of a larger reference class. Mauboussin says that "we all tend to be too reliant on the inside view which often leads to too optimistic assessments of our futures." His tip: always look for the outside view to dampen any optimism that might have been unduly generated.

Mauboussin also talks about how the media can affect investment decisions, saying that the coverage by stock pundits often can amplify trends. He refers to a study that was done with magazine cover stories, noting that "when the cover was really bullish and a company had done really well, not surprisingly because reversion to the mean, they tended to do much more poorly in subsequent periods. Likewise, if they had a negative cover story, they tend to do much better subsequently."

Has the financial crisis made us more risk-averse? The S&P 500 has been down for the last ten years, so anybody that invested in that time has lost money. "That doesn’t feel good. So what people do is they either put it in cash and or cash balances are really high in America, or they buy bonds, right, fixed income, a little bit more boring, less racy, but it's equivalent to having the dollar in your pocket."
 

Michael Mauboussin on the P...

Newsletter: Share: