CHAPTER 7Jerry TsaiYou're Not as Smart as You Think

Genius is a rising market.

—John Kenneth Galbraith

Stocks go up most of the time. At least they have historically in the United States. Since 1900, the Dow Jones Industrial Average has experienced double‐digit gains in 47% of all years. With the wind often at our back, it's the natural tendency of investors to attribute their gains to skill rather than to favorable market conditions.

Humphrey B. Neill, author of The Art of Contrary Thinking, said it best: “Don't confuse brains with a bull market.” The idea that we confuse our ability to select above‐average stocks in a market that lifts all boats is so pervasive that there's a name for it, attribution bias. “Attribution bias refers to the ...

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