Normally, when we're faced with a situation where our knowledge and expertise are plainly not sufficient for our needs we'll call in the experts. We go and see a dentist about our toothaches, our doctor about that nagging pain in our stomachs, and a psychologist about our inability to sleep at night due to worries about monsters in the wardrobe. And very often we'll turn to professional investment experts when it comes to handling our finances.
All of these different types of experts suffer from errors of judgment of one kind or another, but financial experts are almost unique in not being professionally overseen: your plumber may be better qualified than your investment adviser. It's not surprising, then, that the professionals often fall prey to the same biases the rest of us suffer from. What is really worrying, though, is that they're often more affected than we are, because their incentives and ours are not the same: the thing that marks out the professionals from the amateurs is that they're paid for their services, rather than simply rewarded, or punished, through their successes or failures at investing.
And this, dear reader, exposes them to a whole new set of biases. So, if you're reliant on expert help for your investment decisions it's time to steel yourselves for a bracing dose of reality. Welcome to the world of professional bias.
It's an astonishing and remarkable fact that not once in the whole history of American ...