The Little Book of Behavioral Investing: How not to be your own worst enemy

Chapter Four

Why Does Anyone Listen to These Guys?

Stop Listening to the Experts!

 

 

 

 

 

 

OKAY, IT IS POP QUIZ TIME AGAIN.

Following are 10 questions. I’d like you to give a high and a low estimate for each question. Make sure that you are 90 percent sure the high and low estimates you give will surround the actual answer. (The answers can be found in the note at the bottom of page 56.)

90% Confidence Range
Low	High
Martin Luther King’s age at death
Length of the Nile River (in miles)
Number of countries in OPEC
Number of books in the Old Testament
Diameter of the moon (in miles)
Weight of an empty Boeing 747 (in pounds)
Year of Wolfgang Amadeus Mozart’s birth
Gestation period of an Asian elephant (in days)
Air distance from London to Tokyo (in miles)
Deepest known point in the ocean (in feet)

If you are like most people you ’ll find that somewhere between four and seven of your range answers will not include the correct answer. The simple reason is that we are generally far too confident in our abilities. But, what’s more shocking—or more detrimental to our portfolios—is that experts are even worse!

One of the most supported findings in psychology is that experts are generally even more overconfident than the rest of us. Don’t believe me: Let’s look at two groups of experts, weathermen and doctors. Each group is given information relative to their own discipline—weathermen are given weather patterns and asked to predict the weather, and doctors are given case notes and asked to diagnose ...