Turn off That Bubblevision!
Volatility Equals Opportunity
ON ANY GIVEN DAY I CAN TURN ON THE TV and find at least three channels dedicated to filling my mind with in-depth analysis of what are near random fluctuations in the markets. As I mentioned earlier, these channels are described by a friend as bubblevision. The minutiae of the daily moves are explained to the rest of us by a combination of attractive women and impassioned men, with a smattering of bow-tie-wearing experts to aid credibility. The same thing happens in the financial press; column after column is filled with ex -post justifications for why the market did whatever it did yesterday.
As we discussed in the last chapter, too much information leads us to feel overconfident in the extreme, but it does little to aid us. But this isn’t our only problem with information; we actually find even useless information soothing and we process it mindlessly.
For example, psychologists have explored the role of “placebic” information in people’s behavior.31 Placebic information is simply words that mean nothing. Could such redundant information really impact anyone’s behavior?
The psychologists set up a clever experiment by waiting for a queue to form at a photocopier and having a confederate try to butt into the line. Three possible excuses for jumping the line were provided:
1. “Excuse me, I have five pages. May I use the Xerox machines?” The no-information case.
2. “Excuse me, I have five pages. May I use ...