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Value Investing: Tools and Techniques for Intelligent Investment by James Montier

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Chapter 16. Process not Outcomes: Gambling, Sport and Investment![16]

  • Paul DePodesta of the San Diego Padres and Moneyball fame relates the following story on playing blackjack.

    On one particular hand the player was dealt 17 with his first two cards. The dealer was set to deal the next set of cards and passed right over the player until he stopped her, saying: 'Dealer, I want a hit!' She paused, almost feeling sorry for him, and said, 'Sir, are you sure?' He said yes, and the dealer dealt the card. Sure enough, it was a four. The place went crazy, high fives all around, everybody hootin' and hollerin', and you know what the dealer said? The dealer looked at the player, and with total sincerity, said: 'Nice hit.' I thought, 'Nice hit? Maybe it was a nice hit for the casino, but it was a terrible hit for the player! The decision isn't justified just because it worked.'

  • Psychologists have long documented a tendency known as outcome bias. That is the habit of judging ...

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