Economy & Banks

The notion that individual conviction and bravery is a #MassiveFail when compared to a machine gun nest seems obvious and trite to us today. Strangely enough, though, when it comes to prevalent notions of market behavior it feels like we’re still in 1936. What I mean is that there is still a dominant belief in individual decision-making as the most effective route to successful investing, that if we could just learn a little bit more about Company X or Sector Y we will win the day. Is your individual knowledge and conviction level in Company X important for investing success? Absolutely, in exactly the same way that physical and psychological bravery is important for war-fighting success. Still more important, though, is the strength and cohesion of the groups that share your investment philosophy. Not your specific investment opinions, any more than one soldier has the same amount and type of instantiated bravery as another soldier in his unit, but the coherence of investment goals and operational practices across your fellow market participants in a particular market segment. **This is the core insight of Adaptive Investing – that investment success requires a rigorous analysis of both individual AND group dynamics, and that modern evolutionary theory is a better place to find the tools for that analysis than modern economic theory. Ragtag crews, no matter how brave or informed, tend not to do very well in war or markets. **If I’m going into battle or taking a market exposure … yes, I want to have personal conviction and information. But even more so I want to know if I have the intra-group and inter-group dynamics on my side. God is always on the side of the big battalions, said Voltaire, and that sounds like pretty good investment advice, too.

http://www.zerohedge.com/news/2013-12-22/construction-robert-capa