Here are the links to my thoughts on the needed new paradigm in risk management (All About Alpha) and the three things anyone can do to be more successful in the financial markets.
What were they thinking? From MF to LTCM
3 Things anyone can do better to understand the psychological side of the markets - the first blog post in Psychology Today’s new blog Market Mind Games
Risk ain’t what it used to be – if fact, most of the time it isn’t even risk at all. Instead it is something called Knightian Uncertainty – or the fundamental inability of humans to know for sure what will happen tomorrow. Yet we have to make decisions about tomorrow all the time.
Reams have been written in the last decade about how we decide but the truth is we’ve still only got a map that /maybe/ is the equivalent of a 19th century world map. And I specifically say maybe because there is so much we know that we don’t know.
Having said that, there are a startling number of things we are learning that turn the conventional wisdom upside down.
1. Context is everything. Even something as definitive as 2+2 = 4 is technically influenced by context. (Depending on the first language you learned, your brain will process that arithmetic differently).
2. Most of our thinking happens below or beyond our awareness – i.e. in our unconscious minds.
3. We have to have emotion to make any kind of decision at all – so trying to set it aside actually hurts us because in effect we are purposely choosing to ignore what may be the most important factor.
And that’s just the beginning.
So think about the implications – for leadership, for tough choices, for markets and for life in general. We literally need to rethink thinking itself – a task I offer a strategy for in MARKET MIND GAMES.
Two new terms you will (eventually) read in this book I am feverishly working on. (It’s true – I am having a blast and really want nothing else but to be able to work on it… hence, my choice of the word feverishly): “Travesting” – meaning the combination of trading and investing that everyone needs to be undertaking in order to manage their own portfolios and by extension their own futures and “fC” for the feelings context in which we make all of our decisions but certainly the reality with which we make “risk” decisions.
Others that might be new -
Emotion Analytics – internal and external – as risk management and strategy inputs.
Emotional Architectures – the basic reactionary/perceptual explanations we bring to any situation – both conscious and unconscious.