Shakespeare’s Cassius got it about right when he pointed out that “the fault, dear Brutus, is not in our stars but in ourselves”. He might have fine-tuned the remark by adding that the fault is in our thinking – something to ponder as the UK goes into a second, and far more contentious, lockdown. And the great gift of Covid-19 – delivered, admittedly, at a shockingly high price – is that time and again the mayhem it makes illustrates just how messed up our thinking really is.
For investors, to be reminded of this is especially valuable. After all, this is what investors do. We think. We gather facts, we analyse them and then we act. On the one hand, therefore, it is somehow consoling that health-industry experts, making calls on which thousands of lives may depend, cannot dodge the cognitive traps that have ensnared investors through the ages. If these guys, despite their fluency in heuristics and biases, are suckers for phoney thinking, then we poor investors – risking nothing more than a bit of capital here and there – can be forgiven for making the same mistakes.