"I think a lot of people don't realize that investing is a problem that's been solved. We know what the average returns are for equity, for fixed income. We know what inflation looks like over the long haul. We know what the economy broadly does, what the range looks like. The variable, the wild card, that we haven't yet solved for is our own behavior."
"So our brain is this wonderfully evolved organ. It's less than 5% of our body weight, it consumes 20% of our energy, and our big brains are what's helped us essentially dominate the planet. We're a social cooperative species. We've evolved and adapted in a very hostile world. And all of the instinctual lessons we've learned over the past 2 million years, all of the way we're wired, are geared to keep us alive in those sort of dangerous circumstances."
Investment returns, inflation patterns, and long-term economic ranges are well characterized. The remaining unpredictable factor is human behavior, which can erase years of correct investment choices through a few mistakes. Focusing on avoiding behavioral errors offers a clearer path to preserving wealth than endlessly seeking novel investment strategies. Human cognition evolved for survival in hostile environments, favoring attention to threats, rapid action, and sensitivity to bad news. Those instinctual wiring patterns clash with modern financial markets that are recent in evolutionary terms, creating systematic biases that impair investment decision-making.
Read at Big Think
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