THE BEHAVIORAL INVESTOR NOTES FROM SEASON 1
A production of Mad Max Capital
PURPOSE STATEMENT
We solve the mathematical problem of causing an enormous increase in one's bank balance through human effort.
The podcast therefore has two themes, mathematics and human behaviour. Together, behavioural investing. We take a first principles approach by summarising scientific studies and interviewing psychology and mathematics researchers. This will show us the first principles. We will then reason from these first principles to the best strategy to cause optimal human investing behaviour.
In essence, we are using a biological system to own businesses to cause a mathematical outcome.
FIRST PRINCIPLES
WHAT
From WIkipedia, this is a first principle:
“A first principle is a basic proposition or assumption that cannot be deduced from any other proposition or assumption. In philosophy, first principles are from First Cause[1] attitudes and taught by Aristotelians, and nuanced versions of first principles are referred to as postulates by Kantians.[2] In mathematics, first principles are referred to as axioms or postulates. In physics and other sciences, theoretical work is said to be from first principles, or ab initio, if it starts directly at the level of established science and does not make assumptions such as empirical model and parameter fitting.”
Elon Musk talks a lot about using first principles - https://www.youtube.com/watch?v=NV3sBlRgzTI. He said that is how he made cheaper battery packs, by simply using the laws of physics and chemistry, assembling the raw materials needed and designing his own, instead of buying them off the shelf. This enabled them to achieve their own application of physics, chemistry to design something more efficiently and cheaply than what other battery manufacturers had done.
Another example is on the FS blog: https://fs.blog/2018/04/first-principles/, this passage is instructive:
“Every play we see in the NFL was at some point created by someone who thought, “What would happen if the players did this?” and went out and tested the idea. Since then, thousands, if not millions, of plays have been created. That’s part of what coaches do. They assess what’s physically possible, along with the weaknesses of the other teams and the capabilities of their own players, and create plays that are designed to give their teams an advantage.
The coach reasons from first principles. The rules of football are the first principles: they govern what you can and can’t do. Everything is possible as long as it’s not against the rules.
The play stealer works off what’s already been done. Sure, maybe he adds a tweak here or there, but by and large he’s just copying something that someone else created.”
WHY
So this first principles approach has the power to produce a more efficient and cost effective design or strategy than taking something off the shelf. We better use it too in order to check that existing wealth accumulation strategies are correct and to see if we can do better than them.
SEASON 1
WHEN
Season 1 occurred over 4 months from August to December 2020.
WHERE
Season 1 interviewers operated from 4 cities (Brisbane, Adelaide, Novi Sad and Doha) in 3 countries (Australia, Serbia and Qatar). We conducted 6 interviews with guests in 3 countries (4 from Australia (Ben Thackeray, Tom Watts and Phil Wilkes), UK (Tom Perfremont (Australian) and Leigh Caldwell) and America (Ross Bentley).
WHO
Professions covered were accounting, clinical psychology, commercial pilot instructing, car race coaching, professional investing and mathematics (although Leigh said his latest focus is cognitive economics consulting). We thus had two guests for the mathematics theme (accountant and mathematician) and 3 guests for the human behavior theme (psychologist, instructor, coach). The professional investor was an example of someone applying principles from both themes.
INTELLECTUAL HEROES CATALOG
Happiness
Epicurus
Alain de Botton
Primate studies
Desmond Morris
Robert Sapolsky
David Buss
Leda Cosmides
John Tooby
Steven Pinker
Brian Roemmele
Delay discounting
Episodic future thinking
Mindset/motivation
Carol Dweck
Performance coaching
Phil Wilkes
Ross Bentley
Human factors
CD Wickens,
Ergodicity
Ole Peters
FIRST PRINCIPLES CATALOG
EPISODE 1: Ben Thackeray “Putting Ben to Work”
According to Epicurus, happiness is having friends and being free. Freedom he defines as not being dictated to, not having a boss and having enough time to contemplate and improve the self. Further information available from Alain de Botton: https://youtu.be/irornIAQzQY
Financial freedom Ben defines as having enough funds to do big and large scale projects and that it would not matter to one’s financial safety to lose one’s job.
Compounding formula: A=P(1+(r/n))^nt.
A=final amount
P=initial principal balance
r=interest rate
n=number of times interest is applied per time period
t=number of time periods elapsed
Use an index fund with low costs to do the compounding.
One’s family can be used for a multigenerational approach to compounding.
The compounding formula and its potential multigenerational outcome can be used to recalibrate one’s attraction to small wants and desires as the cost of these when compounded over 108 years is incredible and will increase the time it takes to reach a billion.
EPISODE 2: Tom Watts “What a Psychologist Says About Hacking the Dopamine Reinforcement System to Compound Your Way to $1B”
Psychology can be used for behavioral coaching and fundamentally treats clients as computers to program.
Humans are primates.
Pages discussing this:
They are the species sapiens of the genus homo and are the only non extinct species of this genus: https://www.britannica.com/topic/Homo-sapiens
Evolutionary Psychology: A Primer: https://www.cep.ucsb.edu/primer.html
Books
The Naked Ape: https://amzn.to/3o0pPQi
The Human Zoo: https://amzn.to/3rMQySD
The Third Chimpanzee: https://amzn.to/2KUzs4P
Evolutionary Psychology: https://amzn.to/38S2Ss5
Speeches
Like other primates, there is sexual conflict in mating: https://www.youtube.com/watch?v=mu4Uki8VyLc
Human Behavioral Biology by Robert Sapolsky: https://www.youtube.com/watch?v=NNnIGh9g6fA&list=PL150326949691B199
Desmond Morris interview: https://www.youtube.com/watch?v=aZoJbK9hBMo&list=PLVV0r6CmEsFwtuDq9yKrhqqkJ-Era-N7w
In popular culture
The Gods Must be Crazy opening scene: https://www.youtube.com/watch?v=Qgs528eZXSs
The evolutionary psychology primer mentioned above states that overall species in the genus homo have been evolving for 10 million years.
The sapiens primate species in particular has existed for at least 400,000 years after a split which also created the species neanderthal.
The stress response is available from the palette of instincts this evolution has provided to this primate biological system and the urban environment that most of humanity now lives in frequently provides false positives for the deployment of this stress response: https://www.youtube.com/watch?v=D9H9qTdserM
These primates have had accounting for only 1% of that time, 4,000 years.
As discussed in the abovementioned primer, this is not enough time to adapt new, related instincts: “Principle 5. Our modern skulls house a stone age mind.
“Natural selection, the process that designed our brain, takes a long time to design a circuit of any complexity. The time it takes to build circuits that are suited to a given environment is so slow it is hard to even imagine -- it's like a stone being sculpted by wind-blown sand. Even relatively simple changes can take tens of thousands of years.
“The environment that humans -- and, therefore, human minds -- evolved in was very different from our modern environment. Our ancestors spent well over 99% of our species' evolutionary history living in hunter-gatherer societies. That means that our forebears lived in small, nomadic bands of a few dozen individuals who got all of their food each day by gathering plants or by hunting animals. Each of our ancestors was, in effect, on a camping trip that lasted an entire lifetime, and this way of life endured for most of the last 10 million years.
“Generation after generation, for 10 million years, natural selection slowly sculpted the human brain, favoring circuitry that was good at solving the day-to-day problems of our hunter-gatherer ancestors -- problems like finding mates, hunting animals, gathering plant foods, negotiating with friends, defending ourselves against aggression, raising children, choosing a good habitat, and so on. Those whose circuits were better designed for solving these problems left more children, and we are descended from them.
“Our species lived as hunter-gatherers 1000 times longer than as anything else. The world that seems so familiar to you and me, a world with roads, schools, grocery stores, factories, farms, and nation-states, has lasted for only an eyeblink of time when compared to our entire evolutionary history. The computer age is only a little older than the typical college student, and the industrial revolution is a mere 200 years old. Agriculture first appeared on earth only 10,000 years ago, and it wasn't until about 5,000 years ago that as many as half of the human population engaged in farming rather than hunting and gathering. Natural selection is a slow process, and there just haven't been enough generations for it to design circuits that are well-adapted to our post-industrial life.”
Delayed Discounting Theory: the longer you have to wait for profit, the less attractive the profit will be. You will take $10 now rather than $15 in a month. This has a formula: V=A/1+kD.
V=the indifference point
A=the amount of reward
1=to prevent V approaching infinity as D approaches 0
k=scaling factor
D=dela to the reward
Dopamine
Released in anticipation of something occuring that is favourable to our survival, which we value
Dopaminergic system sends dopamine from the ventral tegmental area in the middle of the brain to (https://www.youtube.com/watch?v=YzCYuKX6zp8):
The prefrontal cortex to divert attention to the reward source, for example prompting use of the eyes to focus on the reward source, for example cake
The amygdala to cause positive feelings, namely euphoria
The hippocampus in order to remember things about this experience like what the reward source was and who you were with
The nucleus acumbens, which control motor functions, receives dopamine to prompt more physical interaction with the reward such as spooning more cake into your mouth
As dopamine goes up with activation of this reward circuit, serotonin also goes down, reducing one’s feeling of being satiated or satisfied. This has consequences for drug use and overeating.
Robert Sapolsky points out that if interactions do not reliably result in a reward being presented, but only maybe, this results in hugely increased effort, something exploited by casinos: Sapolsky - Dopamine, Anticipation, & Relationships. Intermittent reinforcement. Contexts of certainty vs contexts of maybe. 50% maybe results in most goal directed behavior/effort response: Las Vegas casinos. Here the chance is actually only 0.01% but they try to convince people there is a 50% chance, resulting in the huge effort and interest in gambling.
SMARTER goals
Specific
Measurable
Attainable
Realistic
Time bound
Evaluate
Review
Episodic future thinking
Scheduling in time, in advance, to experience the anticipated fruits of my labour.
A sufficiently vivid imagination of this will cause dopamine to be released in anticipation of something highly valuable to me occurring.
EPISODE 3: Phil Wilkes “Interview with an A330 Instructor About How Pilots Manage Behavior”
Pilot checklists to investing
Procedural check lists
Challenge-response check lists
To do, or procedural check lists are stepped through on your own and often use a mnemonic to help get the order right and not miss anything. Challenge/response check lists happen with multiple crew members participating. These can be shorter, and occur at the end of a flow, which is a longer, more detailed procedure. The difference between flows and checklists is discussed on the Wild Blue Yonder blog. Rich Martindell says a flow is basically a set pattern of physical interactions the pilot has for example with the instrument panel in order to prepare the aircraft for something like a landing. A challenge/response checklist is then used after the flow in order to ensure the interactions had the correct result. Interestingly, checklists are not only used during take-off and landing but also throughout to ensure flight plan compliance.
Regarding urges
Pilots see them in terms of the impact of startle and surprise. Interestingly, this mental state can mean you don’t understand why something is happening, because you’re not taking the time to think. Decisions which are the product of a startled and surprised mental state might therefore be wrong. So, pilots are educated to anticipate they will be in a startled and surprised state when something goes wrong. They are trained to confirm that the situation they have recognised is correct, by referring to other people, or other instruments. Then they're taught to breathe, to pause, to give their mind more space to respond well. In this way, pilots respond to the impact of urges through a response structure which stops them reacting straight away, and shifts them to working through a thoughtful process involving other people. Additionally, an effect of their rigorous training is that where they do react without thought it can be what Phil termed a 'cue-based response' resulting from their training, rather than whatever springs to a mind that is unfamiliar with the problem before them.
Phil brought up the subject of human factors. Human factors is where being a human can get in the way of performance through biases, the startle effect etc. This is an area of psychology research we will have to review in future podcasts, for example by interviewing a researcher. Phil said training used to be about rote learning, with students exposed to thousands of different set plays to try to drum into them all the different ways to recover from disasters. Now they expose students to scenarios where there is no clear solution or set of procedures to teach. There are many possible outcomes, no set plays or checklists to help fix the problem. The trainer does not care what the solution is, the student may solve it a different way than the trainer. Instead the focus is on the process to arrive at the decision, and how this process could be refined. This produces pilots who will still be useful when a problem they face does not match any of a thousand set plays their training exposed them to. It produces pilots who:
recognise something has happened
confirm what has happened
go through an analytical decision-making process which leverages everything they have learnt during their exposure to scenarios in training, which will have equipped them with structures to guide the analytical process, rather than specific answers.
Phil stated that different pilots may have different structures or processes that help them get through an analysis to define what to do to respond to an incident. It is his role to help each individual pilot build their own effective analytical structure.
Temperament amongst pilots:
Recruit for people with the right temperament already
Human factors research states that temperament is an observable skill, therefore through education people can be given the knowledge necessary to gain the right temperament
Through training and practice, pilots will respond with the right temperament to a black swan event
Regarding biases, Phil mentioned the following four biases and then there were some remarks about how to communicate to avoid the authority bias. The biases were:
Group think – this is conformity, which can arise due to the lack of a devil’s advocate. It is the act of talking yourself or others into something so the group thinks as one rather than benefiting from different opinions.
Confirmation bias – this is ignoring evidence which does not confirm what you already believe.
Expectation bias – this is seeing something based on what you expect to see – giving lip service to checklists.
Proximity bias – this is the idea that those closest to the situation would have a better understanding of it and how to fix it when it can help to have people from another location look at it. One could ask the question: “What is unique about this situation at this location that could be causing a bias?”
Phil said a number of times that simply being aware that these biases exist is key. It creates the opportunity to question an approach by realising that what’s happening looks like a particular bias. Some airlines actually have had bias training. The message is everyone is biased, particularly in key areas. There are questions you can ask yourself in situations to make yourself aware of the bias and eliminate it.
Phil spent a lot of time talking about making it safe to express dissent. He said to create a feeling that even new team members have a right to express ideas even though they have less authority since they’re new. Even if they’re new, they might have been at another airline for a long time, or may have had a lot of non-piloting experience that relates to the situation before the team. This reminds me of the authority bias. It must be a big problem amongst pilots because Phil even had a phrase, ‘level the cockpit gradient’, to describe removing the bias. The aim appears to be to commoditise pilots, they are all simply sources of problem-solving agency regardless of how long they have been doing it and the team output is better when everyone has a say.
Further emphasising the issue of the authority bias, Phil also mentioned language with a special name: Managing Upwards, or Escalating Language for Raising Concern. This starts with:
Hierarchy of cautionary language
Raise a concern
Why are we doing this? I am a bit concerned about this.
If questions are ignored: I don’t think we should be doing this.
Emergency language: Captain, you must listen.
Pilots are trained not to question this emergency level language. Do this now. Talk about it later. To foster an environment of inclusiveness and listening, you just do what people tell you to do at the fourth level, emergency language. People have license to do what it takes to save someone’s pilot license.
Anything that we missed about how to manage behaviour in our discussion of urges, temperament and biases. He made the following 5 points:
Take the pressure off by only worrying about your own life as a pilot. If you land and save your own life, by default everyone else has been saved.
Revisit your training at least yearly. Spend hours or days on discussing human factors and tools to address human factors.
Human factors, also known as, or at least the basis for, modern performance coaching.
Training, rather than checking, is now the focus of simulator sessions, with a human factors discussion prior to each.
Education, training, then practice. Sim sessions 4x per year then information packages are sent out to them throughout the year.
Debriefing
Journaling
Biases
Group think
Confirmation bias
Expectation bias
Proximity bias
EPISODE 4: Ben and Wil “Behavioral Investors Without Borders - Blue Ocean Strategy, Compounding in Nature, Compounding One's Income vs Compounding FOR Income and Some Rants”
Better businesses invent their own category or niche: a blue ocean
Example is the founder of Weebly describing how his website invented the category of drag and drop web interface for designing a website: https://www.youtube.com/watch?v=0LNQxT9LvM0&t=2265s
EPISODE 5: Ben and Wil “Star Principle, Strawman, Why the Value Factor Drawdown is Ending”
Similar to the Blue Ocean Strategy, The Star Principle says to invent your own niche and set up a business that dominates the niche. The niche market should be growing at a rate of at least 10% for it to be a star business. You can also invest in such businesses.
The value factor drawdown is the largest on record in a 200 year study. Some of the best value investing careers have occurred simply because they began at the bottom of such a drawdown. So now is a good time to start.
EPISODE 6: Ben and Wil “Creative Destruction and Capitalising Internally Developed Intangible Assets”
Value factor drawdowns end when regulators step in to reign in the excesses of a technological or other revolution which has caused a lot of creative destruction.
This is now occurring with US and Chinese regulators threatening to break up monopoly tech companies.
Value investors can get their hands dirty in periods of creative destruction by capitalising internally developed intangible assets, converting some of the costs for R&D for example into assets on the balance sheet. This, however, is a subjective process and requires deep knowledge of the business. Hard to do accurately for almost all investors.
EPISODE 7: Ross Bentley “What Behavioral Investors Can Learn from Ross Bentley, Racing Coach and Former IndyCar Driver”
Information can be exchanged efficiently through dance, such as how much the values between two people overlap - Hawaiin greeting dance during house inspection.
Connection at a spiritual level when investing - copying everyone else’s approach can only mean you’ll do as well as others, not better.
Champions adapt - being too aggressive means crashing, being too cautious means losing.
Every successful athlete in the world uses visualisation as a unique practice tool.
Use mental triggers like saying the word ‘patience’ to yourself to cause a patient state of mind - sounds like neuro linguistic programming woo.
Triggers can also be used to start a procedure you already planned/practiced.
Temperament is a balance between guts and analysis - too much of the former causes more crashes due to lack of caution, too much of the latter slows you down too much due to too many details. Flexibility - be aggressive at the right time, passive at the right time. Mistakes are learning takes, each lap is a reset and you can try again.
A team that takes a deliberate approach to having common visualisation and triggers is a team with an advantage
Mindset
“The power of yet”
Growth mindset - “I’m constantly evolving and adapting”, setbacks are feedback to assist growth, belief they are not there yet, but will be one day with extra striving
Fixed mindset - “This is how I am”, preference for cheating due to lack of belief in ability to grow
MI+A=G
MI=mental image of what it is and how I’ll get there
A=awareness - accurate, immediate feedback of how I am in relation to MI
G=goal
With awareness of the difference right now between the current state and the mental image, the brain will work to bring the two together to achieve the goal. To fix poor performance, fix lack of MI clarity or awareness of proximity to MI
Sleep
Being awake for 18hrs is the same as a blood alcohol content of 0.05%: https://www.cdc.gov/sleep/about_sleep/drowsy_driving.html#:~:text=Studies have shown that going,(BAC) of 0.05%.&text=Being awake for at least 24 hours is equal to,blood alcohol content of 0.10%.
EPISODE 8: Tom Perfremont “How T.E.P. Investments Arbitrages Small Cap Investor Behavior”
Fewer professional analysts look at small businesses, hence there are going to be opportunities there due to miss pricings lasting longer.
Since small cap investors are likely to be amateur, they are more prone to emotional overrides
Those who assess the world with emotions experience a pendulum between fear (survival response is activated) and greed
Loss aversion - we feel losses 2-3x more than gains
Selective perception is basically confirmation bias. Perception is not balanced and neutral because greed and hope cause people to ignore some events.
Stock market is not a charity, in fact it is a place filled with people deliberately trying to boss others using emotions.
Behavioral arbitrage opportunities from all of this.
To maintain confidence
Control your environment
Consistency and stability
Avoid the pressure of short term performance
Have a big cash buffer so money I need for survival isn’t at risk
Professional traders
Perform regular due diligence
Check the progress of trades you’ve made in a spreadsheet with a live link to the market
Check announcements daily
Macro environment review
Work when you’re most productive, this is a big benefit of working for yourself
Not about volume of hours but productivity of those hours
Have a system in place for buying (to avoid fear keeping you out of the market) and selling (to avoid greed keeping you in the market)
Sell gradually, offload according to a system as you approach, achieve and exceed fair value.
This is in order to avoid the effect of greed.
Mean reversion (back down from exceeding fair value) will take your profits otherwise.
Another example of loss aversion is cliff height misjudgements are greater from the top of the cliff than the bottom.
Look for value stocks in combination with a major impending catalyst, such as
New management - example was former Seek CEO joining Redbubble upping the price 10%
New deals - example was Queensland Pacific Metals (was Pure Minerals at time of recording) announcing relationship with LG Chem, biggest battery maker worldwide.
Spinoff
Asset sale
Change in demand/supply
Regulatory changes
Milestones are a source of catalysts. Make an assessment of the likelihood of these milestones to play out and act as catalysts. Multibagger can be the result of multiple milestones playing out and each acting as catalysts.
Overall his approach is
Small cap
Value
Catalyst
He uses the Star Principle to identify good businesses.
The 80/20 principle is another first principle. 80% of output comes from 20% of effort but requires knowing what to do and when - you have to understand the world to know this.
Picks on the show: QPM, CXZ, RBL
EPISODE 9: Leigh Caldwell “A Mathematician Uses Non Ergodic Returns to Destroy The Hopes and Dreams of Naive Index Fund Investors”
Intangible assets
He is a consultant who assists businesses to build intangible assets inside people’s heads, or increase their value
The implication is that people are paying for something intangible, inside their heads, something that is a figment of their imagination!
Stocks could well have these qualities - cult stocks for example
Not only do these intangible assets exist only inside people's heads, but there are smart consultants like Leigh who seek to amplify or boost them
Goldilocks effect: we prefer to buy something in the middle in terms of price, so put up 3 bottles of wine with the one in the middle having an inflated price but since it is in the middle people will buy it
Social proof: highlighting the option most people bought - Amazon does this on all items by saying what else the product is often bought with
Anchoring: perceptions about the right price or donation are anchored to what’s in front of them like a sale price showing what the price supposedly was, and suggested donation amounts on a website or a default donation value. If the person is left to make up their own donation or price it will be much lower as their internal anchor is $0.
System 3: we use imagination to envisage and feel choice outcomes before making them. Project oneself into a house to pre-experience living there and register if that produces good or bad emotions. Mental simulation has been shown to activate different parts of the brain than systems 1 or 2 from Tverskey and Khaneman.
Hyperbolic discounting: like delay discounting, it is less painful to pay larger amounts for something in the future than lower amounts for it now. My future money always feels less expensive than what I have right now. My future self in 30 years cant come back in time and make me invest for retirement. My future reward has to outweigh my current reward. System 3 can be used to amplify future him. System 3 can be used to give myself and immediate emotional payoff for serving future me through imagination about how it would feel to have the money. Such as feelings of safety, comfort, taking care of family, even smugness at being better than others.
Investing
Keep it simple: passive, low fees
Betterment is an example of a finance firm founded on behavioral investing principles. They protect you from your own self sabotage from poor temperament and behavior.
Mathematicians refer to compounding as the exponential function, it underpins many significant theories and applications of mathematics
Examples of the exponential function in nature
Coronavirus R value, if it is 1.1 that means it’s compounding at 10%
Chain reactions in nuclear bombs or power plans
Virus or population growth
Cell division in the embryo
Basically where the creation of a new thing in turn can create its own new things
Ergodicity is where the time average is the same as the ensemble average. For example, 100 people tossing a coin each will result in 50 heads. 1 person tossing a coin 100 times will result in 50 heads. This is an ergodic system. The cross sectional sample is the same as the longitudinal one.
Index fund investing is non-ergodic. This is because of random volatility of about 15% per year on average, above and below the average post inflation return of 7%. The sequence of random volatility is not identical for all investors. Those investing in the index fund yearly for the sequence 1900-1950 will have a different sequence of volatility, and realised returns, than those investing from 1950-2000. Even though the average return across the full 100 years is 7%. Sequence risk makes it non ergodic. Economics is filled with non-ergodic phenomena cast as ergodic and as a result Ole Peters is attempting to rewrite the field.
Teaching compounding to kids
Rabbit population growth rate
Grains of rice on a chess board - pissing off the ruler
The exponential function is used throughout Euristica, an agent based model of an economy
Similar to fees charged by financial consultants or planners, Euristica shows that even a small difference in the exponential at the start produces a very large difference at the end
Over a 50 year simulation, Euristica found that
Men earn more than women as they are more likely to start a business
It also found blacks are poorer than whites simply because they start their lives with less assets
It shows governments/policy makers how playing with these parameters illustrates policy outcomes, for example how to best respond to coronavirus
He found adequate modeling of coronavirus required 60-80 parameters, all requiring deliberation about their settings.
The simulations are important for provoking questions as much as giving answers
Not everyone could save and invest at $35k/yr because a passive income involves others doing work whilst you are passive. Not everyone can sit passively at the beach or no one will make the pina coladas.
Nevertheless, it is still virtuous to become rich as there are spillovers from a capital asset which can result in financial opportunities for others, for example Rolls Royce employs people and only the rich can buy them.
Today's guest is Leigh Caldwell, partner at Irrational Agency (https://www.irrationalagency.com) and author of The Psychology of Price (http://amzn.to/leighbook). He began a mathematics degree from age 14 and is therefore the perfect man to check Ben's compounding spreadsheet discussed in Episode 1. Not only do we discuss his book and the exponential function but also an economy simulator that he has programmed called Euristica (https://www.youtube.com/watch?v=7a9FKsLf96U). We managed to get him on record registering an interest in using this tool to model different personal finance and investing behaviors across a population, so keep an eye on his future work. Considering these aspects and his blog about cognitive economics (http://www.knowingandmaking.com), Leigh is a very useful guest to have in completing this first season of The Behavioral Investor. Links to some items discussed in the episode are found below.
...or would he? Maybe he knows about non-ergodic returns ;-)
Leigh can be found here:
Twitter: https://twitter.com/leighblue
Blog: http://www.knowingandmaking.com
FIrm: https://www.irrationalagency.com
Book: http://amzn.to/leighbook
TEDx talk: https://www.youtube.com/watch?v=7a9FKsLf96U
Episode 8: How T.E.P. Investments Arbitrages Small Cap Investor Behavior
INTERVIEWEE:
Tom Perfrement is a successful young Australian small-cap investor who also currently happens to be the nation's 432nd best tennis player (Tennis Australia Rankings). Along with studying for an MBA at Oxford University and helping lead a not for profit (Good Data Institute), he also runs T.E.P. Investments as his full-time occupation. At one point Tom also achieved a coveted red heart on Hot Copper. Listen in as he pitches a few small and nano-cap ASX businesses whilst talking about his method of behavioral investing and achievements in self-mastery.
The discussion covered some psychology research about loss aversion (Tversky & Kahneman, 1992) and fear of heights (Stefanucci & Proffitt, 2009), see references below.
Regarding his assessment of Connexion Telematics, see this valuation on Strawman. Wil's analysis of the same is found here.
TOM CAN BE FOUND HERE ON SOCIAL MEDIA:
REFERENCES
Stefanucci, J. K., & Proffitt, D. R. (2009). The roles of altitude and fear in the perception of height. Journal of experimental psychology. Human perception and performance, 35(2), 424–438. https://doi.org/10.1037/a0013894
Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5, 297-323. https://doi.org/10.1007/BF00122574
THE BEHAVIORAL INVESTOR CAN BE FOUND HERE ON SOCIAL MEDIA:
G'Day all,
i'm brand new to investing and this is my first year, I know its a bit of a gloat but I set out at the start of the year to get my portfoilo upto $50k and as of today I have hit that mark... I have been enjoying these and thought I would share the fact that I reached my goal for the year when a few times I had my doubts and had to push through.
Thanks to Strawman and the Team this has been a great resource for me and I have learnt so much from this resource, hopfully I can contine to learn and grow.