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Human Behavior Pros on Michael Covel Podcast

Great Behavioral Minds
Great Behavioral Minds

Here is an easy way to dig into so many of the psychology pros that have appeared on my podcast.

It will only take you around 30 hours to listen to all.

What else are you going to do? Watch that Kardashian show?

This is 30 hours of podcast episodes that will change your life.

Dig in.

Human Behavior: Core to Trend Following

Calm
Calm

Consider an excerpt from Trend Following:

Perhaps not surprising, trend followers have spent as much time observing and understanding human behavior as they have trading. Understanding human behavior and how it relates with markets is commonly referred to as behavioral finance.

Behavioral finance evolved out of a contradiction between classical economic theory and reality. Economic theory is based on the assumption that people act rationally, have identical values and access to information, and use rational decision making. The truth is people are irrational and seldom make completely rational decisions even if they think they do. I have had the good fortune to learn from some of the top minds in the field of behavioral finance. From Nobel Prize winner Vernon Smith to Charles Faulkner, my eyes have been opened. Faulkner outlined the core issues:

“The current proliferation of electronic technologies— computers, the Internet, cell phones, 24-hour news, and instant analysis—tend to distract us from the essentially human nature of markets. Greed, hope, fear, and denial, herd behavior, impulsiveness, and impatience with process (‘Are we there yet?’) are still around, and if anything, more intensely so. Few people have absorbed the hard neuroscience research that reasons arrive afterwards. That given the choice between a simple, easy-to-understand explanation that works and a difficult one that doesn’t, people tend to pick the latter. People would rather have any story about how a series of price changes happened than that there is no rational reason for it. Confusing hindsight with foresight and complexity with insight are a few more ‘cognitive illusions’ of Behavioral Finance.”

Faulkner is correct, but that doesn’t make his words easy. The problem is that by not accepting that truth, you will get into trouble one way or another, as Carl Sagan reminds us:

“It is far better to grasp the universe as it really is than to persist in delusion, however satisfying and reassuring.”

A few years after writing Trend Following I came across another great mind in the field of human behavior and psychology, Alan Watts. Consider some feedback from a listener:

Mike,

Thanks for turning me on to Alan Watts through your podcasts. Below is a link to an audiobook that I think you may find interesting, considering your interests in yoga and other eastern traditions. Andrew is a Lama (not a llama) and an old friend of mine: Here

Enjoy!
[Name]

Thanks!

Michael Mauboussin Will Make You Think

Michael Mauboussin appeared in my film Broke a few years back and I have always enjoyed his efforts. While not a trend follower much of his work dovetails nicely with the heart and soul of trend following success: human behavior and inefficient markets. Two recent Mauboussin works worth reading (PDF):

The Importance of Expectations. The Question that Bears Repeating: What’s Priced in?
Shaking the Foundation: Revisiting Basic Assumptions about Risk, Reward, and Optimal Portfolios

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