Financial industry veteran Fustey explains how a naïve view of risk and faulty decision-making leads investors down the road to disappointment.
If common sense says to “buy low, sell high,” then why are so many individual investors stymied by investments that fail to live up to their expectations? Fustey argues that much of the problem lies in the investor’s brain. Pointing to research from the fields of neuroeconomics and behavioral economics, the author describes the battle between our “two minds,” where our evolved “logical brain” and our more primal “automatic brain” compete for dominance while making decisions. The conundrum is made worse by the fact that humans do not always process information correctly. The book adeptly catalogs the biases and mental shortcuts that can distort our perception of risk. Trading based on news reports and a tendency to follow the herd are just two mindsets that can negatively impact investment decision-making. Fustey also lambastes two prevailing investment theories—the Efficient Market Theory and the Modern Portfolio Theory—as flawed. His criticism extends to the financial-advice industry and actively managed investments such as mutual funds, which he contends are riddled with hidden costs, conflicts of interest and self-serving tactics that exploit investor weaknesses. Perhaps the book’s biggest warning is to avoid “chasing past returns”; too many investors mistakenly believe an investment’s past returns can predict its future performance. A novice may be intimidated by the complex financial concepts covered in the book, but the author manages to express his views in everyday language bolstered with supporting evidence. Fustey ultimately proposes a practical, though not effortless, solution—combining exchange-traded funds with the strategic use of puts and calls to hedge against damaging losses. As with everything in the investing world, the book’s arguments likely will be disputed by other financial experts. At the very least, however, it can prompt the average investor to ask tougher questions when his financial advisor pitches another mutual fund that seems like a sure bet. Persuasive, no-holds-barred advice that will lead investors to rethink where they put their nest eggs.
Pub Date: Aug. 29, 2011
ISBN: 978-1463525897
Page Count: 221
Publisher: CreateSpace
Review Posted Online: Sept. 27, 2011
Review Program: Kirkus Indie
Striking research showing the immense complexity of ordinary thought and revealing the identities of the gatekeepers in our...
A psychologist and Nobel Prize winner summarizes and synthesizes the recent decades of research on intuition and systematic thinking.
The author of several scholarly texts, Kahneman (Emeritus Psychology and Public Affairs/Princeton Univ.) now offers general readers not just the findings of psychological research but also a better understanding of how research questions arise and how scholars systematically frame and answer them. He begins with the distinction between System 1 and System 2 mental operations, the former referring to quick, automatic thought, the latter to more effortful, overt thinking. We rely heavily, writes, on System 1, resorting to the higher-energy System 2 only when we need or want to. Kahneman continually refers to System 2 as “lazy”: We don’t want to think rigorously about something. The author then explores the nuances of our two-system minds, showing how they perform in various situations. Psychological experiments have repeatedly revealed that our intuitions are generally wrong, that our assessments are based on biases and that our System 1 hates doubt and despises ambiguity. Kahneman largely avoids jargon; when he does use some (“heuristics,” for example), he argues that such terms really ought to join our everyday vocabulary. He reviews many fundamental concepts in psychology and statistics (regression to the mean, the narrative fallacy, the optimistic bias), showing how they relate to his overall concerns about how we think and why we make the decisions that we do. Some of the later chapters (dealing with risk-taking and statistics and probabilities) are denser than others (some readers may resent such demands on System 2!), but the passages that deal with the economic and political implications of the research are gripping.
Striking research showing the immense complexity of ordinary thought and revealing the identities of the gatekeepers in our minds.Pub Date: Nov. 1, 2011
ISBN: 978-0-374-27563-1
Page Count: 512
Publisher: Farrar, Straus and Giroux
Review Posted Online: Sept. 3, 2011
Kirkus Reviews Issue: Sept. 15, 2011
BOOK REVIEW
IN THE NEWS
These are not hard and fast rules, but Meyer delivers important reading for those engaged in international business.
A helpful guide to working effectively with people from other cultures.
“The sad truth is that the vast majority of managers who conduct business internationally have little understanding about how culture is impacting their work,” writes Meyer, a professor at INSEAD, an international business school. Yet they face a wider array of work styles than ever before in dealing with clients, suppliers and colleagues from around the world. When is it best to speak or stay quiet? What is the role of the leader in the room? When working with foreign business people, failing to take cultural differences into account can lead to frustration, misunderstanding or worse. Based on research and her experiences teaching cross-cultural behaviors to executive students, the author examines a handful of key areas. Among others, they include communicating (Anglo-Saxons are explicit; Asians communicate implicitly, requiring listeners to read between the lines), developing a sense of trust (Brazilians do it over long lunches), and decision-making (Germans rely on consensus, Americans on one decider). In each area, the author provides a “culture map scale” that positions behaviors in more than 20 countries along a continuum, allowing readers to anticipate the preferences of individuals from a particular country: Do they like direct or indirect negative feedback? Are they rigid or flexible regarding deadlines? Do they favor verbal or written commitments? And so on. Meyer discusses managers who have faced perplexing situations, such as knowledgeable team members who fail to speak up in meetings or Indians who offer a puzzling half-shake, half-nod of the head. Cultural differences—not personality quirks—are the motivating factors behind many behavioral styles. Depending on our cultures, we understand the world in a particular way, find certain arguments persuasive or lacking merit, and consider some ways of making decisions or measuring time natural and others quite strange.
These are not hard and fast rules, but Meyer delivers important reading for those engaged in international business.Pub Date: May 27, 2014
ISBN: 978-1-61039-250-1
Page Count: 288
Publisher: PublicAffairs
Review Posted Online: April 15, 2014
Kirkus Reviews Issue: May 1, 2014
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