⏳ Reading Time: 9 minutesInvestors aren’t bad at investing; they’re often overwhelmed and exhausted by too many decisions. Our special contributor and Daily Telegraph columnist David Stevenson explores why poor financial behaviours are often driven by decision fatigue rather than lack of skill, and explains how greater discipline can help improve long-term outcomes.
Over 100 years ago, a statistician called Francis Galton attended a county fair in Plymouth where visitors were competing to estimate the slaughtered and dressed weight of an ox. Galton collected and analysed hundreds of eligible entries from the competition, including butchers and farmers who were highly expert in judging cattle, as well as many ordinary visitors guided only by their hunch. The middlemost (median) estimate was 1,207 pounds for the crowd. The actual dressed weight of the ox was 1,198 pounds – meaning the crowd was accurate to within 0.8% of the true value.
Roughly a hundred years later, another academic, this time a psychology and political science professor at the University of Pennsylvania, called Philip Tetlock, decided to tackle the wisdom of the crowd and the power of experts.
To test his theory, Tetlock pulled together 284 highly credentialed experts (economists, intelligence analysts, political scientists) and then tracked the performance of their individual predictions about the future. It won’t come as a surprise to learn that these experts were highly confident in their insights and largely dismissed the opinions of the crowd, aka the common person. Over two decades, Tetlock tracked 82,361 individual predictions they made about the future.
