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Third Quarter 2016 - "Heuristics"

There are many biases that can come into play when making decisions; where one lives and works, where one grew up, and the company we keep (and have kept in the past) all play a meaningful and often not readily apparent role. These biases are inherent to being human 鈥 everyone has them, and while some are self-aware enough to acknowledge them, others are not. In the work we do as investment advisors, allowing such biases to affect our process could lead to poor decision making 鈥 not only in single instances, but in a systematic and serial manner. In this way, an awareness of the biases and other flaws which affect our decision making becomes quite important. Decision making in the investment world is often governed by what psychologists call "heuristics". Most clearly defined, heuristics refers to the way in which we find adequate, though often imperfect answers to difficult questions. In essence, it is the psychological process we use during complex decisionmaking. As complex decision making encompasses the vast majority of what we do as investment consultants and researchers, understanding the way heuristics impact our processes is of paramount importance. Awareness, in our view, is the first step. Addressing them is the next...

Client Letter 2016Q3 Duplex.pdf501.05 KB