I haven’t been able to go for a run for quite some time, being bogged down by work, life and the haze (ah, excuses). It is all in the mind, as they all say.
Finally got my lazy ass down to Punggol Waterway for a couple of runs in the nice weather, and it was simply amazing how much the area has changed in a couple of months. HDB flats are completed, SAFRA construction is underway and Punggol Waterway Point is almost done as well. Here is an artiste impression of the end product.
During the run, it is usually the perfect opportunity to clear my head and most of the time, my mind tends to wander from ideas to thoughts seemingly without any inhibition. As I roamed the waterway, my mind kept returning to the idea of Authority Bias, and this is partly inspired by some of the recent events in the local stock market.
Authority Bias concerns the valuing the opinions of an authority, especially in the evaluation of something we know little about. Simply said, people tend to follow people who they believe to be authorities.
It is human nature, after all. Especially when it comes to money, it makes a lot of sense that folks seek some kind of indications or signs that a person, be it a trainer, an author, a speaker or a blogger knows what he or she is talking about. Naturally, people look for signs of credibility.
In the realm of finance bloggers, is a person of perceived authority (in the field of finance or investment) likely, or able to participate in blogging? If not, what is the equivalent metric by which authority is measured?
Listing the 24 causes of human mis-judgement listed by Charlie Munger in his 1995 Harvard University speech, he mentioned a specific example on bias from over-influence by authority –
You get a pilot and a co-pilot. The pilot is the authority figure. They don’t do this in airplanes, but they’ve done it in simulators. They have the pilot do something where the co-pilot, who’s been trained in simulators a long time — he knows he’s not to allow the plane to crash — they have the pilot to do something where an idiot co-pilot would know the plane was going to crash, but the pilot’s doing it, and the co-pilot is sitting there, and the pilot is the authority figure. 25% of the time the plane crashes.
Of Best Selling Authors ..
Some people write books, and even self-publish them. Does being an author immediately gives credibility? If so, does it mean that one can simply buy authority? Even if sales sucks – nobody knows right?
And then, there are authors who goes even further – they pay to buy their own books so that they get onto the best-seller list. One single time is all they need, after which they can thump their chest and proclaim themselves a best selling author.
Well, not so profitable in the short run, but wow! Imagine how much he or she can negotiate for in the next book deal with the new found status as a Wall Street Journal best selling author? After which, talks and seminars would proved to be a lucrative source of income. Or start running courses as a trainer soon after.
Soon, we may see an advertisement that looks like this! Notice the tangible achievable result in a fixed time complemented by a perception of good value plus an implied scarcity of available spots.
Wall Street Journal’s Best Selling Author of “Earn Your First Million In One Year” – Limited time only! 2-Day course @ $299 (Course valued at $599, Videos valued at $299 plus autographed copy of the Book valued at $59). Guaranteed to make your money back in your first month! Only SEVENTEEN spots remaining!
.. And Influential Bloggers
Let’s think about some of the really popular finance bloggers that we know of. What makes them influential or credible? What factors would impact the audience more?
Is it their profession?
Or does age matter? A 18 year-old dishing out financial advice compared to a 38 year-old financial independence superstar on the verge of an early retirement – who would have more authority?
Perhaps their blog is known for publishing exclusive content or extremely rare information? Are well researched technical posts a daily affair to look forward to?
What about the person’s wealth or portfolio size? Do we ever wonder how did they acquire their wealth? By inheritance? Income? Investment? Strike Toto?
For superstars of the blogosphere, how do we measure the success of a blog? Page views? Number of comments? Number of twitter followers? Number of page likes? Number of subscribers? Does it thus equate to sound principles and good advice?
With the tremendous influence being wielded by some bloggers, I couldn’t help but be reminded of this popular saying –
.. With great power there must also come — great responsibility!
Unfortunately, there is one aspect that is simply beyond their control. Are their writings, made from their perspective, being consumed and understood in the intended way by the people who read them? Intentions are typically good but results may somehow turn out to be unexpected, unfortunately. It is like driving a car. One can be a perfectly safe driver, but then there is no way to prevent other drivers from crashing into you right?
Monkey See, Monkey Do
Not so long ago, Saizen REIT provided a windfall to investors when they accepted an offer for the acquisition of all of its real estate assets which boosted its share price from $0.85 to $1.10 practically overnight.
Disclousure : I have a small stake in Saizen REIT as well, but I don’t usually blog about individual stocks I invest in.
What I found to be more amazing were the investors who didn’t know how to find out the reason for the price jump. I would think that the official Saizen website would be an obvious source of credible information. That’s undeniable authority for sure.
Instead, the preferred mode of acquiring information, for some, is to ask a blogger. Mind boggling! Are some investors lacking the necessary knowledge to even begin investing? Are they aware of Saizen’s tumultuous history? Were they simply lucky this time round?
Let’s turn our attention to another trust based in Japan – a business trust instead of a REIT, this time round. See here for the difference between a business trust and REIT. I wonder if Accordia Golf Trust’s less than glowing earning results would give some investors sleepless nights.
Are some investors succumbing to Authority Bias and failing to exercise their due diligence? Are they making decisions that they otherwise wouldn’t have made, because of the influence from a person of authority?
Sometimes, I worry ever so slightly for them, and their family. Of course, sleepless nights for some may well be an excellent opportunity for some to up their stakes. Water can sink, and float, a vessel.
Building An Online Persona
The real person behind a blogger’s persona can anything beyond your wildest dreams. Some people tend to present their best side when creating their online persona. Best be prudent and take everything on the web with a pinch of salt.
So, are you curious who the Turtle Investor actually is?
I’m just an average guy living in a HDB apartment – no car, no private jet, no multi-million portfolio. Neither rich nor famous. Neither old, nor wise. I’m nothing but a blogger who likes to write.
Or am I?
More Than Index Investing
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