Source: Our World in Data
I do a number of presentations about investing, behavioral economics and psychology. My favorite slides for a few years has been the focus on what kills us — heart disease, cancer — and what we fear: Shark attacks and terrorism; selfie deaths have become an issue even thought they are so small in number as to be statistically meaningless.
The above chart via Our World in Data shows how deaths are over- or under-represented in the media. Terrorism and homicide get greater disproportionate play versus kidney disease, heart disease and overdoses. It is no surprise that the emotional hot buttons generate more media buzz than do longer, slower, less fear-driven deaths. The media also drive the average person’s fears. This is what smart folks like Steven Pinker (The Better Angels of Our Nature: Why Violence Has Declined) and Hans Rosling (Factfulness: Ten Reasons We’re Wrong About the World–and Why Things Are Better Than You Think) have been describing for years.
What is it that motivates our own behaviors and psychology? Very often, we are unaware of what the factors are that move us. We need to become better at understanding ourselves; we are notoriously bad at metacognition.
This matters a great deal in business, in our personal relationships, in the formation of our worldview, and of course, in markets. Investors tend to fear the big splashy events like market crashes and hyper-inflation, while what they should really be concerned with are things like costs and their own behaviors. Over-trading, style drift, and chasing the new hotness are the equivalent of cholesterol and high blood pressure — each is much more likely to damage you or our portfolio than the big media focused issues we all tend to fear.
Does the news reflect what we die from?
Our World in Data, May 29, 2019
Fearing the Dramatic, Complacent for the Mundane (April 29, 2019)
Denominator Blindness, Shark Attack edition (February 5, 2019)
Shark Attacks Illustrate an Investing Problem (February 4, 2019)
Crashes & Terrorists & Sharks – Oh, My! (November 9, 2015)
How’s Your MetaCognition? (August 16, 2013)
Ritholtz: Your Brain On Stocks @ TBP Conference (October 14, 2011)