“Just a week after 9/11, William Hirst and a group of researchers asked more than 3,200 people to write down where they were when they first heard about the 9/11 attacks and some facts about the attacks themselves. CLICK HERE for the full report.
The researchers then performed follow-up surveys 11, 25, and 119 months after the attacks to get a better sense about how our memories can change over time. The idea behind the study is that 9/11 is the kind of flashbulb moment that would be seared into people’s brains for eternity.
But that wasn’t the case.
They found after just a year there were glaring inconsistencies in the stories people were telling themselves about their own memories. And after 10 years, many of the participants couldn’t believe what they initially wrote in the days after 9/11 because their memories didn’t match up with what they said at the time.”
I was struck by this passage which I read in an article recently. It really got me thinking and questioning.
To start with, aren’t we pretty sure we remember things clearly, especially big things? And, if we don’t have perfect recollection about stand out events, what are the chances that we misremember the minutiae that make up much of our day to day living? And how could that affect what we do in the present? Or what we think about the future?
Understanding that we misremember should have quite a significant impact on how we go about things.
For starters, much of what we do in the here and now is informed by what we think happened in the past. But the research suggests that we have a hazy memory.
Even worse, we can behave like we’re sure about what will happen in the future. But our thoughts on the future are based on what we think happened in the past, e.g. “So and so will do this, because that’s what he has always done”.
Which means we’re making decisions today based on wonky / inaccurate / misleading / incomplete information and assumptions.
Then, of course, everyone has their own version of the truth, which is why, if you ask 20 witnesses to the same incident “What happened?”, you end up with 20 different answers. No two people see the same thing the same way, and neither of them are “wrong”.
Which is obvious when I write it down, but we don’t often given very much weight at all to it.
So, given we misremember, can we really wonder why we don’t get the outcomes we hoped for? Can we accept we know nothing about tomorrow and yesterday is a lie? Can only the present be trusted?
Imagine being entirely in the present and acting on only that. What effect would that have on our conversations and actions?
Maybe that’s not realistic, but shouldn’t just knowing we’re working with misinformation, and there’s more than one version of the truth, give us pause for thought?
And, if we act understanding that, wouldn’t that lead to better actions and outcomes?
How often do we ask ourselves questions like “Hang on a minute, are we sure we know what we think we know?” or “What if what happened isn’t really the way it was?”.
In finance (and politics and sport and economics) this is important. The press etc. are awash with stories trying to explain the past and predict the future.
We’re told by the experts that disaster awaits in the event of a no deal Brexit. How do they know? How can they be so sure?
None of them saw the financial crisis of 2007-08, did they? In fact, my recollection was that the powers that be were completely sure there wasn’t a crisis unfolding.
Here’s Chairman of the Fed, Ben Bernanke in March 2007: ““[The impact of] problems in the subprime market seems likely to be contained.”
And again, in February 2008: “At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year…”
And here’s Treasury Secretary Henry Paulson in May 2008: “I do believe that the worst is likely to be behind us.”
Have we got better leaders and experts this time round? I doubt it. So why do we continue to give credence to what they have to say?
I digress, the reasons why what is happening today has little to do with what happened yesterday. The press etc. feel they must give a reason and then look forward to predict/guess what might happen in the future. They feel confident and free doing this because they’ll never be held to account on either score.
Unlike your financial plan and investments which can suffer immeasurably. There’s always a reckoning.
Saying “No-one can be sure why the market dropped 5%” just doesn’t cut the mustard. Yes, there may be correlation in the reasons given but causation? Much less than we imagine.
Still, millions of us make decisions based on the past performance or experience when it comes to investing our money. Even at the most basic level – “It’s just gone up 10% so it’s bound to keep doing that.”
In the realm of financial planning and investing, there’s a simple solution.
Spread your investments as widely and sensibly as possible, stick to your strategy and block out the noise – do nothing other than rebalance and make sure there’s enough cash to cover the short term.
In so doing we’re proud to admit we can’t be sure why what happened yesterday happened or what’s going to happen tomorrow.
In terms of wider financial planning, we choose simply to act on the information we have today, that we know we can trust most, without reducing our ability to change tack as tomorrow’s information might require us to.
With such clarity, we prevent reliance on past experience or the futility of predicting the future. That’s an immense benefit, you will make fewer mistakes and get a much better outcome.
At least, that’s how it looks to me.
And apologies to any of you expecting a piece about Fleetwood Mac.
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