How much do we really know about our investments?

I’m a big space nerd. To the point that for my birthday two years ago my girlfriend flew us down to Houston to tour the Johnson Space Center (spoiler alert: it was awesome). Some of my favorite books the past few years have either been about the Apollo missions or how we’re going to get to Mars. So you can imagine how excited I was last year when we were out getting drinks with friends and one of the friends-of-a-friend was a woman who works at NASA. I basically bombarded her with questions the entire night.

One of the main things I was asking her about was what obstacles they still need to overcome to be able to get to Mars. She was giving me some pushback on what I thought I knew about space radiation and I remember starting the next sentence “I know [random blurb about space radiation].”As soon as I was done blabbering I thought to myself “why the hell did I just start that sentence with ‘I know’? I’m talking to a freaking NASA scientist about space travel and all I’ve done is read some books and online articles about the topic. That hardly counts as knowing.”
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How Effective are Boards of Directors?

Directors are supposed to represent shareholder interest. Isn’t it ironic then that new directors are usually a) handpicked by the CEO and b) not shareholders? How can a director represent shareholder interest when they haven’t been a shareholder? The situation is even worse when a hired CEO who has little share ownership himself is picking directors.

I recently read Dear Chairman, which is a great book about corporate governance (or lack thereof) on public company boards. One of the examples from the book was Steve Jobs inviting someone to join Apple’s board. But after that person mentioned some of his ideas to improve corporate governance, Jobs rescinded the offer. He wanted directors who were yes-men, not ones who wanted to change things. This happens all the time and it shouldn’t be a surprise. Humans are selfish and we look out for ourselves first (and that’s how it should be, our self-preservation instinct is a good thing). A CEO wants to keep his cushy position making way too much money every year—why would he want to shake up the group of people that “oversee” him? It makes perfect sense when you think about it from a psychology standpoint.
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Human Biases Make Investing Hard

I recently read Thinking, Fast and Slow for the first time, one of the go-to books on human biases. If you’re unfamiliar, there are many things the human brain does that are both automatic and unconscious. You can’t look at “2+2=” and not have “4” pop to the forefront of your thoughts—it’s automatic. Most of these unconscious processes are there for our own good thanks to generations of evolution, but sometimes these innate biases can get in our way. Being aware of these biases is the first step to being able to recognize and overcome them. Thinking, Fast and Slow dives into many biases that affect us, but I want to talk about the ones that relate most to investing.
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