Nobel Prize winner in Economics gives PRECIOUS tips on how to invest better

This Tuesday, the 30th, Daniel Kahneman, winner of the Nobel Prize in Economics in 2002, pointed out in an interview some directions that investors can follow in the midst of a world that requires decisions to be taken quickly and assertively.

The interview took place at the Data Driven Business event, which was promoted by Neoway, a software company acquired by B3 last year.

Kahneman, who is regarded as the father of behavioral finance, released his book “Noise: A Failure in Human Judgment” in 2021. The purpose of the book was to share his theory that won him the Nobel Prize. He also wrote “Fast and Slow: Two Ways of Thinking”.

According to his theory, we are not rational, but neither are we irrational. “We are not rational from a technical point of view. The human mind has this limitation. We are subject to cumulative errors of reasoning.”

These repeated mistakes are heavily discussed in the book “Fast and Slow”. Among them is loss aversion, which causes people to react much more intensively to losses than to gains. Kahneman also explains the fact that people are more risk averse in choices that involve certain gains, while they are more open to taking risks in choices that can cause potential losses.

In this way, what can be done to avoid both spills and noise at decisive moments? This can be done in a simple way: delaying the intuitive and quick decision as much as possible. It is important, before making decisions involving investments, to gather as much information as possible on the subject. This is part of what Daniel calls “decision hygiene”.

“Would it be possible to invest better this way? It’s the best advice I could give!” he said at the press conference.

Kahneman also said that algorithms will always be more efficient than human decisions, due to the lack of noise. However, if there is no noise in the algorithm, there is the bias placed in it by the data creator.

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In his view, algorithms pose another problem: they encourage political polarization. “If you advocate the death penalty, you will be exposed to strong and extreme messages because the Google wants you to stay longer on their platform. It is a negative effect for society. The algorithm is a partial solution: it gives me what I like, but it should also include a random effect, other things to tempt me to do and think differently,” he said.

Paulo Amorim

Paulo Henrique Oliveira holds a degree in Journalism from Universidade Mogi das Cruzes and in Radio and TV from Universidade Bandeirante de São Paulo. He serves as editor of the FDR portalwhere he already accumulates vast experience and research, producing articles on economics, finance and investments.


The article is in Portuguese

Tags: Nobel Prize winner Economics PRECIOUS tips invest

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