I’ve posted Entry #64 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s called Voters Don’t Know What They Want, and Neither Do Investors.
Juicy Excerpt: There’s a fundamental flaw in the way we think about politics (I learned about it from studying investing and I am going to tie it to that subject in just a bit). The flaw is the assumption of rationality inherent in our system.
We decide things through votes. There’s a rarely voiced assumption inherent in a decision to do that. The assumption is that people are capable of knowing their own interests and of pursuing them by voting in support of them. But what if most or all humans are simply not capable of knowing their self interest? Wouldn’t that throw a monkey wrench into the machinery?
Most people are not capable of understanding what is in their self interest. The human is the rationalizing animal. We kid ourselves. We possess the intellectual ability to discern reality. But we often choose not to accept it. We live in fantasy worlds. Not only when it comes to our dating lives. We do this when we decide who to vote for. And we do this when we decide how to invest our retirement money.