Losing Money with Metaphors

Freud’s psychiatric conclusions have largely been discredited but he rightly maintains praise for understanding the central role of metaphor and narrative in human thought. Professor Cowen HERE, is only the latest to build on this theme although importantly, he concentrates on the negative, blinding aspects of the tendency. Nowhere is this more clear than in the “stories” that surround investments.

Choosing a metaphor presupposes a conclusion. For instance, there’s no way to hear “the Chinese economy is a bubble” without unconsciously associating the country’s outlook with fragility and inevitable disappearance of a soap bubble. If we describe China’s GDP as similar to a hot air balloon on the other hand, our subconscious will immediately become more suceptible to the argument that upcoming government stimulus will right the economic ship. (You see what I did there – the use of the word “ship” is insidious.)

Good metaphors are a double-edged sword and their ubiquity in stock pitches suggests investors remain on their guard, never accepting one outright no matter how successfully it seems to communicates the situation.

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6 thoughts on “Losing Money with Metaphors

  1. kris says:

    Mr. Cowen’s speech was fantastic. However he spoke about the less important thing “messy” and mentioned only slightly the real important thing ‘dogma’. However, he acknowledged the existence of dogma. That is quite important.
    Einstein put together the Theory of Relativity. But even Relativity badly needed a CONSTANT=C, a DOGMA. Every Natural Law, like Gravity is a dogma.
    However, there are True Dogmas and Fake Dogmas like for example in economics:
    Fake Dogma = Infinite Growth
    True Dogma = Reversion to the Mean which is a derivative of the other natural law or dogma called Supply/Demand.

    I think that the beauty of life and the beauty of every system is NOT looking for the “messy”, never believe anything, always agnostic thing, but it lies in MESSILY looking for the C. Everybody’s life is an hermeneutic circle, so is the Market.

  2. ToNYC says:

    kris: please lose the word “dogma”. Dogma is an accepted belief not subject to new discovery. Faith-based as it were is anti-science as your metaphor ironically proves. Human nature is a constant in different dress; not a dogma. There can be no true or fake dogma; dogma is as perfect as the medieval minds that require meaning of their own collective fantasy.

    • kris says:

      Thx for the comment.
      Are you disagreeing with the use of the term? I don’t see you disagreeing with the intent of my comment.
      As to science vs religion, science nowadays is quite dogmatic, if the word is used under your description. Fake Global warming is one big example.

      • ToNYC says:

        Yes, I am certainly disagreeing with use of the term: the definition does not allow for a binary condition: T. or F. Dogma is not science, nor is science dogmatic. Some non-scientific practitioner could sound dogmatic, but that is the place where sloppy metaphors lead; not to truth but interminable confusions.

  3. [...] Losing Money with Metaphors (Interloper) [...]

  4. [...] use of metaphors in investing is a double-edged sword.  (Interloper also [...]

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