Apple Inc. (AAPL), S&P 500 (.INX): To Become a Better Investor, Think More Like a Scientist

Both of these observations are only possible with the advantage of hindsight. But that’s precisely the point. Some of the most important variables that will determine where stocks go are things we just don’t know today. But many investors don’t think like that. They take what they know and assume it’s what counts.

Blogger Shane Parrish borrows the term fragilista from Nassim Taleb to describe this type of thinking, and writes:

Fragilistas are naive rationalists. They think that the reasons for things are, by default, accessible to them. They know the cause and effect of everything, or at least that’s what they think.

Because they mistake what they don’t know for the non-existent, they exhibit a strong — if mistaken — regard for the powers of reason. They lack humility and respect for the first law of ecology: we can never do merely one thing.

Any action we take, and in this case inaction is a course of action, results in some unwanted consequences.

Food for thought.

The article To Become a Better Investor, Think More Like a Scientist originally appeared on Fool.com is written by Morgan Housel.

Fool contributor Morgan Housel has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.

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