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This is RV Classics, a monthly newsletter where we’ll take you on a journey deep into the Real Vision vault. We’ve spent the last 8 years learning from some of the greatest investors of our time, and we’ve got thousands of hours of analysis to show for it. Well, now it’s time to revive the most electric insights.

Consider this our tales from the crypt — the greatest hits handpicked by Raoul Pal to help you learn how past cycles are shaping the world today.

Real Vision Classics Newsletter

A decade of the best financial interviews, compressed into a 5-minute read.

This Week…

Back in 2021, Nobel Prize-winning psychologist and economist Daniel Kahneman joined Real Vision for a mind-bending discussion on the psychology that drives human judgment. Alongside Josh Wolfe, the co-founder of venture cap firm Lux Capital, Kahneman enlightens us on the origins of cognitive bias, something he calls “decision hygiene,” and the powerful forces that determine our perception of life, success, and happiness.

Frankly, this interview is market agnostic. But in this age of information overload, polarization, and AI domination, understanding why we make decisions — and where we have blind spots — has never been more relevant.

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The Highlight Reel

  1. According to Kahneman, human judgment is influenced by a variety of biases and heuristics — aka learned mental shortcuts — that can lead us toward decisions that are not necessarily rational.
  2. But Kahneman actually doesn’t believe in categorizing humans as “rational” or “irrational.” For him, those are technical concepts regarding logic… and since human decision-making is inherently imperfect, totally consistent logic is impossible for us to achieve.
  3. In fact, being human means sometimes acting illogically. So go ahead and give yourself some grace.
  4. Our beliefs and our feelings are largely context-dependent, and context often changes — the key is understanding why we act on our biases.
  5. “Anchoring” is a bias that occurs when we’re influenced by an initial piece of information, even if that information is irrelevant to the task at hand. As investors, anchoring can cause us to miss an important shift in a stock’s narrative or a macro tipping point.
  6. It’s important to remain fluid and open to opposing viewpoints. But, as Kahnemen explains, many people are not capable of changing their minds even when confronted with “disconfirming evidence.” Individuals with particularly strong beliefs — whether in politics, religion, or the markets — tend to dig in their heels…
  7. As humans, we believe in our convictions and expect everyone to see our reality, but that’s a false belief called “naive realism” that only shields us from the holes in our own worldview. In other words, blind faith in anything can be illogical.
  8. As Kahneman puts it, our minds can lead us astray before we even realize it — a fact that contributes to our momentary happiness… or lack thereof.

On Happiness

According to Kahneman, there are 2 definitions of happiness: momentary happiness and overall satisfaction with life. Momentary happiness is strongly tied to love and social connections, while overall satisfaction is derived from traditional societal markers like marriage and career success.

🔑 The key is developing healthy “decision hygiene,” or the process of maintaining good decision-making habits. Each of us has a thirst — to varying degrees — for momentary happiness and overall satisfaction, so it’s important to understand how one impacts the other.

When we go too long chasing momentary happiness via illogical decisions (i.e., acting illogically), the likelihood of building good habits deteriorates and overall satisfaction ultimately feels harder to achieve.

Watch Now

Beware the paywall: This video is available to Real Vision Essential members and above.

Thanks for reading — we hope you enjoyed this trip down memory lane. In our next issue, we’ll flash back to the age of apes for a fascinating examination of meme-trading, market cults, and the powerful dynamics that can lead to mania.

Real Vision Classics Newsletter

A decade of the best financial interviews, compressed into a 5-minute read.

RELATED CATEGORIES: Investing, Learning, Market Analysis