Quarterly Review and Outlook – 2nd Quarter 2017

“If you take shortcuts, you get cut short.”

  • Gary Busey

Elevators are the unsung heroes of economic development. We only notice them when they stop working, but the density of modern cities would be unthinkable without safe and efficient vertical transportation. Nick Paumgarten’s 2008 article[1] “Up and Then Down” is a classic on this subject, and one piece of information has always stuck with us: On elevators installed since the early nineties, the door-close button doesn’t work.

It seems like it works—you press the button, the door closes soon enough. Rest assured it can still be turned on in a fire, but the chief utility of the door-close button has evolved into granting perturbed passengers the illusion of power. Among the universe of illusions that impact our lives, the stakes here are low, and even those of us cursed with this knowledge can find some relief when the door lingers a bit too long on an empty floor.

With investment illusions, the stakes are much higher. They can be obvious or subtle, simple or complex, but almost always promise a convenient shortcut around the labor of fundamental research. They are appealing in part because the mind is hardwired for shortcuts, which were incredibly helpful when the goal was don’t get eaten by a tiger. Modern life offers different challenges, and asset management is in many ways the application of research and experience to limit the negative effects of our natural biases.

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