Customer Reviews

Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Mistakes with Your Money

5 star:		(26)
4 star:		(17)
3 star:		(10)
2 star:		(2)
1 star:		(2)

 

 

I was drawn to this book because I love to read about financial markets and psychology. Since this combined both of them I instantly had to read it. I was not expecting too much because I have read many books on this same area and thought "how much new info could this book really have?" Surprisingly it did have a few things that made me think.

One thing I have learned over the years is that my first instinct in most areas of my life is the correct one. I have also learned that my first instinct when it comes to trading and investing, is usually the wrong one. Actually I did quite a bit better taking the exact opposite viewpoint. Why is that? David Adler explained his theory on it in this book.

The author takes a pretty complicated subject and explains it in an extremely understandable way. Usually giving multiple examples of the same topic, so even if you were a little fuzzy on one explanation, the other one should clear it up.

Basically this book helps you think through your investing strategy. It explains why some choices are good, and why some are bad. Most of the bad ones are the choices that most of us make naturally.

The author's purpose is to show us how our bad decision making can lead us into trouble such as gambling, and using psychology for financial decisions

Most interesting are the stories he tells and one which is really remarkable was that

most people were willing to take a sure $500 instead of a 15% chance at making a $1 million. How people come to making their judgement calls is amazing

He talks about the pitfalls like overconfidence, that can lead to leads to things like excessive risk-taking,

Overall, I liked the book.it was easy to read and examples the author uses are entertaining and easy to understand Plus one chapter does not build on the previous ones so you can pretty much open the book and begin reading

My intuition proved correct when I decided to buy David Adler's book. Nonetheless, I was surprised by the author's high level of sophistication and yet how clearly he writes. He's also a witty guy.
I learned not only about economics and psychology, but also about myself. For instance, after taking the short test prepared by the Yale School of Management I was surprised to learn I was almost pathologically "risk averse." (Maybe that's one reason my investments have done so poorly...) I'll certainly use that information when I interview my NEXT financial planner, and I'll use the advice Adler distills from Nobel Laureates in economics and psychology. That advice is also useful when considering whether to buy insurance, annuities, and so on.
In sum, the book gives great insights into the ways financial markets work and the way investors -- of whom I am one -- think. Next time, I actually may have a shot at building a better portfolio.
Thank you, David Adler!

The Pitfalls of Snap Judgments

This is an informative, very engaging, and unusually topical book. The basic theme of the work is the dangers of intuitive or instinctive decision making, which Adler sharply contrasts to analytical or deliberative decisions. To be sure, he recognizes that there is a place for "snap judgments." They work very well, for example, in understanding social situations, interpreting language cues, and recognizing faces. In many other circumstances, however, relying on intuition to reach decisions leads to very bad results. Adler illustrates the point by detailed discussions not only of investing, and other financial decisions, which are his major focus, but many other matters as well. They range from football and tennis to gambling, health insurance, car accidents, the recent credit crisis, the behavior of CEOs, and much else.

Throughout his thoroughly researched book, Adler frequently quotes from his interviews of numerous academicians and others. Although he has clearly been influenced by behavioral economics, which he elucidates, his work is by no means an academic treatise. Rather, it is a refreshing, down to earth book that gives plenty of practical advice about the topics that are discussed. All-in-all, it is a very enjoyable, highly instructive, and eminently readable work that I strongly recommend.

Snap Judgment is essentially a summary of behavioral finance findings. This field is an extension of the heuristics and biases research program into the realm of finance.

The heuristics and biases program is a deep scholarly literature that shows in great detail how the mental shortcuts that help us survive can also derail our thinking. Recently researchers have applied these principles and expanded the program to include a lot of specific insights into how money affects our thinking and how financial judgments are shaped by our "gut instincts."

The bottom line is very simple, our gut instincts about money are really bad. They create havoc in both our personal lives and in larger scale economies. First implication: knowing about our mental shortcuts should help us make better financial decisions individually and collectively. Second implication: we need to think more with better data and better decision techniques and rely on our gut less in making financial decisions. Third implication: knowing how people react to trends could potentially help predict "anomalies" in financial markets.

These conclusions are argued very strongly over and over again in this book with very specific and detailed examples. Perhaps this is because the gist of Snap Judgment flies directly in the face of other popular books such as Malcolm Gladwell's "Blink" which seem to give the opposite message, that we need to trust our 'rapid cognition' more.

From my reading, when you look closely the evidence falls mostly on the side of the heuristics and biases program. Our gut, especially our "trained gut" serves us very well in certain kinds of decision, to be sure, such as those we evolved good instinct for and those where decisions have to be made faster than we can think effectively. But in other situations, such as when money is involved, and we have the time to make a good decision, this book shows very effectively why our gut misleads us dramatically time and time again.

The unique strength of this book is that it goes into great detail about markets and finance in various areas and applies its findings to very specific cases. This is not yet another general book on decision making, it is extremely focused on financial decisions. It covers in detail the psychology of stocks, bonds, annuities, mutual funds, gambling, CEO behavior, bank runs, and credit of various kinds. The lessons are applied very briefly to other kinds of decisions for comparison and contrast, but the focus is really money.

One small warning, if you have a general interest in decision science or cognitive science and not much interest in finance, much or this book will make your eyes glaze over because the examples are so detailed. That's also why you will find it so great if you want to know in detail how and why our financial decisions go wrong when we rely on our instincts.

If this book does its job, it will make you think when you make financial decisions, and it will help you understand better why money tends to make our judgment bad, and these are very useful lessons.

This is a book that aims to give you investment advise based on the fairly recent field of behavioral economics. The author starts out explaining that humans have two decision systems available, one based on gut instinct and one based on conscious reasoning. The first system (aka snap judgement) works surprisinly well in our lives for questions such as "does she like me", but fails miserably in an environment where our ancestors didn't grow up in, such as the stock market. If you've ever taken a statistics 101, you know this already, with most calculated probabilities being completely different from what you thought they would be.

In a sizeable part of the book, you are then given financial advise based on the fact that you can make the most money when you do the opposite of what the herd does, still mostly ignoring your gut feelings. Reading the table of contents should give you a good idea of the covered subjects, so I won't repeat them all here, but add to that the fact that the chapters are all a fairly easy read. Also, the chapters are usually quite short, introduce a few key people of the behavioral research community, use real- life examples, and don't go too deep technically explaining financial products. If you forgot what a bond was I recommend you keep wikipedia access handy while you read.

But even if you're not about to become a trader, David Adler has a lot of insight for you, making analogies from money to drugs, from the horse track to the stock exchange, and from the financial system to the USSR. There are also a few surprises in stock; did you know, for example, that a coin toss does NOT have a 50/50 chance of heads or tail?

Some chapters about CEOs reveal that this class of bankers are at highest risk of being disconnected about their own business, making them (in my opinion - not speaking for the author directly here) dangerous and preferably disposable.

Mr. Adler also tackles the recent financial near- meltdown. He first sums up what happened, who was involved, and so on, without passing judgment. That part of the book is the nicest summary of the crisis that I've read to date, again with a surprise or two thrown in, for example the fact that mortgage- backed securities date from 1970s and have been a bigger export business than American movies or weapons. And if you're interested "whodunit" you will probably have an answer after reading this book, along with some advise (although not to you, the investor, rather to the powers that be) about how to not make the bomb go off for good next time.

I enjoyed reading this book and am sure I'll get back to it as a reference when making investment decisions, especially since the chapters are such short reads and properly appear in the table of contents.

This book examines the role emotions play in financial choices. Whether it is the decision to buy a hot mutual fund right after it has had its best year ever, or how CEOs of investment banks were arrogant enough to take on enough risk to destroy their corporations and personal wealth in the process. You will see why we buy high and sell low in investing. Also the book has the answer to why the stock market peaks are bottoms when a bull or bear finally appears on a national magazine, why it is that when a CEO appears on the cover of a major business magazine his stock is usually down 50% over the next year, or an athlete appears on the cover of sports illustrated then has his worst season ever, it is simply due to reversion to the mean. All of life usually follows an average and when something or somebody outperforms that average they usually return to the average, or they are even due to be below normal to balance out their over performance.
The main theme of the book is that we do not make any financial decisions in a vacuum. There are strong feelings and emotions involved in investing, budgeting, and making buy and sell decisions in all aspects of our lives. Money means different things to different people. Some see it as security, some see it as power. To some it is simply to spend to get more things. If you are interested in the new field of behavior economics, then I believe you will enjoy this fun and interesting read.

"Snap Judgment" comes highly endorsed by well known leaders in economics, finance, management, and business. Author David Adler has a successful career in publishing, film making and in the communications industry. His highly regarded articles in the Financial Planning Magazine, Barron's Institutional Investor, Psychology Today, and The New Republic all add to the credibility of the views presented in his current work.

Adler contends that understanding the psychology of investing is crucial to interpreting the wide-ranging scope of economy, especially in times when the investor is responding to the crisis by making volatile impulsive investment decisions in times of financial and economic crisis. In "Snap Judgment" he presents an all-encompassing look at actions that led up to the current panic situation. Adler, then, offers proposals and insights for building a stronger financial system which will insure a better outlook in the future.

Adler has incorporated engaging examples to help identify the importance of choosing analytical intelligence over intuitive snap judgments when making investment decisions. Uninitiated investors planning ahead for financial security in the future, seasoned individual investors ready for retirement, and corporate investors will all find "Snap Judgment" practical, informative and entertaining.

Despite the sub-title and the Financial Times moniker, this is not really an investment book, per se. It's more of a "let's look at things differently for a while, and - oh, you can do this with your investments, too" kind of approach. The author provides lots of stories, interview snippets, data analysis, and opinions of informed persons to show why quickly made decisions are not always correct. (Admittedly, this is no great revelation, but he sets about to prove it, and largely succeeds.) By using a number of very short chapters, the book explores mathematical concepts related to decision making, as well as psychological and economic theories, and many things in between, such as future prediction, probability, trend analysis, parimutuel wagering, you name it. This book really has a little of everything. My only real complaint is that it never comes out and gives you the guidance it suggests it might. You know, "Because Dr. Soandso proved this, when investing in tech stocks, you should..." There's none of that. The author gives you a few anecdotal do and don'ts, and voila, you're on your own. Still, the book is well-written, very interesting, and different from any other investing book. It will teach you a few things you don't know, give you some good ideas, and open your eyes when you look to add to or subtract from your investment portfolio. This is a worthwhile, easy and informative read.

I did not think that I was one who made snap judgments, that is until I read David Adler's provocative book on the subject. Mr. Adler delves into the reasoning behind our conclusions and examines intuition with story telling, games, and tests. His short, bite-sized chapters are packed with easily digestible information much of which came from interviews with a wide range of experts. This is a "must read" for anyone who wishes to build a portfolio with the help of behavioral economics. It is fascinating to learn about stock trading patterns that are often self-destructive. We are reluctant to sell losing stocks and yet we will sell winning ones, often to our detriment. This and much more in a story telling that is never dry and always succinct. I am now going to read Snap Judgment again.