Brian: “You’re all different!”The crowd: “Yes, we ARE all different!”Man in crowd: “I’m not.”The crowd: “Ssssh!”
Monty Python’s Life of Brian
Investment has been institutionalized. Shares are now mostly bought and sold by institutions on behalf of someone else, not by individuals. Investors are judged by league tables, with a priority to maximize the amount of funds they manage rather than to make the biggest investment returns. With everyone trying to match the others, rather than stick out from the crowd, this drives them into “herding” behavior—and bubbles form where the herd goes.
What are investment managers paid to do? You might answer that they are paid to take their clients’ money and make the ...