The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

Like Monkeys at the Zoo

Kurt Vonnegut understood the psychology of investing better than most. The writer lived through the Great Depression. In his novel, Slaughterhouse Five, Vonnegut imagined aliens take two people to their planet, put them in a zoo cage with a big board displaying stock and commodity prices, a news ticker, and a telephone connected to a brokerage firm on earth. The earthlings are told they have been given a million dollars to invest, and that they must manage their money from the zoo cage to insure they are rich when they return to earth. Big crowds came to watch.

“The telephone and the big board and the ticker were all fakes, of course. They were simply stimulants to make them jump up and down and cheer, or gloat, or sulk, or tear their hair, or to be scared . . . to feel as contented as babies in their mothers’ arms,” Vonnegut wrote.

The investors even try appealing to a higher power. “They had lost a small fortune in olive oil futures. So they gave prayer a whirl,” Vonnegut wrote. “It worked. Olive oil went up.”16

Life imitates art. Professional investors view amateur investors as Vonnegut described. This will shock many people, and perhaps offend them, too. Naturally, you likely consider yourself rational, sound, and intelligent. You probably are—in your nonfinancial life. When money is not involved, people routinely process loads of information, much of it complex. They make decisions. They solve problems. But clear thinking often falls apart when you ...