22 Quotes by Peter L. Bernstein

The information you have is not the information you want. The information you want is not the information you need. The information you need is not the information you can obtain. The information you can obtain costs more than you want to pay.

The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite. Life is not an illogicality; yet it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait.

We could turn this assertion around and state that a decision should involve the strength of our desire for a particular outcome as well as the degree of our belief about the probability of that outcome.

In the first sense, probability means the degree of belief or approvability of an opinion – the gut view of probability. Scholars use the term “epistemological” to convey this meaning; epistemological refers to the limits of human knowledge not fully analyzable.

The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.

The prevalence of surprise in the world of business is evidence that uncertainty is more likely to prevail than mathematical probability.

Shefrin and Statman hypothesize the existence of a split in the human psyche. One side of our personality is an internal planner with a long-term perspective, an authority who insists on decisions that weight the future more heavily than the present. The other side seeks immediate gratification. These two sides are in constant conflict.

This is the essence of risk aversion – that is, how far we are willing to go in making decisions that may provoke others to make decisions that will have adverse consequences for us.

If the random-walk view is correct, today’s stock prices embody all relevant information. The only thing that would make them change is the availability of new information. Since we have no way of knowing what that new information might be, there is no mean for stock prices to regress to. In other words, there is no such thing as a temporary stock price-that is, a price that sits in limbo before moving to some other point. That is also why changes are unpredictable.