Emotional Humans

Recently on Jeopardy, there was a contest between Watson (a super computer) and former champions Brad Rutter (won over $3 million) and Ken Jennings (74 consecutive wins). However, 10 racks of IBM servers, 15 terabytes of memory and 200 million pages of programmed information were too formidable an opponent for the humans.
After the contest, Brad Rutter wrote an interesting commentary on the Wall Street Journal blog entitled, "Why I Lost to Watson." He said one pivotal reason he and Ken lost was because they are human:

“Jeopardy is an emotional game. The better you can weather the storm without getting too overconfident or discouraged, the better you are likely to do. Watson’s emotions obviously will never affect its performance. Its only focus is the one clue in front of it, and the more you can get into that Zen-like state, the better. While cockiness can be a player’s undoing, a certain confidence is essential to success.”
“Tell a human contestant, 'You’ll be playing against the two guys who have won the most money in Jeopardy history on national television for a top prize of a million dollars,' and most would immediately start mentally spending the third-place prize. I attribute most of my success on the show to my attitude: someone’s going to win this, why shouldn’t it be me? As a soulless hunk of circuits instead of a living, breathing human, Watson already had a big leg up over any human coming into this challenge."

There is a lot for investors to learn from Brad's observations; emotions are our worst enemy when investing. And, as an advisor, I have to not only deal with my emotions but your emotions as well. Emotions have their place (so my wife tells me), but the investment world is not a place where being emotional has proven to be beneficial.

It is all too easy to get caught up in the moment; unrest in the Middle East, rising gasoline prices, Japanese quake, tsunami & possible nuclear disaster. What does all of this have to do with the stock market? Maybe nothing, maybe a lot - time will tell. I evaluate the markets using an unemotional and systematic approach and as long as the market is continuing to support higher prices and demand is in control of the investments we own, we will continue to play offense.

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