One of my favourite things I used to do was to browse through the investment section of bookstores and look for books that were published in 1998 or 1999 or 2000 about how everything was different this time and how you had to throw out everything you knew about investing and how all this new technology was going to drive double-digit stock market returns for an unprecedented third decade in a row. I don't see those books on the shelves anymore.
Why Smart People Make Big Money Mistakes and How to Correct Them was published in 1999. It is not one of those books. Written by Gary Belsky and Thomas Gilovich, I am not sure if they knew at the time how prescient their tome would be. I cannot remember a single instance of the authors describing the mania during the end of the 1990s as a Bubble. However, if investors who bought all the nonsense that financial markets were entering into a New Paradigm had understood the behavioral mistakes they were making as described in this book, those investors would have a whole lot more money today.
Belsky and Gilovich's book is an easy to read introduction to behavioral finance and economics, and describes the foibles human beings are prone to in both investing and life. To the investment professional, none of the concepts nor many of the examples are new. However, to the investing newbie, the recreational investor or the ungrad economics student, such a book should be required reading. Belsky and Gilovich write with a breezy style, laying out the concepts in an understandable manner that will not take the reader long to finish.
Out of 5, I rate it
and place the book on my recommended reading list.