The Psychology of Money - An Investment Manager\'s Guide to Beating the Market

The last distinction in this grid of contrasts—college major—

provides a good example of how the two types clash. Each semes-

ter Ken Doyle, professor of journalism and mass communication

at the University of Minnesota, fills his classroom with half busi-

ness students and half liberal arts majors and shows the movie Wall

Street. Gordon Gekko, the tycoon who proclaims that “greed is

good,” fascinates the business students. They take notes on his

tactics. They relish his “take no prisoners” attitude. This same

Gekko repulses the liberal arts students, who delight in watching

his demise. Afterward, the liberal arts students invariably express

the desire to shower and scrub with soap. The point of the exercise

is not to debate which set of attitudes is “right,” but rather to see

them clearly and explore the differences. In fact, this distinction

between tough and tender is as basic as parenting: the balance of

tough love and tender love for a child. Parents continually wrestle

with the right amount of discipline versus nurturing.

Professional investors, then, must blend the best of thinkers

and feelers and use each skill appropriately. Figure 13.2 shows how

this is done. When investors are dealing in the markets, they are

expected to be knowledgeable (“expert”) and tough (“thinking”).

When dealing with clients, who occupy one of the other three boxes,

investors must use the golden rule and put the client’s interest first.

This balance is tricky, as proven by the high annual incidence of

Novice Expert

(Low) (High)

Thinking Novice and tough Expert and tough

(tough-minded) (exploit ignorance). (fair fight).

Feeling Novice and tender Expert and tender

(tender-minded) (exploit both). (exploit trust).

Figure 13.2 Knowledge of investing/temperament types.

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