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

1. How much did the NASDAQ stock market increase in
   1999?


2. How long is the Nile River?


3. How many words are there in the English language?


4. When was Genghis Khan born?


5. How many miles long is the Great Wall of China?


6. What is the population of Pakistan?


7. What is the distance in miles between Pluto and our sun?


8. What was the gross domestic product of Brazil in 1994?


9. How many employees did Mobil Corporation have in
   1998?


10. When was Harvard University founded?

Compare your ranges with the correct answers, given at the end of

this exercise, and see how many answers fell outside the range that

you specified. If you are like 99 percent of the executives who have

taken tests like this, you had more than one answer that was out-

side the range. In fact, most executives had six or more fall outside

the range! See what we mean about overconfidence?

Answers: 1) 85.6 percent; 2) 4,187 miles; 3) 730,000; 4) A.D.

1167; 5) 1,500; 6) 129,270,000; 7) 3.67 billion; 8) $640 billion;

9) 43,000; 10) A.D. 1636. (Sources: Microsoft’s Encarta encyclope-

dia; Wall Street Journal.)

Exercise 2: Clean Slate

On a plain sheet of paper, write down your beliefs about the in-

vestment world. What ideas are you absolutely certain of? Are you

certain that diversification is good? Are you positive that earnings

growth is the most important factor in stock prices? Are you sure

that risk and return are always correlated (more risk is the only

way to get more return)?

Whatever they are, list your beliefs on your paper.

“A” Is for Assume Nothing 167

14-25 ware 167 1/19/01, 1:15 PM