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

36 THE INVESTOR

ness in his “mental game” is or how to strengthen and overcome

it. That’s the value of the MBTI. It helps us get beyond the fact that

“we don’t know what we don’t know.” In fact, a recent study,

reported in the New York Times, suggested that the very people

who are most confident of their skills are the ones who are least

competent:

In a series of studies, Dr. Kruger and Dr. Dunning tested their

theory of incompetence. They found that subjects who scored in

the lowest quartile on tests of logic, English grammar and humor

were also the most likely to “grossly overestimate” how well they

had performed.

The study relates to investors in this way:

This deficiency in “self-monitoring skills,” the researchers said,

helps explain the tendency of the humor-impaired to persist in

telling jokes that are not funny, of day traders to repeatedly

jump into the market—and repeatedly lose out—and of the po-

litically clueless to continue holding forth at dinner parties

on the fine points of campaign strategy” (New York Times, Jan.

18, 2000).

How can that be? Apparently, you need to have some compe-

tence in an area before you can even begin to judge your own

abilities.

The following are “exercises” for each of the functions, so that

investors can strengthen their weaker areas.

Extraverts and Introverts: Stretching Exercises

Extraverts love action and are energized by people, places, and

things. As investors they like to kick the tires. Peter Lynch seems

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