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Charts, Cliffs and Cavemen ... the perspective of Steve Saenz

Burgess COMMENTARY
I love charts and graphs. They stimulate me to think about causality ... not correlation ... and what it is that is really going on in the economy and society that is NOT captured in the charts and graphs I am looking at. For example: the DJIA is about price, but what about volume. The loss in value of the market is not really price times number of shares issued, but something else. For example: the chart presented is from a perspective, but what about looking at the issue from another perspective ... organizations may be making profit, but communities where organizations are located are doing badly. Where are the charts for the performance of communities?

I won't go on ... but I do love charts because they get me thinking about what is possible if only we would use the resources available for things that are really worth a damn!
Peter Burgess

Charts, Cliffs and Cavemen...

People in the financial services industry LOVE charts, especially ones with upward sloping lines. Charts, replete with disclaimers basically saying that you should not pay any attention to charts, have been the go-to-sales-tool for financial professionals since I can remember. For all I know, our great great great ancestors drew charts on their cave walls in an effort to persuade (er, advise) their cave mates.

However, this is not a history lesson about charts, per se. Rather, it is a non-academic (caveman's) look at what we can learn from going over a cliff. The series of charts below tell a rather interesting, albeit anecdotal, story. The moral of that story is that our perceptions (and resulting decisions) are often influenced by our current reality.

Illustration by Andertoons

Those who study behavioral finance sometimes refer to this as extrapolation bias. It's damn hard to see a 6,000-point rally coming when you have just witnessed (suffered) a 7,000-point blood letting. The paradox is that, the closer you are to action, the more difficult it is to see around the bend.

Speaking of seeing around the bend, I had the good fortune of meeting and interviewing a man by the name of Verne Wheelwright several years ago. Verne wrote a terrific book called, It's Your Future: Make It A Good One. According to the World Future Society, an organization to which Verne and I both belong, FORESIGHT, is the most important skill one can develop for the 21st Century. I could not agree more, which is why I included this as a category in my new Wealth Management Bookstore.

In any event, the purpose of this slog post (as always) is to get you thinking. Hope you find this helpful.

Looking back from the far side of the chasm...

It's twue, it's twue, hindsight IS 20/20

View from the top...

I feel good! Think I'll go to a seminar and learn how to flip real estate...

View from the bottom...

Damn, that hurt. I think the world is coming to end...

Déjà vu all over again...

The World Future Society says that the most important skill one can in the 21st Century is 'foresight.' Maybe I should look into this...