Don’t forget – human memory is fallible

No matter what people may think, the human memory is far from infallible. For investors, that is absolutely fine – just so long as we understand and acknowledge that fact


Ben Arnold

Ben Arnold

Investment Specialist, Equity Value

When was the last time we referenced one of Malcolm Gladwell’s ‘Revisionist History’ podcasts, here on The Value Perspective? If memory serves, it was a couple of years back when his Big man can’t shoot episode led us to suggest most professional basketballers would make terrible value investors.

Having just checked, it was indeed – but the point of two of Gladwell’s more recent podcasts is that, on the whole, memory doesn’t serve.

The second of these podcasts, Free Brian Williams, is especially interesting – not least when it discusses what psychologists call ‘flashbulb memories’.

These are the vivid ‘snapshots’ people tend to have of the moment and circumstances when they learned of a surprising yet particularly important or emotionally charged piece of news – for example, the death of Princess Diana or the assassination of John F Kennedy.

Another, of course, is 9/11.

Where were you when you heard that first plane had flown into the World Trade Centre that day in September 2001? Who told you? What were you doing? Are you sure?

The reason we ask that last question is that Gladwell mentions a study that probed some 3,000 people about their memories of learning about 9/11 the week after it happened.

The same people were asked the same questions 12 months and then three years afterwards – and some significant disparities began to emerge between how individuals recalled this supposedly indelible memory a week after it happened and at these later points in time.

Memories can be inaccurate

In short, as that research and the rest of Gladwell’s podcast suggests, no matter what you may think, you cannot wholly trust your own memories.

And that is fine – just so long as you understand you cannot wholly trust your own memories.

Here on The Value Perspective, we are not only keenly aware of this fact, we have acknowledged it in our investment process. As we have explained in pieces, such as Investment edges, we maintain a database of every company we look at, with all the information held in a consistent format.

In effect, then, we put all our analysis in cold storage until such time as we need it again – for example, when a stock hits a price target and we want to revisit it.

Clearly it is extremely useful to know what we thought of the business the previous occasions we put it under the microscope – and hugely reassuring to know our archive is far more reliable than human memory.


Ben Arnold

Ben Arnold

Investment Specialist, Equity Value

Ben joined Schroders in 2016 after spending 3 years as an analyst at the Royal Bank of Scotland. He moved in to the Value team in January 2018 as an investment specialist after working for two years in Schroders' Distribution division. He is a CFA Charterholder and holds an MSc in Corporate Strategy from The University of Nottingham.

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