Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

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Nigel Davies: Deception and the Bad Old Days

Amongst my current reading matter is The World Chess Championship 1963: MM Botvinnik v. Tigran Petrosian by Bob Wade. Here's a quote from the introduction to game 11:

"When a player turned up for the resumption of an adjourned game minus flask the cognoscenti told themselves the game would not last long before a resignation. But I (Wade) believe Botvinnik deliberately left his flask behind in one of the Tal matches, just to help create an illusion..."

Besides being a nice deception by Botvinnik, this set me thinking about how bad the 'good old days' really were. Botvinnik had to bring a flask to his World Championship matches - where on earth were the coffee machines? And this is to say nothing of the other joys of modern life that we seem to take for granted.

Why is it that the old days are continually referred to as 'good'. This made me wonder if there's such a thing as 'nostalgia bias', a possible cause being that we look at certain events and place through rose tinted glasses if they occurred at a time when we were younger and more beautiful.

I googled for 'nostalgia bias' without success. Does this phenomenon exist in markets? One manifestation might be how people lose back their money after a run of success because they're still thinking about that great trade they made last year. Another might be the relatively slow price decline of long-established companies when their best days are behind them. Or 'after-shocks' in certain price patterns.

Incidentally the author of this book, Bob Wade, once gave me some great advice which I've only been partially successful in keeping. "Don't keep your trophies", he told me. "Put them in the bin". He lives that philosophy too. Bob doesn't hark back to the past but is still playing regularly, fighting it out with players half a century younger than he is.