Mae Jennings was a legend at Radford High.
She never married – instead she devoted her life to teaching biology and farming. She lived her whole life in the farmhouse where she was born and raised.
Miss Jennings was known as a strict grader and she would accept no frivolity in class or especially in the lab.
So I entered her class with a combination of terror and excitement. That’s because I wanted to be at a zoologist at that time in my education – and I already loved biology. My year was to be the last that she taught.
The rumors that it was my nit-picking that drove her to retire were greatly exaggerated…
…but not without some basis in fact.
The very first day of class, Miss Jennings peppered us with questions to test our incoming knowledge of the subject.
I was on fire.
Requirements for photosynthesis? What is this, fourth grade?
Diffusion vs. osmosis? Please.
Mitosis vs. meiosis? Piece of cake.
Then came the animal portion of our Q&A session. I was actually asked to stop raising my hand.
Then Miss Jennings did the unthinkable. She gave a wrong answer.
And I could contain myself no longer. After querying the class about the oldest living animals, she “corrected” everyone with the answer of the blue whale.
I politely disagreed, stating that a National Geographic magazine at my house stated that the Galápagos tortoise were the longest-lived animals.
Miss Jennings informed the class that animal longevity was proportional to heart size, hence the largest animal (the blue whale) is the longest-lived.
She then informed me that no rebuttal would be allowed and that, in fact, I could come back to her classroom after school for some educational detention.
Throughout my school career, I did my fair share of time in detention for talking during class. But I must say this was the first time it happened on the opening day of school…
What happened when I returned that afternoon was so bizarre that I couldn’t possibly make it up. And it taught me an extremely valuable lesson about decision making that is exceptionally useful in the markets – especially right now. Let me explain…
Miss Jennings Suffered from “Anchoring Bias” – And Most Investors Do, Too
When I walked into Miss Jennings’ classroom after school was out, she didn’t say a word. She just marched me over to a bookshelf where she pulled out (and dusted off) a green-covered biology text.
She dug through the index and turned to the section that had animal species longevity as a function of heart size. Elephants – the largest land animals lived, according to this book, to be 250 years old. Blue whales – 1000!
I asked her to see the book and checked the copyright date – 1933. It was the textbook she used in college. A lot of new information from the zoological world had come out since then…
That learning experience at university proved to be her anchor point for the subject of animal longevity. And any additional information or new learning was discounted by her memory and decision-making capabilities.
It is this “anchoring bias” that has so many people missing out on profits in today market environment, that it is a mindset issue worth learning about.
Here’s a definition of this bias from the world of psychology:
The anchoring bias occurs when we make a decision or evaluation based on the first piece of information received. Our first impression acts as an anchor or reference point to which all subsequent and related information is compared. If the anchor contains incomplete or irrelevant information we can end up making a bad decision.
Miss Jennings was certainly anchored to her original learning on animal longevity.
And traders and investors do the same thing.
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Most famously, we consider the price where we buy a stock to be a key characteristic of that company as long as we’re in the trade. If it drops, there’s a part of mind that considers that purchase price as the “fair value”.
And we have an even more useful current form of anchoring bias gripping traders and investors. Leading up until January of 2018, the U.S. equities market had been almost a one-way ride for the better part of two years:
Then came the implosion of the inverse-volatility trade in late January, and the market is reintroduces two-way action to everyone:
This has paralyzed some traders who are mentally anchored to a market that only one way for so long.
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Recognizing that we have anchoring bias built in to our DNA is the first step to helping us overcome a money-making decision block and instead make trading decisions based on our proven system to take profits out of the market in all kind of different market conditions.
Great trading and God bless you,
D. R. Barton, Jr.
P.S. My story with Miss Jennings ended well. Even though she ended our detention session on that first day of class calling me a know-it-all, Miss Jennings ended her year and career by nominating me for a state-wide biology scholarship. Seems that she found out that I shared a love for her favorite subject. And that old green book? Ms. Jennings gave that to me as she packed up for a keepsake…