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Showing posts from July, 2018

The Strange Life of Abraham de Moivre

This edition is about a topic that fascinates me: bidding behaviour.
On how people make decisions under conditions of uncertainty. And the notion of ‘rationality’. *****  Many of you participated in a game I played with you recently. (I’m sure you are glad that I didn’t ask you to predict your expiry dates!)
An investment prospect offers 100% return potential over your benchmark return (your ‘required return’). How much of this excess return would you be willing to pay/share upfront to participate in the idea?
There were no right answers for this ‘buy in’. Only interesting answers.
Chart time.

Buyin for ‘50%’ represents 50% and above. Participants comprised of finance and non-finance backgrounds. The left bins generally had finance people; who opted for some variant of upfront fee and profit share structures. Many non-finance guys populated the higher bins. Interestingly, several finance folks populated the 50% and above bin. And I had some friends who were steadfast in populating the left mo…