Illusion of Attention
Jan 2021

Dear Patrons,

During monsoon, have you heard often that cars and vehicles washed away in gushing flood water? During heavy rains, flood like situation arise. Local water streams and rivers start overflowing and sometimes starts flowing over the shallow parts of the roads. Authorities closes that part of the passage for time being and divert the traffic.

Now Illusion of Attention comes into play here.

We see in news and armature videos that each day cars drive past through it despite visible warning signs and rushing water. The drivers are so focused on their car’s navigation system that they don’t notice what is right in front of them.

Take example of Swissair or Kingfisher airlines of Jet airways, the management was so fixed on expansion that they literally overlooked possible worst market scenarios and eventually they went bankrupt. Similarly in 2007, everyone was so immersed in enjoying upward move of stock market that no one literally checked risks brewing on banks’ books.

In Mutual Funds, investors are very much fixed to the past performance of the schemes that they literally loss the vision for the future. How false would it be to think that a fund having best track record of last 10 years will continue to have the same greatness for next 10 years as well?!? We come across investor saying ‘I have done research on my own’. But is it really a research of past performance and connecting them randomly? Can this be called as research or just number crunching?

Instead, confront yourself with all possible and impossible scenarios. What expected can happen? Pay as much attention to silences as you may get away with noises. Check periphery and not just the center. Something unthinkable can be huge and disastrous. But when you already factor these unthinkable scenarios, their impact can be minimized.