Podcast Review | Reasonable vs. Rational by The Morgan Housel Podcast

Reasonable vs. Rational by The Morgan Housel Podcast

This is a brief episode of a popular business podcast that defines two key terms when it comes to investing. A few generations ago, a doctor noticed that patients with an incurable condition were often cured if they contracted another serious illness that caused a high fever. An extreme fever caused their bodies to fight against both conditions. Without the fever, their bodies didn’t fight against the incurable condition. So, what did this doctor start doing? He would inject patients with doses of viruses which caused extreme fevers as a way of resolving the bigger issue. Does the idea of purposely getting sicker to get better seem like a rational endeavour? No, clearly not…but given the circumstances and the evidence, it does seem like a reasonable course of action.

So, what on earth does this have to do with investing? Morgan Housel, drawing on a lesson from psychologist Daniel Kahneman, explains that acting rationally during financial market turmoil is extremely challenging. A popular business podcast briefly defines two key terms: humans, at least historically, are not wired for rationality, but we can strive to be reasonable in our thinking. Reasoning can help us maximise, not necessarily for returns, but for getting a good night's sleep and for avoiding future problems before they happen. If rational investing is largely unattainable, reasonable investing can serve as a solid alternative.

‍

‍Link to Podcast

View more NAOS podcasts and book reviews‍