Daniel Kahneman: Why I’m against active investing

Posted by Robin Powell on June 29, 2018

Daniel Kahneman: Why I’m against active investing


Daniel Kahneman, the Israeli-American psychologist, won the Nobel Prize in Economic Sciences in 2002 for his work on behavioural economics. His 2011 book Thinking, Fast and Slow has sold more than one and a half million copies worldwide.

Kahneman has said little in the past about active and passive investing. But he does touch on the subject in a new podcast for CFA Institute.

In it he says this:

“All behavioural economists are against active investing — I might as well say it outright — because we think the market is unpredictable, or very, very difficult to predict. And yet we believe people who believe they can predict the market. That illusion is very important.”

So then, does he think intuition has any role to play in investing?

“The reason that intuition cannot be acquired in stockpicking is that there are no regularities in stockpicking to be learned. You develop intuition from successful experience… With well-functioning markets I do not see intuition having a role in investment.”

Kahneman does, however, see an important role for financial advisers — primarily in managing investor behaviour. What advice, the interviewer asks him, would he give to the CFA Institute’s 150,000 members worldwide on how to learn more about this subject?

“You will learn a lot from reading some books. I would recommend the book by my friend Richard Thaler, Misbehaving, which is readable and has humour. When you finish that book you’ll have learned something.”

The interview is only 12 minutes long and is well worth listening to in full:

Kahneman’s Insights: Beyond Thinking Fast and Slow


Picture: Jonathan Farber via Unsplash


Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.


How can tebi help you?