Sep 22, 2026 · 1h 4m

Smart investors still fall for the same human biases

The Psychology Behind Why Smart People Make Terrible Decisions | Alex Edmans – EP 823

The episode shows why expertise and abundant data cannot replace skepticism about stories, consensus, and the information markets overlook.

3 key takeaways

1Intelligence and expertise do not prevent investors from succumbing to confirmation bias, anchoring, sunk costs, or collective emotion.
2Markets often undervalue culture, trust, employee relationships, and other intangible assets because visible information is easier to measure.
3The most reliable corrective is to ask what the other side believes, what evidence contradicts the thesis, and what optimism already prices in.

Don't miss

Edmans uses Isaac Newton’s investment in the South Sea bubble to show that exceptional intelligence cannot defeat shared narratives and human bias.

The brief

Alex Edmans argues that financial markets do not simply process facts; they reflect human psychology, collective mood, and the stories investors use to make uncertainty feel legible.

The episode challenges the idea that individual biases cancel out. Investors can overreact or underreact in the same direction, creating systematic distortions rather than efficient balance.

Edmans also looks beyond numbers to culture, trust, psychological safety, employee relationships, and brand power—intangible sources of value that markets can struggle to recognize.

Isaac Newton’s investment in the South Sea bubble becomes a vivid reminder that extraordinary intelligence offers no immunity from anchoring, social contagion, or persuasive narratives.

The practical discipline is simple but demanding: ask “What is the other side?” before accepting an appealing thesis, especially when consensus feels like evidence.

Featuring

Alex Davies