The philosophers for thousands of years have been trying to determine causality. The desire to find the cause-and-effect relationship between two or more different events has always been the quest of mankind. In over ten thousand years of human history, this quest has never ended and man even today remains not satiated with this hunger for knowledge. The only tool embodied in the human psyche is the power to reason. This ability shows us men the path to reason rationally and determine the validity of facts.
We are also endowed with emotions which very often make us sway from the path of reason and reality. Emotions deter our innate ability to judge facts even when these facts are in front of our eyes. To the ancient men, fear provoked merciless gods and goddesses who had to be placated in order to ward off evil. Then again, there are other facets of emotion such as love, greed and jealousy which motivate us to act differently from what is expected of a rational man. Collectively, we understand these shortcomings and endeavour to correct these evolutionary mistakes in our behaviour through corrective means of law, justice and religion.
The Code of Hammurabi was one such venture over 3000 years ago to relate justice to facts. The moral issue which is still in our judicial and religious discipline was an eye for an eye. Thus, the code set out punishments for stealing, for short-changing and murder. Reason prevailed over emotions and thus justice was achieved. The rigours of history gave the civilisation the just Roman law which was eventually lost to the society with the decline of the empire. Once again, the society declined to emotions and in the Middle Ages, one sees the emergence of justice through the tests of gallantry rather than of facts. In history, we note the trail by fire of witches; trail of knights by joisting; trail of virtue by combat. For a very long time in history of the people, the need for facts was forgotten.
Our great struggle to survive as people has always been a fight between reason and emotion. Our quest to grow as a nation has been always successful when reciprocated by reason. Often emotions influence our step forward and so we move back, we miss a step, we falter a little till once again we are awakened by the intensity of reason. In all aspects of our life, others try to influence, provoke or motivate us not by reason but by using emotions. Be it the life insurance salesman or someone selling shirts, there is some play on the veracity of our feelings. The summation of all emotions is the driving force behind marketing of both goods and services in all businesses.
Thus, the stock market cannot be outside the scope of the struggle between reason and emotion. One may admit that the concept of shares and securities are unlike any other product. The intangible nature of securities makes it swing more because of emotions and expectations than facts. Then again facts about securities are never easily available or there is always the limited ability of both investors and brokers to judge the flow of information. But the fact is that the valuing securities is not a rocket science. There are basic and fundamental parameters which would give even the na
Assault on reason: The mutual fund fiasco
Imtiyaz Husain | Published: August 06, 2008 00:00:00 | Updated: February 01, 2018 00:00:00
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