Pursuing an evidence-based approach to investing (as we do) includes hearing from those whose thoughts align with ours as well as those who challenge our assumptions. In that spirit, one of my recent reads was “A Man for All Markets: From Las Vegas to Wall Street, How I Beat the Dealer and the Market,” by Edward Thorp.

That’s a big book title, from a larger-than-life author. Even if he spiced up his story with a few potential exaggerations, Thorp obviously is one of the most brilliant people you may never have heard of.

A childhood genius and young math professor turned Vegas gambler turned hedge fund manager, Thorp knew his way around the data analysis block, warning a client about Bernie Madoff’s fake trades before the news went public.

He also suggests he scooped Nobel laureate Myron Scholes and collaborator Fischer Black on their insights into how to price options and other financial risks. The implication is that Nobel prize would have been his, had he played his cards right. He doesn’t say how much he earned over his career, but in the the book, he states that Citadel Investment Group was built using his market-neutral strategy, and the managing partner was worth $5.6 billion at last count.

Then there were his casino-beating tactics – employing statistical analysis to tilt the odds in his favor, plus a few tricks up his sleeves to stay in the game (such as wearing disguises once the casinos were onto him). I found this portion of the book the most entertaining.

But what about his investment advice? If anyone could crack the code on how to consistently beat the market, you’d think it would be Edward Thorp. Instead, when he tried his hand at active stock-picking, he soon discovered the same thing we did: Stock-picking advice is worthless, after-the-fact news.

The conclusions Thorp drew from there differ from our own. One of his chapter titles says it all: “Wall Street: The Greatest Casino on Earth.” While Thorp tries to apply some of his casino-beating tactics to pursue statistically significant edges over the market, we feel there’s more compelling evidence suggesting long-term investors are better served with a less dicey approach.

“A Man for All Markets” is a fun summer read for peeking inside the mind of a mathematical whiz with a flair for living and investing on the edge. When it comes to managing your money for all markets, we continue to recommend evidence-based investing.

Is there such a thing as too much knowledge? There can be! It’s called “the curse of knowledge” when we forget that nobody will have a clue what we’re talking about if we leap right into the deep end of investment theory.

That’s why our first responsibility is to recreate those same, “ah-ha!” moments that we’ve already enjoyed. Today’s video with journalist Robin Powell does just that, for those of you who are wondering what this “evidence-based investing stuff” is all about, as well as for anyone who could use a handy, two-minute reminder. Enjoy!

Robin Powell and Matt Hall on Evidence-Based Investing from Hill Investment Group on Vimeo.

Michael Lewis’ latest book, “The Undoing Project,” weaves together the biographies of Amos Tversky and Daniel Kahneman, two Israeli psychologists whose work in the 1970s–1990s launched a new way of combining behavioral academics with practical applications. Their specialty was exploring the ways the human mind makes systematic errors when forced to judge uncertain situations.

At first, you may not think that sounds like gripping entertainment. But in typical Michael Lewis fashion, these pair of academics become a fascinating read.

I and my Hill Investment Group colleagues had the privilege of meeting Lewis and hearing him speak shortly after he published his 2003 book, “Moneyball.” In it, he showed how Major League Baseball teams were making poor decisions on valuing players based on human judgment. Defying convention, Oakland A’s General Manager Billy Beane evaluated players using data rather than “expert” judgments to successfully compete against teams boasting much higher payrolls.

When Lewis wrote “Moneyball,” he wasn’t aware how powerful his book would become. He was simply intrigued by a real-life illustration of objective evidence beating the pants off of conventional so-called wisdom.

In some respects, “The Undoing Project,” is a prequel to “Moneyball.” Lewis admits, he didn’t realize it at the time how much of what he explored in “Moneyball” came directly from professors Tversky and Kahneman and their earlier work. Once he connected the dots, he decided to write a book about them too. Their story is about how they used their understanding of systematic errors in people’s judgment to improve that judgment, and thus improve their decision-making.

I believe one of their most important findings is this: Knowing you or others have biases (such as relying on overly small samples, anchoring on past assumptions, and mistaking hindsight as being predictive) isn’t sufficient to overcome them. Even when we know we’re being influenced, we often let it happen anyway!

Here’s one example from Lewis’ book:  In 2016, basketball player Jeremy Lin signed a $38 million contract with the Brooklyn Nets – clearly a coveted hire. But back in 2010, no NBA team would draft him. “He lit up our models,” one team manager said … but as a Chinese-American Harvard grad, Lin didn’t fit the stereotype. Even though they had the evidence (the models) in hand, they were unable to overcome their biases and recruit him when he could have been had for far less money.

Back to professors Kahneman and Tversky. In 2002, Daniel Kahneman won a Nobel Prize for the work that continues to shape our lives today. Amos Tversky likely would have received the award as well but, sadly, he passed away in 1996, and Nobel prizes are not awarded posthumously. In any case, their work has contributed to untold advances in medical diagnosis, military decisions, professional sports and – last but hardly least – financial economics.

Across all of these disciplines and more, the takeaway is that human bias is ever-present, which is why we must remain ever on guard against it. Hint: One of the best ways I know to combat your own biases is to recruit someone who is aware of how prevalent they are, to let you know when it’s happening to you.