Distorted Reality

I just saw Christopher Nolan's amazing new movie Inception the other day. Most of the movie takes place within dreams. Leonardo DiCaprio and his gang of infiltrators pry their way into another person's thoughts when he is sleeping in order to extract valuable information from his subconscious when he is at his most vulnerable. The trick to doing this successfully is a good architect, Ellen Page, who artificially constructs the dream environment for Leonardo DiCaprio and his extractors. She has the freedom to bend her surroundings in any way she pleases, as you see in the trailer when she folds the city block back on itself. But when infiltrating the minds of others, she has to construct a dream environment that is believable so that the dreamer will not realize that something is completely strange and out of the ordinary and wake up, dashing their chances at extracting the information.

Photograph: Warner Bros/Sportsphoto Ltd/Allstar

This made me think about how we distort things in our mind. We can be confronted with cold, hard facts, but we can be convinced or convince ourselves of just about anything even when the facts are staring us in the face. When we dream, we can be in the presence of people who look nothing like our family, but we somehow perceive that it is our family standing next to us. We might be doing things that are totally outrageous, but somehow we think everything is very very real. In the same way, when we're awake, we can hold on to a belief with very few facts to back it up. A belief can be so entrenched in our mind that we don't really know why we believe it anymore, but we cling to it so desperately that our life depends on it. If it's all we know, how can we possibly change?

That's how I feel about the media's treatment of buy and hold investing. All around us, we are surrounded by people who preach buy and hold investing, buying up shares of undervalued companies and holding on to them to ride out their business success. But it seems to me that this ideavirus has populated the world not because of the cold hard facts backing its success. In fact, it's the exact opposite. We are infused the belief that this method works, without being shown any proof that it works consistently. We just trust that it works, until events like we've seen over the past few years shake our belief to its core.

In addition, ideas can be implanted into the minds people, lead them to behave in certain ways, and can have a viral influence. Trends are born when enough people start believing something that is perceived as important or trustworthy information. A trend in a stock price emerges as a result of many people acting as sheep and just following along with the herd. New products, strong business growth, an exponentially rising stock price, among countless other things, persuade many people of a particular outcome all at the same time and serve to accentuate and perpetuate a trend.