What is Facebook really good at?

Birthday reminders and investing?

Apart from helping people connect and aggregating data for targeted advertising, I was confident that Facebook's greatest gift to the world was its birthday reminders. That was until I went back and looked at some of my older status updates.

"Can someone please send me an Olive tree on Farmville!"

"Lampard. What a goal Wow!"

Facebook's greatest achievement is to remind you of what a moron you were five-ten years ago. I was busy growing trees on my virtual farm while giving redundant commentary on football games. If this was not bad enough my mother had stored a diary which I had when I was seven. Turns out I had just discovered what compositions were and this was my take on the festival of lights.

"Today in the evening, we had a Diwali Pooja. Mom and dad prayed to God and then we all had Laddoos. They were really tasty. Then I went out to burst crackers with dad. It was very exciting."

Imagine 500 words of that. I had this vague impression of me being a " somewhat cool kid" which vaporized due to the anecdotal evidence that was found on Facebook and a diary. While unfortunate in the scheme of things, this very evidence acts as a reminder of what I was thinking of when I was seven or thirteen. It's a superpower in a way as it allowed me to travel back in time. It's something that every investor and trader needs.

Once we know how something happens it's almost impossible to go back in time and understand what we were thinking before the event. Our brain almost automatically weaves a narrative to explain what just happened. For an investor, this is scary as it allows us to convince ourselves that "we knew it would happen before it even happened".

Hindsight bias prevents us from learning from our mistakes and successes as we may claim that we always knew it along. Having written evidence prevents us from weaving narratives and looking at our thoughts before the transaction. Keeping an investment journal becomes crucial to improvement.

After all, to improve as an investor we need to know when we make a mistake and our journal reminds us that we make mistakes more often than we think.

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