A few years ago, the city council of Monza, Italy, barred pet owners from keeping goldfish in curved bowls, saying that it is cruel to keep a fish in a bowl with curved sides because, gazing out, the fish would have a distorted view of reality. But how do we know we have the true, undistorted picture of reality?
Stephen Hawking

We are worse than goldfish

The attention span of human beings is getting shorter and shorter. A while ago, researchers did a study and found that it is now shorter than that of goldfish. 2,000 Canadians were surveyed, and the researchers studied the brain activity using electroencephalograms. The results showed the average human attention span has fallen to eight seconds. Meanwhile, they found the attention span of goldfish to be about nine seconds (Source: https://neurotracker.net/2017/05/24/humans-attention-span-shorter-than-goldfish/).

Although not everybody agrees that attention spans are getting shorter and shorter (Note: See for example http://www.bbc.co.uk/news/health-38896790), at least in the world of investments, my 34 years of experience does indeed confirm that to be the case. I clearly remember the heyday of the mid-1980s, when I first started out in the industry. Our boss would regularly ask us youngsters to think about the long-term implications of what we intended to do and, by “long-term”, it quickly became obvious to me that he meant next year, the year after that or sometimes even further out in the future.

Most people do not look that far into the future anymore. When I speak to investors today, and particularly to young investors, I sometimes get the impression that by “long-term”, they mean next Monday morning - so dramatically have attention spans compressed in my lifetime.

I could spend the rest of this month’s letter speculating on why that is, but that is somewhat irrelevant – at least as far as a financial newsletter is concerned, although I am sure psychologists have an opinion. It will take me two seconds to prove, though. One of the best measures of attention spans is the willingness – and the ability – to read lengthy texts, and fewer people than ever read anything of any length anymore (Exhibit 1).

Exhibit 1: Percentage of American adults who read any work of literature in the past year
‍Exhibit 1: Percentage of American adults who read any work of literature in the past year
Source: National Endowment for the Arts, The Washington Post, September 2016

What is IADD?

The problem in a nutshell is what I call Investor Attention Deficit Disorder or IADD (Note: For the worried reader, I should point out that IADD is not a recognised medical condition). If you know somebody who suffers from IADD, you will know that they struggle to establish a coherent and robust investment strategy, and that they do highly irrational things such as buying shares in Alibaba just because they attended a dinner party last night where the host toasted to Alibaba, saying it is the next Amazon.

Sufferers from IADD do other strange things too. For example, afraid of upsetting anyone, they rarely make otherwise reasonable demands such as asking their investment manager to charge reasonable fees, which aligns the interest of the investor and the investment manager. They just go with the flow – probably because they are too busy monitoring the latest news on their smartphone.

I happen to know one or two of them, and I can assure you their life is not easy. Allow me to introduce you to my long-standing friend Joe, who was diagnosed with IADD about 10 years ago. Joe would love for things to change, but he is so addicted to the smartphone lifestyle that he simply cannot deal with things the way you and I can.