Why Most Investors Lose — and Don’t Even Know Why

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Markowski takes aim at the illusion of control in modern investing — from flashy trading apps to overconfident day traders staring at eight screens of data. Drawing on insights from Nassim Nicholas Taleb’s Fooled by Randomness and The Black Swan, he explains how luck is often mistaken for skill, why hindsight bias ruins sound judgment, and how refusing to adapt can sink even the smartest investors. His takeaway: real intelligence in the markets comes from humility, skepticism, and knowing your limits.

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.

Speaker 2 (00:16):
Over the years, I've tried my darness here to help
investors and point them in the right direction. But time
and time again, individual investors doing it on their own
with the trading software the apps doesn't make any difference.
They always lose. I actually saw an E Trade commercial
this past week. I don't watch a lot of TV,

(00:37):
and I caught this commercial, and this E Trade commercial
was touting their trading software, and it had these traders
sitting in front of multiple screens. I mean it was
like one two, It was like eight screens, charts, grafts,
and colors. Crash, bang, boom, Wow, look at all this stuff.

(01:00):
Oh yeah, Oh, we got pattern recognition, we got this,
We got that. You will lose. You're gonna lose time
and time again. The statistics, the numbers prove it. Terrence
Odean did it back in the nineteen nineties. He studied

(01:21):
all the discount houses. Same thing today today, Actually even
worse than it was back then. With the various different
dark pools that are out there picking you off. They
buy and sell you. You don't have a shot. Investors,
on the other hand, different traders. No. I want to

(01:46):
share with you something I often talk about this gentleman
here on the program of an enormous amount of respect
for him. He is a great thinker, He is a
great risk manager, philosopher. His books some of the most
influential books of the twentieth century. On twenty first century,

(02:09):
whether it be fooled by Randomness, whether it be the
Black Swan, I go on and on, anti fragile, I'll
talk about that skin in the game. All must read books.
I want to go over his. I want to We're
Fooled by Random's first book. Here he talks a little
bit about the behaviors that human beings engage in where

(02:34):
it leads them down the wrong path. The past is
always deterministic. We overestimate what we knew at the time
of the event due to subsequent information, which is known
as hindsight bias. Why people's brains are not made to

(02:56):
analyze why things happen exactly. That takes time and is
less relevant than what will happen next. It's funny, you know.
I try to tell kids this when I'm coach for
the same thing. You know, make fast mistakes, and to
make a mistake, forget about it, move on. See Ted

(03:19):
Lasso did that in the television show. So you've got
to have the brains of the goldfish ten second memory. Anyway,
when you rate your investments, try to assign vague probabilities
to scenarios. That way, after the event took place, you
won't be fooled into thinking it was obvious all along.
Oh yeah, I should have known that, right, Luck mistaken

(03:42):
as skill. This is a great line. There is one
world in which I believe the habit of mistaking luck
for skill is most prevalent and most conspicuous, and that
world is the world of markets. Markets are the perfect
place to mistake luck for skill. Risk an investor took

(04:02):
is impossible to know. Investing processes are opaque. There's an
incentive to look skilled, and investors want to believe they're
good at what they do. There's a loyalty to ideas.
The world is ever changing. What's right today can be
wrong tomorrow when these circumstances change. Being married to ideas

(04:24):
is a safe way to an unsuccessful investing career. Options
and ideas should change with the facts again, deal with
the terrain probability and skepticism. In reality, probabilities aren't a
mathematical problem as they are in textbooks. We don't know
the different scenarios. We don't know any of the odds.

(04:46):
So it's not about solving a mathematical problem. Again, they
get you thinking they got all the software else you're
gonna figure it out. You're not. It's about being attented
to the fact that we don't know everything we would
need to know. Highest side of intelligen You don't know,
you don't know. Okay, you realize that you don't know
what you don't know. We are dependent on luck in

(05:07):
some circumstances. In the investing context, this lesson will make
us use a margin of safety, never let risk lead
to ruin. Many more when it comes to this, I'll
discuss it this weekend on the radio show. But again,
man's gonna know those limitations. Watchdog on Wall Street dot
Com