Q: How should advisors help clients?
Kahneman: Clients should think in terms of policies. Clients should not look at results on a daily or a weekly basis. The less frequently they look at their results, the less they will churn and make changes. And the less changes they make, the better off they will be. You should encourage long-term commitments. You should help them to try to avoid overconfidence.
Q: Have you changed or revised any of your earlier theories?
Kahneman: That is a trick question. I’ll look bad regardless of what I say.
Q: But have you?
Kahneman: Actually, I change my mind all the time and I forget about it immediately. (Laughter.) So when I look back, I say I always thought all of these things. When I look back, I was wise from a very early age. (More laughter, applause.)
Q: How much did you lose on the Seahawks?
Kahneman: You know the answer.
Q: How do you talk about clients about things going bad with a plan?
Kahneman: It is important to discuss with the client under what conditions the client will change his mind. So you are making an investment and things might go poorly, temporarily or permanently. How much are you willing to use before you quit? That’s an important conversation. Now the client may not always know the answer but it is very important to try to pin them down. But is your client willing to tolerate a drop in your investment? So that is a very important conversation.