Finally, the illusions of validity and skill are supported by a powerful professional culture. We know that people can maintain an unshakeable faith in any proposition, however absurd, when they are sustained by a community of like-minded believers. Given the professional culture of the financial community, it is not surprising that large numbers of individuals in that world believe themselves to be among the chosen few who can do what they believe others cannot.

One study found that people who just thought about watching their favorite movie actually raised their endorphin levels by 27 percent.

We can't live in a state of perpetual doubt, so we make up the best story possible and we live as if the story were true.

Individual investors predictably flock to stocks in companies that are in the news.

We deeply want to be led by people who know what they're doing and who don't have to think about it too much.

There's a very good reason for why economics developed the way it did, and that is that in many situations, the assumption that people will exploit the opportunities available to them is very plausible, and it simplifies the analysis of how markets will behave.

There are some conditions where you have to trust your intuition.