Why Your Investment Strategy Needs a Science Upgrade | Ep. 372

• Thomas defines an investment portfolio as money put to work with potential for loss, distinguishing between scientifically-backed investments (stocks and bonds) versus speculative ventures lacking sufficient data like crypto and NFTs.

There's not enough data out there to validate that it's actually scientifically derived or has what's called a risk premium in it. For the most part, they're just speculative gambles and that's not scientific.

• Most investment decisions are based on compelling narratives rather than scientific evidence. Using Tesla as an example, Thomas explains how factors like Elon Musk's vision are already priced into current valuations.

All that stuff that's already happened is already factored into the current price. That's why it's trading at what it's trading at. That has no bearing on what the future value of it will be.

• Thomas emphasizes that psychology and science must work together. Without discipline, investors fall prey to 'shiny object syndrome' and abandon sound portfolios for trending investments.

Without that, you won't stay disciplined to a scientific portfolio. You'll get the, ooh, squirrel, right? The shiny object syndrome.

• Thomas introduces the efficient market hypothesis as the foundational concept: markets aggregate all buying and selling decisions to create efficient pricing that individuals cannot consistently predict or beat.

If I believe that markets are efficient, it means that there's no way for me as an individual to presuppose or to guess or predict consistently what the buying and selling decisions of all the other people involved are going to be.

• Using Louis Vuitton as an analogy, Thomas illustrates how supply and demand determine pricing across all markets. The aggregate actions of all participants—not any single entity—control market outcomes.

It's the aggregate total of all these people that control the markets.

• Thomas provides practical guidance: investors should ask their advisors about the scientific principles behind portfolio construction. Those using evidence-based approaches can clearly articulate their methodology.

What kind of scientific principles do we use in our portfolio management? How did you, what science did you use to determine how my investments are set up?