IE Focus || Behavioral Finance

IE Focus | By Ignacio de la Torre, Professor at IE Business School Behavioral finance has a marked short-term impact on markets, but the price of assets will always depend more on efficiency levels in the long run.Which is the riskier country in which to invest, Argentina or Spain? I will be explaining the answer…

IE Ideas || Related to “Reality”

I don’t believe it would be an exaggeration to say that the present time is unique, unprecedented. All you have to do is read the papers to realise the importance of what is happening in our countries, and the speed at which it is happening. Our world has grown in complexity. It seems everything that is happening is inter-related, and that it is more and more difficult to find clear explanations for the circumstances that surround us.

What is happening? And above all… what is going to happen? Undoubtedly, this is the question and, as there is no convincing answer, we have chosen to isolate “things we don’t like” from “our normal life” and label them with the word “crisis”. However, I think there is widespread feeling that when this “crisis” disappears, things will not go back to the way they were. Why not? What do we suspect? It seems that these visible changes hide “something” that goes much deeper and that is going to affect the way we relate to reality in the immediate future.

For centuries, we have perceived “reality” as an objective entity, independent from us, in which the human being appeared to be confined. Our limits were configured by a context that was seen to be hostile and resistant. Man defined himself in “contrast” to the reality around him, and his capacity for action was reduced to mere “reaction” to it, either through “resistance” or “adaptation”. Whatever the case, this turned him into the victim and, as such, he paradoxically contributed to re-nourishing the paradigm. The very term “contrast” suggests “something” or “someone” we can oppose and that points to a “dialectical” focus in our interrelation with reality.

Although it remains very present, this way of relating to reality fell apart in the 20th century, which was undoubtedly the largest burial ground for beliefs in the history of our civilisation.

Perhaps that is why a new form of relationship between the human being and reality has gradually appeared: that in which we no longer feel defined by it insofar as we assume that what we refer to as reality is only our interpretation of it. Thus, we abandon the dialectical viewpoint and accept that there are other interpretations of reality that are as legitimate as ours.