The Sunday Times 25 February 2018

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I don’t often dwell upon death or its likely causes, but a publication from the Royal Statistical Society of Britain caught my eye recently.

It announced that the international statistic for 2017 was 69; the number of US citizens killed on average in lawnmower accidents each year, compared with the just two killed by immigrant Islamic terrorists.

The article’s other numbers also showed that 21 Americans are killed by “armed toddlers” and a further 737 die annually as a result of “falling out of bed”.

Originally published in an article in the Huffington Post, the 2017 statistic went viral after it was tweeted by Kim Kardashian in response to Donald Trump’s proposed ban on Muslim migrants.

An unlikely ambassador for statistics maybe, but Kardashian is certainly a force in helping to bring a greater understanding of risk to a wide audience. 

In terms of the numbers and the actual risks or potential harm, what these statistics highlight is the need to keep things in perspective.

You are more than three times as likely to die from taking a selfie than by shark attack according to Princeonomics, but the former is not an activity that we associate with danger.

This applies equally well to other domains, none more so than financial markets where the things we tend to concern ourselves with loom larger in our minds than is warranted by the chance of occurrence.

The financial media has a role to play here as their priorities differ to investors. They don’t have your profit motive in mind and don’t exist to help you become better at investing. There is an understandable desire to provide lively copy, but it can mislead.

A Yale study “Crash Beliefs from Investor Surveys”  assessing investor perceptions about likelihood of a stock market crash showed investors assess the probability to be significantly higher than the reality.  On average, those polled estimated the odds of a one-day crash to be about 19 per cent, which is wildly at odds with the actual probability (which data show to be 1%).

The study examined the role of media influence, and found that investors are prone to acting on a mental shortcut known as the “availability heuristic” - to use the term coined by Nobel laureate Daniel Kahneman. Adverse market events made salient by financial press are associated with increased assessment of the likelihood of a crash on the part of investors. And it found these assessments had an impact on investment activity, i.e. exaggerated fear of a market crash impacted investment behaviour.


A mountain of research shows that humans give more weight to negative events and experiences. Negative experiences are more likely to be remembered and more likely to influence our evaluations so little wonder, then, that media negativity holds much greater sway than media positivity.


The availability bias in essence means that when people evaluate the odds of something happening, they tend to rely on easily recalled events. A brilliant example of this was done by Kahneman in a study on air travel.

When air travelers were asked how much they were willing to pay for life insurance for an upcoming flight covering death due to any reason, or death due to a terrorist attack (only), they reported a substantially higher number for the latter. Death by any cause clearly includes terrorist attack, so this makes no sense.

But it makes a lot of sense to Kahneman, who argues that we associate terrorism with fear and fear is associated with a greater willingness to pay for insurance. Kahneman reckons we have strong tendencies to miscalculate risk likelihood in predictable ways.

And when we miscalculate risks, we sometimes behave in ways that are riskier than those we are trying to avoid. We worry more about risks we cannot control than those we can. Why do we feel more comfort behind the wheel of a car than as a passenger on a plane, despite driving being significantly more dangerous? Consider the example of New York in the aftermath of 9/11. Airline passenger numbers dropped considerably as people took to their cars. Professor Gerd Gigerenzer, a German academic, has estimated that an extra 1,595 Americans died in car accidents (to say nothing of injuries) in the year after the attacks – indirect victims of the tragedy.


The investment lessons that arise out of this are plentiful. With a view to leaving you with something salient and easy to recall, I’d offer the following counsel.


Treat financial media in the same way as you might astrology; entertaining to read but potentially harmful when it comes to important decisions, such as investing.  


Meticulously avoid business television channels – Narcos or the Crown is fine!


And though the next stock market downturn could well be a significant one, no one really knows. Tread carefully but bear in mind, the denouement may loom larger in your mind than it does in reality.    

Gary Connolly is Managing Director of iCubed. He can be contacted at or on twitter @gconno1. iCubed Training, Research and Consulting, trading as iCubed, is regulated by the Central Bank of Ireland.

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