How to Make Millions of Dollars By Drawing Pictures Even Though You're Very Bad at Art

I received a couple of email queries about my earlier post "Writing Down Your Goals". I had explained that it's mainly about impressing your goals onto your unconscious mind. And I had said that thereafter your goals will start coming true, even if you don't consciously know how to make them start coming true.

Some readers wanted to understand more about how this works. As I'm a little pressed for time, I'll just share with you Scott Adam's take on this. Scott is the creator of the tremendously well-known cartoon strip Dilbert. He is also a long-time practitioner of "thought affects reality" theories (his earliest accounts of his "thought adventures" go back to the time when he was nine years old).

I don't agree with every single point which Scott makes in his article below, but by and large, I agree with the "big picture" of his explanation:


Several years ago, in the closing pages of my otherwise humorous book titled The Dilbert Future, I told a weird little tale of how I used a technique called affirmations in my attempts to achieve a number of unlikely goals. Since then, I’ve received more questions on that topic than on anything else I’ve ever written. So I know this will pin the needle on the blog comments.

The idea behind affirmations is that you simply write down your goals 15 times a day and somehow, as if by magic, coincidences start to build until you achieve your objective against all odds.

An affirmation is a simple sentence such as “I Scott Adams will become a syndicated cartoonist.” (That’s one I actually used.)

Prior to my Dilbert success, I used affirmations on a string of hugely unlikely goals that all materialized in ways that seemed miraculous. Some of the successes you can explain away by assuming I’m hugely talented and incredibly sexy, and therefore it is no surprise that I accomplished my goals despite seemingly long odds. I won’t debate that interpretation because I like the way it sounds.

But some of my goals involved neither hard work nor skill of any kind. I succeeded with those too, against all odds. Those are harder to explain, at least for me, since the most common explanation is that they are a delusion. I found my experience with affirmations fascinating and puzzling, and so I wrote about it.

At this point, allow me to correct a mistake I made the first time that I described my experience with affirmations. If you only hear the objective facts, it sounds as if I believe in some sort of voodoo or magic. That’s not the case. While I do think there is something wonderful and inexplicable about affirmations, I have no reason to conclude it is any more than a pleasant hallucination. But if it is a hallucination, it’s a totally cool one. When I have flying dreams, I know they aren’t real, but it doesn’t stop me from enjoying the hell out of them. And so it might be the same with affirmations. Affirmations might be nothing more than a wonderful illusion that you can control your own luck.

Skeptics have suggested – and reasonably so – that this is a classic case of selective memory. Perhaps I tried affirmations a bunch of times and only remember the times it seemed to work. That’s exactly what I would assume if someone told me the stories I’ve told others. But working against this theory is the fact that affirmations leave a substantial paper trail. It would be hard to forget writing something 15 times a day for six months. And if it turns out that this is what happened to me, it’s fascinating still, because it says a lot about how the mind works.

My best guess about what really happens when you use affirmations is that several normal phenomena come together to create what seems abnormal. I’ll describe a few theories of what might be behind affirmations. Maybe there are more.

There’s a book called The Luck Factor, in which researcher Richard Wiseman describes studying people who considered themselves lucky, to see if they had any special powers along the lines of ESP. It turns out that they don’t. But he did discover that people who expect luck have a more powerful ability to notice opportunities in their environment. Optimistic people’s field of perception is literally greater. And the best part is he discovered that when you train people to expect luck, their field of perception increases accordingly. I think part of the mystery of affirmations has to do with the fact that it improves your ability to notice an opportunity. And when you do, it seems like a lucky coincidence. In my case, about half of my seemingly miraculous results with affirmations could be traced back to my noticing something important.

I’m not sure if optimism is what inspires a person to go through the effort of writing affirmations, or if the affirmations cause the optimism. But in either case you would expect that people who are writing affirmations would more readily notice opportunities than the average non-optimist.

I also wonder if affirmations are one way in which the subconscious (if such a thing exists) communicates with the rational part of your brain. Writing affirmations takes effort. Perhaps your subconscious only allows you to spend that much time on goals that it feels you have a chance of obtaining even if your rational mind does not. For example, my rational mind didn’t believe I could become a syndicated cartoonist with no experience and virtually no artistic ability. But maybe some other part of my brain knew it was a realistic goal.

Viewed in this light, if you can write a goal 15 times a day for months, there’s a good chance that some part of your brain views the goal as achievable even if your rational mind doesn’t see how. Writing affirmations also helps you focus on your goal, moving them from wishful thinking to something in which you are willing to invest yourself. If you have ever managed people, you know that your staff’s level of commitment makes a huge difference to their success. Perhaps affirmations are a way to manage your own level of commitment. In effect, you are brainwashing yourself, and this might help you get through the tough patches that come with pursuing ambitious goals. When I started Dilbert, I didn’t take a day off for ten years. You only work that hard if you fully expect something good to come from it. I did.

My favorite explanation for the power of affirmations also has the least evidence to support it, i.e. none. The idea behind this explanation is that human brains don’t have the capacity to understand all the complexities of reality, and so our brains present us with highly simplified illusions that we treat as facts.

In this model, affirmations are a lever on some entirely natural chain of cause and affect, but not a chain that our brains are capable of comprehending. While this view is unlikely to be correct, it has the advantage of being totally cool to think about.

Since the publication of The Dilbert Future, I’ve received thousands of e-mails from people recounting their own experiences with affirmations. Most people seem to be amazed at how well they worked. I heard all kinds of stories of people changing careers, marrying the person of their dreams, making money, and starting businesses. I also heard stories from people who claimed affirmations didn’t work for them, but the failure stories were the minority. To be fair, the people who had success were more likely to get excited and write to me about it, so the most that I can conclude is that lots of people BELIEVE affirmations worked for them.

Since I know you are going to ask me a bundle of questions about affirmations, let me answer the ones I can anticipate:

1. If affirmations work, it’s probably because you are focusing on a goal. Therefore I doubt it matters exactly how you word the affirmation, or if it’s handwritten or typed, or if you keep them or throw them away, or if you stop for a few days and then continue. I won’t answer any other
questions about technique because I’d be guessing.

2. I’ve never heard of a “monkey paw” affect where you achieve your goal but something horrible happens to you to balance it out.

3. I’m not doing any affirmations at the moment, mostly because I already have everything I want except a Nobel Prize. And even that wouldn’t change my life much. But I do visualize all of my goals and I always expect good luck, so I probably get the benefits of affirmations – even if those are only psychological – without the effort.

4. I don’t know how long you should try affirmations before concluding that they don’t work for you. But trying it for less than six months probably doesn’t give it a chance.

5. Affirmations have not worked every time for me. But the few times they did not work, I must say I wasn’t fully invested in the objective. For example, there are a few cases where if I had achieved an objective it would have caused a lifestyle change that wasn’t entirely positive.

6. If you want to read more about affirmations, Google it. I don’t have any particular book to recommend.

I know from my experience describing this topic that fully half of you reading it just concluded that “the Dilbert guy believes in magic.” The truth is that I believe in cool things that haven’t yet been explained to my satisfaction.

So here’s a good test of your personality. If all of your friends told you that they win money on the slot machines whenever they stick their fingers in their own ears, would you try it? Or would you assume that since there is no obvious reason it could work, it’s not worth the effort?

Scott Adam has often written about "thought affects reality" theories. He had been doing so long before they became topical again due to the release of that controversial new video ("The Secret") that some of my readers have been mentioning.

Of course, the nature of these "thought affects reality" theories being what it is, Scott has often been heavily criticised for sharing his views and personal experiences. The funny thing is that some skeptical people actually believe that these theories are some kind of new contraption recently invented by modern-day crooks like Mr Wang.

Actually, thoughts have always been affecting reality, and in different ways, there have always been some people at any point in time who knew that. For example, as far as the 16th/17th century, for example, a famous, wise and very accomplished man already wrote:
"... the moment one definitely commits oneself, then providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one's favor all manner of unforeseen incidents, meetings and material assistance which no man could have dreamed would have come his way. Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now." - Johann Wolfgang von Goethe (1749 - 1832).
Time has put a vast distance between Goethe and Scott, but if you stop to think about it for a moment, you'll see that they are actually talking about the same thing.

In subsequent posts, I'll discuss Scott's comments in further detail. Gotta run now.
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Little Science Lessons

"The doctrine that the world is made up of objects whose existence is independent of human consciousness turns out to be in conflict with Quantum Mechanics and with facts established by experiment." - Bernard d'Espagnat, director of the Laboratory of Theoretical Physics and Elementary Particles at the University of Paris XI (Orsay) from 1980-1987.
Mr Wang is busy at work and apologises to his readers for not responding to their emails (yet). To the reader who argued that "if thought can affect reality, then telepathy would be possible!", yes, in Mr Wang's opinion, your reasoning is logical.

Thus Mr Wang would refer you to Professor
Brian Josephson, Nobel Laureate in Physics. He is currently a professor at Cambridge University, and a strong advocate of the possibility of the existence of paranormal phenomena. He is also the head of the mind-matter unification project at Cambridge.

Note that the non-local aspects of telepathy (for example, the ability of a person in one place to instantly read the mind of another person in another place) is not inconsistent with the nonlocality aspects of quantum physics (the ability of a subatomic particle to instantly affect every subatomic particle that it has ever entangled with, regardless of wherever they may now be in the universe). See
this, for example:

"Nonlocality has been invoked as an explanation for telepathy and clairvoyance, though some investigators believe that they might involve a deeper level of nonlocality, or what Bohm calls "super-nonlocality" (similar perhaps to Sheldrake's "morphic resonance" (1989)). As already pointed out, if nonlocality is interpreted to mean instantaneous connectedness, it would imply that information could be "received" at a distance at exactly the same moment as it is generated, without undergoing any form of transmission. At most, one could then try to understand the conditions that allow the instant appearance of information."
As a matter of fact, researchers are now working on possible technological applications of this phenomenon - for example, two computer systems employing quantum technology could instantly "teleport" encrypted information to each other.

Sir
Roger Penrose, the world-renowned mathematical physicist at Oxford University, may not agree though. His argument appears to be that while thoughts may indeed affect reality and consciousness may indeed be required to collapse a subatomic particle either into a wave or a particle, the kind of consciousness that may be necessary to sustain the existence of the universe is not the kind of "consciousness" that any computer, no matter how advanced, could have.

In other words, even if the universe was created by God, He was most definitely not a piece of software.

Stay tuned for more, Mr Wang will be back!
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Thoughts Affect Reality. Let's Imagine Muscles

Hilariously, some readers are still missing the point. I wonder when they'll get it.

I have been using different sorts of examples to illustrate the "thoughts affect reality" concept.

But when I used Buddhism as an example, some readers said I shouldn't use Buddhism.

When I used quantum physics, some readers said I shouldn't use quantum physics.

When I used financial markets, some readers said I shouldn't use financial markets.

When I used rats and children in the Rosenthal experiment, some readers said I shouldn't use rats and children.

They miss the point. They just don't see that reality refuses to be divided up into neat slices according to our academic classifications.

Reality is not "Buddhism". Reality is not "quantum physics". Reality is not "financial markets" and reality is not "rats" or "children".

Reality is just reality. And thoughts affect reality - all of it. Whatever you think about.

And that is why you can look into ANY area of reality, including such diverse areas as Buddhism, quantum physics, finance, psychology etc, and still find evidence of the same "thoughts affect reality" phenomenon at work.

Today, what shall we talk about? Ummm, let's see. How about health and fitness? Shall we proceed to grow our muscles just by thinking about them?

"Ridiculous! Mr Wang is insane! Next he'll tell us that scientists have really discovered that you can increase your muscle size AND strength, just by thinking!"

Yawn. It's quite old news, actually:
Physical Training in Your Dreams

Scientists have come up with just about the best news that a couch potato could ever want to hear.

They say you can increase the strength of your muscles just by sitting back and imagine yourself taking exercise.

The discovery could help patients too weak to exercise to start recuperating from strokes or other injuries.

If the technique works in older people, they might use it to help maintain their strength.

Muscles move in response to impulses from nearby nerve cells called motor neurons. The firing of those neurons in turn depends on the strength of electrical impulses sent by the brain.

Dr Guang Yue, an exercise physiologist at the Cleveland Clinic Foundation in Ohio, says that this suggests you can increase muscle strength solely by sending a larger signal to motor neurons from the brain.

New Scientist magazine reports that Dr Yue and his colleagues have already found that visualising exercise was enough to increase strength in a muscle in the little finger, which it uses to move sideways.

Flexing biceps

Now his team have turned their attention to a larger, more frequently used muscle, the bicep.

They asked 10 volunteers aged 20 to 35 to imagine flexing one of their biceps as hard as possible in training sessions five times a week.

The researchers recorded the electrical brain activity during the sessions.

To ensure the volunteers weren't unintentionally tensing, they also monitored electrical impulses at the motor neurons of their arm muscles.

Every two weeks, they measured the strength of the volunteers' muscles.

The volunteers who thought about exercise showed a 13.5% increase in strength after a few weeks, and maintained that gain for three months after the training stopped.

Controls who missed out on the mental workout showed no improvement in strength.

The researchers are now repeating the experiment with people aged 65 to 80 to see if mental gymnastics also works for them .....
Boy, this sure gets repetitive. Do I have to say it again? Thoughts affect reality, yadayadayada.
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Writing Down Your Goals

Over the past two weeks, I've been receiving several emails like this. The stories they tell are different, and yet a strikingly similar theme runs through:

Dear Mr Wang,

I have been reading your blog regularly. Your recent topics on 'mind over matter' struck a chord with recent events in my life and my personal experience as a whole.

My life undergone a drastic change 7 years ago from a struggling under-achiever to a reasonably successful professional. All I did was that I started writing my goals down and things began to change for the better. Most of my friends said I was lucky, but I think it was more than that. I always dreamt of an Ivy league education but was either too poor or not smart enough to attend one. In a span of 7 years, not only did I have a successful career, I went to INSEAD to do my MBA and my current company is sending me to Harvard for further education. I simply believe that I could do it and to me everything you want to achieve in life starts from having the right thoughts ....

.... It was like all the different pieces begin to fall into place and reading your blog makes it even clearer to me now. I always have this fear that if I share my 'secret' with friends, I will get ridicule and laugh at. So instead, I kept this to myself and believe that once I have made something with my life, it will be easier for me to talk about this with the right people at the right time. thank you for sharing this wonderful topic on your blog. Keep writing.

Yours sincerely, P

This reader provided his real name, but I'll just call him P because I'm not sure he wants to be named.

What is the strikingly similar theme I mentioned? Typically, the person starts off in average, mediocre or distinctly dismal circumstances. Then at some point in time, he starts experimenting with some particular "success technique" or mindhacking method.


Suddenly, his life begins to change. Drastically, and for the better. The success is startling even to the person himself. Eventually, compared to his previous circumstances, he becomes almost embarrassingly successful.

Then at some point, he develops an urge to want to share his wonderful secret with others. With his friends. With his family. But there is fear. There is hesitation. There is the worry that he will be perceived as superstitious, mad or delusional. And so he holds back. He doesn't tell.


I should know. I've been there.

There are lots of things that Mr Wang knows through personal experience, and he isn't even telling you. What he tells you on his blog is only the tip of the iceberg.

Same for P. Within his little email above resides a very big secret. Those who know, know. Those who don't, don't. Their loss.

Anyway, P's chosen success method, by his own account, was to write down his goals. To the uninitiated, mere writing may sound like an utterly ineffective method to achieve anything.

What may surprise you is that practically every self-improvement book emphasises the importance of writing down your goals. Furthermore the authors will devote many, many pages as to how exactly to go about this task. There are many little tips and tricks to make it work.

This is a simple yet formidable method which must never be underestimated. The real secret is to write such that the goals get impressed onto your unconscious mind.

And then something quite similar to the Rosenthal effect will happen again. Remember - the teachers don't actually know how to make the kids smart. But simply by believing that the kids are smart (even though this belief is objectively false), the teachers WILL end up making the kids smart, creating a clear, measurable jump in their IQ scores.

Similarly, you may not know exactly HOW to achieve your goals. Your conscious mind may not even accept that you could achieve such goals. But if you write the goals down such that they are impressed onto your unconscious mind, then your unconscious mind WILL make your goals come true, creating clear, measurable results.

Mr Wang would explain further, but why bother. Thoughts affect reality; your mind is the universe; the unconscious overpowers the conscious, Freud's iceberg model of human consciousness etc etc. Those are the details. Those who really want to know, will find out. Those who don't, won't.

If you know how to impress your goals onto your unconscious mind, then like P, you could write your goals all the way to Insead and Harvard. If those were the goals you chose.

Of course that's entirely up to you. You could choose entirely different things. Far more amazing things, and yes, most of them will come true.
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Mind Influences Matter

You're about to flip a coin. You really, really hope to get tails. Does the effect of your hope, your intention, have any effect on the likelihood that you do get tails?

Of course it does. Duh. Thought affects reality, remember? I must have told you that about 50 times in the past two weeks. Haven't you been paying attention?

See below for an article about an experiment, conducted at one of the Ivy League universities in the United States, to determine whether human intention can affect events which are apparently of a purely random nature.

The experiment is still ongoing. Based on current results so far, the answer is yes, pure human intention does affect such random events. So far, the statistical probability that this answer is wrong is calculated at less than 1 in 1,000,000,000,000.

In other words, there is more than a 999,999,999,999 out of 1,000,000,000,000 chance that human intention does affect apparently random events.

Note: this is not to say that you're going to get 999,999,999,999 tails out of 1,000,000,000,000 times you flip a coin. What the experiment says is that your intention DOES influence the outcome on the event. And that the probability that such a conclusion is wrong is less than 1 in 1,000,000,000,000.

To put it another way, it is quite absurd to believe that human intention does NOT affect "random" events.
Somewhere in the late 1970’s, an undergraduate student at Princeton University approached the then dean of engineering, Dr. Robert Jahn, and complained that not a single member of the engineering faculty was willing to supervise her senior project. “That’s impossible” thought Jahn, until she went on explain what her project was about. “I want to replicate experiments which show that the mind can influence physical matter!” announced the student. When he heard this, Dean Jahn knew exactly what the problem was; even he wouldn’t want to advise a project that was based on such non-sense!

Rather than dismissing her project off the bat, Jahn remembered his earlier promise that students at Princeton could pursue projects in any legitimate topic that interested them. For the sake of promoting free intellectual inquiry he told the student that he would supervise the work himself if she could demonstrate the serious nature of the project.

In the months that followed, Professor Jahn was persuaded that the subject at least warranted some kind of precursory inquiry. Experiments run by a man named Helmut Schmidt at Boeing labs claimed to show a correlation between the output of a device known as a random event generator and the intention of human participants. After talking with Schmidt and contemplating the engineering implications of the data, Jahn agreed to supervise a replication of Schmidt's experiment.

In this experiment, a device called a random event generator would be used much like an electronic coin flipper. The device produces outcomes that can have one of two states, which are analogous to the heads and tails of a coin toss, each with exactly a 50% probability of occurring. Unlike an electronic coin flipper, the REG takes advantage of the fundamental properites of quantum mechanics to generate its random outputs. Unlike most other objects that we encounter, even with information about every element of the system, modern physical theory states that it is impossible to predict the next output from one of these devices.

In the experiment that was being attempted, operators would attempt to distort the 50/50 balance of the device using nothing more than their intention. Operators would literally sit in front of the random event generator and “will” that one outcome be produced more often than another. Over the course of many outcomes, a statistical profile could be built up that would allow the experimenters to contrast the device's output when a person was not attempting to influence it ....
The article is quite long, and split over several web pages. To read in full, start here.

I am busy with some other personal mindhacking projects - I may not blog here so often in the next 2 weeks or so. But rest assured that Mr Wang shall be back to tell you more about how thought affects reality.

There is no escape! Your mind is the universe. Change your mind and the universe must ___________. .
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Thoughts And The Reality of Pets & Children

So while we're still on the topic of thoughts affecting reality, let's turn our attention to our animal friends. Do you have a pet dog or cat? Would you like it to be smarter? Just start believing that it is smarter, and it will immediately start becoming smarter.

What? You don't believe Mr Wang? Let me make an even more grandiose claim. This "thought-affects-reality" method will work even for your pet hamster. Start believing that it is a smart little rodent, and its IQ will also expand.

Yes, this has been scientifically verified for rodents. In a famous experiment, a group of graduate students were given some rats and were told that these rats had been specially bred for their superior intelligence, especially for their "navigational" ability. Another group of students were given some other rats and were told that these rats had been specially bred for their stupidity.

All the students were then asked to train their respective rats to figure their way out of mazes. True enough, the supposedly "smart" rats ended up performing much better than the "stupid" rats. Most of the "stupid" rats did not even manage to make it past the start line in the maze.

Of course, the truth was that none of the rats had been specially bred for anything. All the rats had been randomly chosen for this experiment. They were "equal" rats. However, the (objectively false) belief that certain rats were smart led to the superior performance of those rats. The (objectively false) belief that certain rats were stupid led to the inferior performance of those rats.

Another simple example of thought affecting reality.

"Mr Wang, that's amazing," you say. "But are you sure it works for dogs and cats?"

Well, actually I don't know of any such experiments involving dogs or cats. After Robert Rosenthal finished his rat experiment, he skipped the dogs and cats and went on directly to human children.

In a school environment, teachers were, in effect, tricked into believing that certain children had been tested, and had already been proven, to be smarter than the other children. All other variables were controlled for. Eight months later, due to the teachers' false beliefs, the supposedly "smarter" children indeed turned out to be smarter. Despite having the same teachers and the same classroom lessons and the same school environment, the supposedly "smarter" children showed more intellectual gain on their IQ tests than the other children. In some cases they showed about twice as much improvement as the other children:


"All of the children in the study were administered a nonverbal test of intelligence, which was disguised as a test that would predict intellectual "blooming." The test was labeled "The Harvard Test of Inflected Acquisition."


There were 18 classrooms in the school, three at each of the six grade levels. Within each grade level, the three classrooms were composed of children with above-average ability, average ability, and below-average ability, respectively. Within each of the 18 classrooms, approximately 20% of the children were chosen at random to form the experimental group. The teachers of these children were told that their scores on the "Test of Inflected Acquisition" indicated they would show surprising gains in intellectual competence during the next 8 months of school.


The only difference between the experimental group and the control group children, then, was in the minds of the teachers.

At the end of the school year, 8 months later, all the children were retested with the same test of intelligence. Overall, the children from whom the teachers had been led to expect greater intellectual gain showed a significantly greater gain than did the children of the control group, thereby supporting the "Pygmalion" hypothesis."
Link.


Here's the simple, practical summary. If you want your children to be smart, start believing that they are smart. If you want your children to be stupid, start believing that they are stupid. Whatever you choose to believe about your children, will come true.

Now, Mr Wang invites you to consider this. If your beliefs about another person, or even a rat, can already affect his/its mental abilities, how would your beliefs about yourself affect ..... your own mental abilities?
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Thoughts, Reality And the World of Finance

Here's an old joke about the efficient market hypothesis:

A finance professor and his student take a walk together. Suddenly they see a $50 note lying on the ground. As the student stoops to pick it up, the professor says: "Don't bother - if it were really a $50 note, it wouldn't be there."
Hahahahaa! Well, okay. If you don't know what the EM hypothesis is, you might not get this joke. Anyway, this Sunday, Mr Wang will take you on a whimsical "thoughts-affect-reality" tour of the world of finance.

Let's start with the basics. How do you make money out of the stock market? Very simple. You buy a share at a certain price, eg at $1.00, and later you sell it at a higher price, eg $1.50. There - you just made $0.50.

But in the first place, how do you know what to buy? There are three major schools of thought, known as fundamental analysis, technical analysis and the efficient market hypothesis. Let's take a look.

Intuitively, fundamental analysis makes the most sense to the layman. As the name suggests, you'll analyse the "fundamentals" of each stock. For example, you could start by analysing the general economy (eg the government's estimates for annual economic growth). Then you could analyse a particular industry within that general economy (for example, the financial services industry and the factors affecting it). Then you analyse a particular company within that industry (for example, DBS and its financial statements, its products and services, its business strategies etc).

You then form a view. You say, "Based on my analysis, the intrinsic value of this company's share ought to be $1.50." You then check the market. You find that the share is actually trading at $1.00. You quickly buy the share. In your opinion, the share is undervalued; people will realise it later; you're smarter than them, because you realised it first; and later you will be able to sell the share for $1.50. There, you made $0.50.

Mr Wang would say this: "Fundamental analysis assumes that there is an external objective reality. If we study this reality rationally, we can discover what that reality is. Using logical thinking, we will be able to identify the intrinsic value of the share. By using superior logical thinking, we can spot cheap shares faster than other investors, buy them up quickly, and sell them for a profit later."

Technical analysis is quite different. It does not care about the economy. It does not care about the growth prospects of any particular industry. It does not care whether the company's CEO has 20 years of management experience or had dropped out from primary school. All these factors are completely irrelevant in technical analysis.

Technical analysis says that the market value of a share is determined solely by the supply and demand for it. Supply and demand depends on the hopes, fears, opinions, views, conclusions and guesses of numerous potential buyers and sellers - whether rational or not. All these factors are ultimately reflected in charts tracking the price of a share, the volume of trading etc.

Furthermore, chart patterns tend to repeat themselves. Terms to describe such patterns include "head and shoulders", "double top", "consolidation rectangles", "runaway gaps" and so on. From these patterns, you can predict certain trends that will continue for some time (that is, the price will either go upwards for some time, or downwards for some time, or stay approximately constant for some time). By studying the charts (and absolutely nothing else), you can predict which way the price is going to go. And that's how you make money, using technical analysis.

Mr Wang would say this: "Technical analysis assumes that there is an external reality, but that the reality is subjective. This reality is continually responding to the thoughts of investors, as a whole. If enough investors think hard enough that a particular share will go up, then it will go up. If enough investors think hard enough that a share will go down, then it will go down.

Thus it is a waste of time studying "objective", "rational" data such as the latest release of economic data or the level of political stability in Singapore. Just study the charts, whch represent all the investors' collective thoughts, which in turn move in predictable patterms. Study the charts, and you will know how the external reality will change in the future."

Now we turn to the efficient market hypothesis (also known as the random walk theory). It says that financial markets are so efficient at pricing in all available information that absolutely no one in the world can consistently predict the direction of the stock market or which stock will be the next winner.

For example, let's say that today, there is a terrorist attack in New York, or DBS announces its new business strategies for the next five years, or Microsoft appoints a new CEO. As soon as this information is released, it is instantly priced into the market. Investors, as a collective group, instantly take note of this information and the share prices of DBS and Microsoft immediately adjust, according to the opinions and views of investors, as a collective whole.

According to the efficient market hypothesis, fundamental analysis is basically useless. That's because every piece of information that the fundamental analyst is studying has ALREADY been taken into account. There is no point in studying the economy, or the industry, or any company, in the hope of finding a cheap, undervalued share that you can sell for a higher price later. Every available piece of information you're looking at has ALREADY been priced into the entire market.

The implication is that there is no rational way to find a "good" share to buy. There is no rational way to identify a "bad" share. Shares are simply whatever the entire universe of investors think they are. World-renowned finance expert Burton Malkiel goes so far as to say this: "A blindfolded chimpanzee throwing darts at the Wall Street Journal could select a portfolio that would do as well as the experts."

Here's another way to look at it - at any given moment, as long as the stock exchange is open, the price of each share is a perfect reflection of (1) all available information in the universe about that share, and (2) the sum total of all opinions, guesses, hopes, fears, beliefs, conclusions and expectations that all investors have ever had about this information.


Mr Wang would say this: "The efficient market hypothesis says that the present reality of a share's price is created by all the thoughts, past and present, that all investors in the universe have EVER had about that share. Furthermore, any new thoughts that investors may have about the share INSTANTLY affect the share. Time is pretty much an illusion."

"Woah, that sounds like karma.
Even instant karma, haha."
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