The Rashomon effect

A “Rashomon filter”, which assumes that whatever we and others believe about investment decision making, is subjective, self-serving, and contradictory.

It is a term related to the unreliability of eyewitnesses. It describes a situation in which an event is given contradictory interpretations or descriptions by the individuals involved.

The effect is named after Akira Kurosawa’s 1950 film by the same name ― Rashomon. The story revolves around a murder described in four subjective, alternative, self-serving, and contradictory ways by four witnesses.

Each of the characters relate the incidents as a contradiction of the other, but they describe them in such a convincing manner that the audience tends to believe them all.

Now, even though we may not want to admit it, we play Rashomon’s characters in our lives almost all the time. We tend to see what we want to see. We tend to believe what we want to believe. And we are not alone in this. Everyone behaves the same way.

We describe our beliefs – that often change with time – to ourselves in such convincing manners that we are always sold on them, even when we are wrong… and especially when we are wrong (which we only realize in hindsight). Worse, the way we believe others talking their own narratives, we ignore that their opinions and analysis may also be subjective and self-serving, like Rashomon’s witnesses.

A “Rashomon filter” may help here, which assumes that whatever we and others believe about investment decision making, is subjective, self-serving, and contradictory (that’s like, guilty until proven guilty!). And that is why we must always be extra careful when we come across –