The Allure of Shiny Objects
The Allure of Shiny Objects
Wayne Hendry
Client Relationship Manager
Lexicon Financial Group of Raymond James Investment Counsel
Growing up in South Africa, my mother led me to believe that crows were attracted to shiny objects. One day, she found an injured crow in our backyard and decided to nurse it back to health. She let me know to hide any small shiny objects I had, because the crow could be attracted to them and possibly take them. The crow came and went for several months, until one day, it flew away and never returned. I didn’t seem to be missing any shiny objects, but I continued to believe that crows were attracted to them.
Contrary to my beliefs, crows are, in fact, more likely to be scared of shiny objects than attracted by them. In some locations, objects that catch the sun and reflect dazzling beams of light can be used to deter or scare off crows from a piece of land or a bird feeder. The only thing that crows are known to deliberately and frequently stash is food. [1]
Humans also store food for future meals. However, unlike crows, our species is definitely attracted to shiny things.
In investing, there is something called "The Shiny Object Syndrome" and it can be a real problem. Why? Exploring a shiny new form of investing or investment asset class is tempting and alluring. So much so that you may invest capital in it, potentially without regard for or understanding how it impacts the overall risk level in your portfolio. So, why do so many people do this?
Their current investment strategy seems boring, is generating average returns, and they want to change things up.
The other investment sounds exciting, seems to be on the road to success, and may deliver a higher “Return on Investment” (“ROI”).
Their personality leads them to want to explore and invest in new and unique things that are mentally stimulating.
Market cycles and a “Fear of Missing Out” (aka “FOMO”) are driving them to get in on the action. Everybody else is, so why not them?
Media hype and narrative shifts are influencing them. Also, humans have a history of chasing shiny objects. Over the last four centuries, we have seen shiny objects like the roaring ‘20s stock markets, the Dotcom bubble, cryptocurrencies, non-fungible tokens, artificial intelligence (AI), to name a few. The madness of the crowd and herd-like behaviour surrounding these shiny objects have also helped to drive investors from one shiny object to the next.[2]
Much like a flame attracts a moth, these shiny objects usually draw investors towards flashy, trendy assets without fully considering the associated risks. Sometimes, in pursuit of something new, investors tend to stray from the long-term financial plan and put their goals at risk.
An historical example of this was during the Tulip Mania of 1636. Many investors lost everything, driven in large part by the fact that they had purchased tulip flower bulbs on credit, hoping to repay their loans when they sold their bulbs for a profit. When tulip prices started to fall, holders were forced to sell their tulip bulbs at any price and to declare bankruptcy in the process. Tulips had no commoditized value but the opportunity to make a good return appeared to be real. Sound familiar? Look at the millions spent on NFTs and other shiny investment objects. Justin Bieber's Bored Ape NFT, which he purchased for a staggering $1.3 million in January 2022, has seen a massive drop in value. As of mid-2023, the NFT has lost about 95 per cent of its worth and was then valued at approximately $60,000.
Most investors invest when a particular asset class is gaining momentum. One of the reasons for this is recency bias - the cognitive tendency to place too much weight on recent events or information when making a judgment or decision, while downplaying historical data and long-term trends. Consensus predictions about equities, commodities, bonds and even stock markets help boost this bias. During the Dotcom bubble, venture capitalists (VCs) backed every startup that added “.com” at the end of their name. In the mid-2010s, VCs backed more than 10,000 photo apps based on a belief that the next Instagram would come from their investment. More recently, during the time of crypto, VCs were funding any crypto project, and now during AI, investors and VCs are seeking to invest in the next OpenAI. [3]
Warren Buffett once said that investors should be fearful when others are greedy and greedy when others are fearful. Remember this the next time a shiny object catches your attention, whether it be in investing or in life. Having a thing for bling can cost you more than you expect.
Do Crows Like Shiny Things? (What About Magpies + Myths Debunked), Birdfact, March 3, 2024
Mastery & Shiny Objects, Arie van Gemeren, CFA, The Timeless Investor, February 6, 2025
The Shinning Object Syndrome in Investing, James Okpare, Medium, December 20, 2023
Wayne Hendry is Client Experience Manager with Lexicon Financial Group (www.lexiconfinancialgroup.com) at Raymond James Investment Counsel.
The opinions expressed are those of Wayne Hendry and not necessarily those of Raymond James Investment Counsel which is a subsidiary of Raymond James Ltd. Statistics and factual data and other information presented are from sources believed to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters.