2025-08-07

By Jean-Philippe Legault, Guest Contributor

In the 1980s, Hans Moravec, a research professor at the Robotics Institute of Carnegie Mellon University, and his colleagues observed that it was much easier to program a machine to perform complex human tasks than to carry out simple ones.

To better understand the paradox, let’s take the case of chess. When played at a high level, chess is extremely complex. Yet, it is relatively simple to develop software capable of defeating the world’s best players. In other words, it is easier to create the software than to become the best player. Outside of chess, there are many tasks in which humans cannot compete with artificial intelligence and robotics, such as data analysis, scientific simulations, and logistical optimization.

Conversely, tasks that seem mundane to us—like motor skills (walking, picking up a pencil, opening a door) and social interactions (detecting sarcasm, holding a logical and organized conversation)—are far from obvious for robotics and artificial intelligence. Technological advancements are progressing, but we are still far from achieving human fluidity.

In short, what is simple and unconscious for a human is very complex to program, while what is complex for a human is easier to code. This is what’s known as Moravec’s Paradox.

In the field of investing, I often find that this paradox is reversed. What should be relatively simple for a human often turns out to be very difficult to carry out. Here are a few examples.

A stock you’ve been following for a long time keeps falling. The news is consistently negative, and investors are highly pessimistic. Yet your in-depth research leads you to believe there is little reason for such pessimism. The company’s results remain solid, and you see this storm as temporary, with healthy long-term growth potential. Moreover, the stock’s decline makes its valuation all the more attractive. Despite your thorough analysis, you avoid buying the stock because you hesitate to go against the crowd. In this case, the task is simple: buy a stock you find attractive after a major drop. While it seems simple, the psychological context makes this action difficult for a human to carry out.

You’ve held a stock in your portfolio for several years and know the company well. However, you feel that the long-term growth prospects are deteriorating. Competition is intensifying, and the strength of the business model you once admired is gradually weakening. The stock’s potential appreciation now seems moderate, at best. Despite this, you don’t want to sell because your purchase price is higher than the current stock price. By selling, you would realize your loss and, in doing so, confirm the failure of your investment. In this case, you’re suffering from the psychological bias of anchoring, where your attention is focused on a specific reference point. Excluding tax considerations, a computer would place no importance on the purchase price. Ignoring the purchase price of your shares is simple in theory, but often difficult for an investor to do.

In March 2020, the onset of the COVID pandemic hit the stock markets hard. At the time, you reviewed your holdings and noticed a very high level of volatility that made you uncomfortable. The media was filled with bad news, and the future became hard to predict. Your holdings were experiencing significant losses. Panicked, you liquidated your entire portfolio. What would have been the simplest task to accomplish? Doing nothing. There is probably no simpler task than doing nothing. Yet many investors failed at this and sold.

What seems to be the simplest thing for a stock investor is often the hardest to accomplish.

Jean-Philippe Legault, CFA
Portfolio Manager at COTE 100

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