Monday, December 06, 2010

Your Money and Your Brain by Jason Zweig [a summaview]

Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You RichYour Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich by Jason Zweig

This is not my normal genre, aside from the fact that I read widely. I received it as a gift and decided to wade through it.

Jason, editor of the Intelligent Investor newsletter, worked with neuroscientists to examine how the brain processes information related to investing. Zweig subjected himself to several studies and imagery programs illustrate how the brain reacts to experiences such as anticipation, gain, loss and regret. Chapter titles include: greed, prediction, confidence, risk, fear, surprise, regret and happiness.

From the book jacket: “Why do otherwise smart, rational people make irrational, foolish decisions about money? Combining psychology, neuroscience and economics, the new science of neuroeconimics answers that question… Your Money and Your Brain exp=lains why we oveten misunderstand risk and tend to be overconfident aobut our investment decisions. Zweig blends anectodes from experimends in which he participated with stories aobout investing mistakes - some from highly successful people - distilling them to offer practical steps that investors can take to make better decisions and take control of the battlefield between reason and emotion.”

The book has application for leaders as well as investors. In any field in which we take responsibility for our own decisions and actions, help to understand how we process information is valuable.

A few broad takeaways for me.
  1. Anticipation seems to be a stronger motivation than does receiving.
  2. It has been my experience that all history is revisionist, and all revisionist history is nostalgic. Stated simply, we remember only the best of times and upon reflection, our recollections are rarely objective.
  3. If investing, make a log of thoughts, processes, and feelings when you make an investment. It will help you document your path when you are tempted to second guess yourself. Same goes for any decision.
  4. The brain is a wonderful gift. It is fascinating in its ability to adapt, process information and (re)program itself.
  5. We are prone to deception. We may fool ourselves or be fooled by others. We must be aware of that and careful to guard against it.
I’ll be passing this book along to a friend in the investment business, rather than keeping it on the shelf for reference.

Bibliography - Zweig, J. (2007). Your money and your brain: how the new science of neuroeconomics can help make you rich. New York: Simon & Schuster.

1 comment:

Diana said...

That book looked really interesting to me.