| | |  | Roger Dooley | | Home » | | | | | | | Product Promotions: | | | | | Description: | | Starred Review. It's tempting to blame your upbringing or your stingy boss, but the real culprit in your flawed relationship with money is your very own brain, argues finance writer Zweig. Combining concepts in neuroscience, economics and psychology, he explains how our biology drives us toward good or bad investment decision. Our brains are pretty self-deceptive, it turns out: we have difficulty admitting our lack of knowledge about finances; we overestimate our own wisdom and performance; and our preference for mistakes of action rather than inaction often leads us to irrational investment decisions. Most tellingly, humans believe we're smart enough to forecast the future even when we have been explicitly told that it is unpredictable. Among the book's fun facts: the MRI brain scan of a cocaine addict is virtually identical to that of someone who thinks he is about to make money. Backed by stellar research and written in an entertaining, informal style that makes a complex subject accessible to the layperson, Zweig makes clear how we can understand what our brains are doing and how to use that knowledge to get out of our own way and invest wisely. (Sept.)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. | | | Product Details: | | | Author:
| Jason Zweig | | Hardcover:
| 352 pages | | Publisher:
| Simon & Schuster | | Publication Date:
| August 01, 2007 | | ISBN:
| 074327668X | | Package Length:
| 9.3 inches | | Package Width:
| 6.4 inches | | Package Height:
| 1.3 inches | | Package Weight:
| 1.2 pounds | | Average Customer Rating:
|  based on 23 reviews |
| | | | Customer Reviews: | |
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 Good insight into the inner workings of the brain.Jul 22, 2008
Wealth Odyssey: The Essential Road Map For Your Financial Journey Where Is It You Are Really Trying To Go With Money?
Jason Zweig does an excellent job at summarizing the research about what happens inside our heads when we think about our different relationships (feelings, greed, confidence, risk, fear, surprise, regret, and happiness - each with their own chapter) with money and investing. Our brains have spent more time evolving in hunter gatherer and agrarian settings than they have in the modern technological age. That hard wiring inside our heads affects our thinking and reactions - often without us even realizing it has happened.
Among the observations in the book: Our expectations are more intense that the experience. Most of us don't understand our own behavior. And much more.
The work may disappoint some in that there are few suggestions about how to use this kind of new found knowledge when designing an investment allocation. In my opinion, this is not a major weakness with his work. There has to be research with modern medical machinery on the phenomenon before application can follow. This is not to say that works applying this research are not out there, only to say that the purpose of Zweig's work was to review the research to date on the inner workings of the brain, period. The first step in recognizing what we do is to recognize how our brains actually think: when and where the thinking, or reacting, processes occur.
A companion book to this one would be Predictably Irrational by Dan Ariely which researches our behavior through experiments on people, how we act and react to different situations related to money, rather than the mechanics and chemistry of inside the brain when confronted with those situations.
Ariely's work also does not include how to design a portfolio allocation. Neither of these works intended to. They intended to describe our behaviors. Knowing how and why we behave the way we do is just as important, maybe more so, as portfolio design. In fact, my observation is that people are often in more of a hurry to design the perfect portfolio, as an end in itself, than understand the what-and-why of the portfolio and their relationship with it and investing.
A fascinating field of study, which is just beginning to be able to explore the inner workings of our minds through modern non-invasive methods, to tell us why we behave the way we do with money - we're only human.
2 of 3 found the following review helpful:
You CAN teach an old primate new tricks (about investing) May 25, 2008
If even a blindfolded chimp can pick stocks successfully, how come you and I can't?
Part of the problem seems to be that the human brain was programmed by thousands of years of evolution to operate in a particular way; and while human brains are very, very good at tasks that are similar to the tasks our ancestors faced a couple of hundred thousand years ago, investing in financial markets requires us to perform new analytical tasks that just don't come that naturally to us. The habits learned over thousands of years of evolution just don't work that well in today's financial jungle.
But help is on the way!
Zweig's book presents some interesting information about studies in behavioral finance, evolutionary psychology, and neuroscience (e.g., MRI studies of the brain activity of people pondering "investment" decisions), and then uses that information to help explain how people make investment decisions and how they could do better.
The book is very well done. Each chapter covers a separate topic like Greed, Confidence, Risk, Fear, Surprise, Regret, and Happiness. Most chapters contain a brief "man in the street" discussion of how the chapter's subject emotion influences investing behavior, followed by a discussion of brain activity in subjects actually engaging in behaviors relevant to the chapter's topic. It was very interesting to see how "man in the street" views are supported or contradicted by controlled, scientific studies.
Most chapters contain anecdotes illustrating the chapter's topic. There are some pretty sad stories. Even people you'd think would know better frequently do some really dumb things. "Human nature" is hard to overcome, even for professionals.
For example, I think everyone knows that when Enron collapsed, its employees lost not only their jobs but also their nest eggs, because their 401(k)s contained so much Enron stock. Everyone knows that sad story, and certainly no professional would ever let the same thing happen to him/her, right? Well, during the recent Bear Stearns meltdown, I heard a news report about the 401(k) plans there. Do you think the Bear Stearns employees learned anything from the painful lesson that Enron taught? Sad, sad, sad.
The bottom line, as Zweig's book shows, is that investing generates very powerful emotions. Recent, scientific studies can help us understand why our emotions are so powerful and why they make us do some of the things we do, which in turn can help us control our emotions and make better investment decisions.
The book's actual investment advice is pretty standard: diversify, re-balance, pay attention to costs, don't chase performance, etc.; but knowing more about how our brains work helps show why that standard advice is so appropriate.
P.S. There is some technical language about brain anatomy, but it is pretty limited; about what you'd hear in an episode of "CSI: Las Vegas" or "Bones."
Interesting ReadApr 01, 2008
I usually enjoy books on personal finance and psychology as I believe these two subjects to be quite interesting and fascinating so when I came across this book, I was really excited since it puts these two subjects together in one reading. Basically it explains how your emotions can sometimes disrupt logical thinking when it comes to your personal finance. The writing is not as focused as I would like, but there are some pretty interesting points. The most important one that seems to repeat throughout the book is that what you expect is always better than what you finally get. My wife is living proof.
great insightMar 22, 2008
This book provides awesome insight into how we make investment decisions. I read lots of investment books & highlight the sections I think are important to reread later. It would've been easier to black out the passages that wern't important to me. Hopefully, with this knowledge I'll make better decisions. Everyone should read this book
1 of 1 found the following review helpful:
Sobering experienceMar 09, 2008
"Know thyself" was the recommendation from the Greek philosophers. This books leads you to that same objective. The impressive difference is the Greeks did not have MRIs to scan their brains when we were thinking deep thoughts.
Zweig does two very important things.
He brings science to the process of making investments. It's not quant models of the S&P, but an understanding of the 'investor.' We are human and we respond, even in the Wall Street world, based on circuitry configured over a million years of living off the land. His prolific description of experiment after experiment convinced me that his lessons were real and based on the best behavioral science available (and I hope there is more on the way). The book is not a screaming-head extorting the wonders of the magic method of getting rich. What a relief!
The second very valuable aspect of this book is Zweig does not talk down to you. He takes you on a journey through your brain -- much more complicated than I understood. But you don't get swamped by the complexity -- this is not an anatomy text. As a matter of fact, it was a little scary for me because I'd stop to contemplate what I was contemplating. It's a little zen-like.
He encourages you to examine your investing failures and successes then relate those decisions to the mechanisms between your ears.
"If you can dream -- and not make dreams your master;
If you can think -- and not make thoughts your aim,
If you can meet with Triumph and Disaster
And treat those two impostors just the same."
'If' by Ruyard Kipling; 1895
Will you become a billionaire? Not likely. But then, that wasn't likely anyways. You will say, ten years down the road of investment, I'm here because I want to be here and here is where I belong. With all the millions of baby-boomer Americans (I'm one of those) facing the retirement future -- this book sets the tone. Read, enjoy, learn, prosper.
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