- Hardcover: 352 pages
- Publisher: Simon & Schuster (August 1, 2007)
- Language: English
- ISBN-10: 074327668X
- ISBN-13: 978-0743276689
- Product Dimensions: 9.3 x 6.5 x 1.2 inches
- Shipping Weight: 1.2 pounds (View shipping rates and policies)
- Average Customer Review: 4.1 out of 5 stars See all reviews (75 customer reviews)
- Amazon Best Sellers Rank: #597,320 in Books (See Top 100 in Books)
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Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich
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From Publishers Weekly
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.)
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Do you fret over the value of your investments on a daily basis? Do you buy stocks based on a "hunch" or a gut feeling? According to Zweig, the latest scientific evidence shows that this common behavior usually results in financial loss and is caused by the way our brain reacts when we think about money. According to recent research in the emerging science of "neuroeconomics," the pleasure center in the brain that is stimulated in anticipation of "the big payout" is the same area that is affected during sex or drug use and is responsible for the addiction to gambling. Our brains, which evolved more than 200,000 years ago to react quickly to patterns and minute changes in our environment, are not equipped to handle the randomness of the stock market; but nevertheless we attempt to create meaningful patterns where there are none and base our investment decisions on erroneous assumptions. The good news is that awareness of this phenomenon can make us better investors, and Zweig offers some simple tips to avoid the pitfalls, such as taking the long view and avoiding overtrading. Siegfried, David
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Top Customer Reviews
One particular example made me think that the author doesn't quite understand what he's writing about: He quotes some research at U of Chicago (Hogarth/Einhorn) in which participants are asked to select the minimum information that would support a hypothesis. We're told "... an expert claimed that the market always went up after he predicted that it would rise." Then we're asked what's the minimum information we need to verify this claim. Choice 1 is "what the market did after he predicted that it would rise"; choice 4 is "what he predicted before the market fell". Now Zweig crows that many people got it wrong by saying #1 was sufficient information, where #1 & #4 are both needed. Unfortunately, he's flat wrong -- #1 is indeed sufficient information. The expert hasn't claimed that he can predict drops correctly, or even that he can predict all increases. He simply is saying that all his "up" predictions are 100% correct, so all we need to do is to verify that prediction. Zweig then waxes on about falsification, but by now it's clear he doesn't quite get how to formulate the falsifiable hypothesis. (I'd surmise that he read the research paper wrong, because UChicago people would know better.)
Your Money and your Brain was an interesting read. The author insinuated that we have two brains, the reflective and intuition which guides us to make decisions. We are too confident in our decision making and the fact is we don't know everything. Things should be thought out rather than instant instinct decisions.
Well written book and the price point was adequate. My only concern is how am I going implement the new found information to my brain and have both my brains retrained.
Those who enjoy reading Daniel Kahneman - Heuristics and Biases school of decision making.
Those who can appreciate Benjamin Graham’s - ‘Margin of safety’ approach in investing
Those who has been dosed with neurophysiology during their college or medical school
In simple terms this is a journalist attempting to shed the light on behind the scenes of our investment decision making process, its pitfalls with citations and what to do about it .
T-H-I-N-K, T-W-I-C-E. ( Appendix 1 pg 266 )
I would rate 4.5 for typo’s , missing figures in the print.
The interesting thing is that the interplay between the emotional side of the brain and money (or the perceived value of something in relation to money, a stock for instance) is actually an old subject. The "Fool and His Money" has been widely commented on by an assortment of people diverse enough to include Penn & Teller, Harry Houdini and Anton Lavey as well as Warren Buffett, Ben Graham and the other financial types that you would expect to see at the table for this topic.
The difference is that now it has a name that gives it more credibility as a specialized field within both psychology and economics. The subject is old, but it's serious study is quite new. Most of what you will read and hear in Neuroeconomics represents recent work. This book is an excellent place to start. Interviews with this author and related videos on Neuroeconomics can be found on YouTube. This book and those vids will give a sound introduction to this subject.