Skip to main content

Your Money and Your Brain – Jason Zweig ****

It might seem a book about investing isn’t really suited to a popular science site, but hold on – Jason Zweig’s book is much more than a ‘how to make money on the stock market’ tome. Yes, it does give some lessons for would-be investors, but the subject of the book is much more interesting (with a scientific hat on). In fact the investment advice, when you come to it, is fairly bog standard stuff like the need to investigate a company before buying shares, not just relying on the shares’ track record on the stock exchange. This book is almost back to front. What it really is, is an in-depth exploration of why the way our brains work make us hideously unsuited to playing the stock market.
Before assessing the book as a whole, I do need to clarify one issue that nearly stopped me reading it. There’s an example on page 20 that just doesn’t make any sense. It is supposed to show how people make the wrong assumptions about the evidence they need to make a decision, but unfortunately the way the problem is stated makes the assumed ‘wrong answer’ correct. Zweig has attempted to correct this in the US paperback, but after discussing this with both the author and the academic on whose paper the example is based, it’s clear that the example would probably never be able to usefully show what was required here. So if you read the book and get hung up on the problem of the consultant who says the market rises every time after he predicts it, don’t. It doesn’t work – ignore it!
Once past that issue, the book has fascinating detail about the way different parts of the brain react to the types of stimuli presented to us by stock trading, whether it’s fear, risk, surprise, regret or prediction. By using MRI scans and other technology, Zweig takes us through how the brain reacts under those pressures, making the kinds of decision stock market players have to make and demonstrates not only what happens in the brain, but how our natural responses make us highly unsuited to the whole business. The aim is that we can be aware of these natural faults and overcome them, but the reality is it makes you feel that no one sane would ever have anything to do with these kinds of investments. It has always worried and irritated me when I hear on the news that a stock index has collapsed because traders were worried about something or panicking about something. The financial basis of our institutions shouldn’t be animal, reflexive reaction. Yet Zweig shows this is almost inevitable.
So whether, like me, the impact of the book is to make you think it’s time we did away with stocks and shares and introduced a more reasoned way of financing businesses, or, as Zweig intended, you use this as a book to get insight into the best possible way of investing, there can be no doubt that this is an interesting read and one that is much more about the brain and human response than it is about money. If you have an absolute aversion to matters financial you might find it a little hard going in places, but if, like me, you find business interesting and the human brain wonderful, this book will provide plenty of food for thought.
Review by Brian Clegg


Popular posts from this blog

The Feed (SF) - Nick Clark Windo ****

Ever since The War of the Worlds, the post-apocalyptic disaster novel has been a firm fixture in the Science Fiction universe. What's more, such books are often among the few SF titles that are shown any interest by the literati, probably because many future disaster novels feature very little science. With a few exceptions, though (I'm thinking, for instance, The Chrysalids) they can make for pretty miserable reading unless you enjoy a diet of page after page of literary agonising.

The Feed is a real mixture. Large chunks of it are exactly that - page after page of self-examining misery with an occasional bit of action thrown in. But, there are parts where the writing really comes alive and shows its quality. This happens when we get the references back to pre-disaster, when we discover the Feed, which takes The Circle's premise to a whole new level with a mega-connected society where all human interaction is through directly-wired connections… until the whole thing fails …

Everything You Know About Space Is Wrong - Matt Brown ****

What we have here is a feast of assertions some people make about space that are satisfyingly incorrect, with pithy, entertaining explanations of what the true picture is. Matt Brown admits in his introduction that a lot of these incorrect facts are nitpicking - more on that in a moment - but it doesn't stop them being delightful. I particularly enjoyed the ones about animals in space and about the Moon.

Along the way, we take in space exploration, the Earth's place in space, the Moon, the solar system, the universe and a collection of random oddities, such as the fact that Mozart didn't write Twinkle, Twinkle Little Star. Sometimes the wrongness comes from a frequent misunderstanding. So, for example, Brown corrects the idea that Copernicus was the first to say that the Earth moves around the Sun. Sometimes there's some very careful wording. This is used when Brown challenges the idea that the Russian dog Laika was the first animal in space. What we discover is that, i…

Dark Matter and the Dinosaurs - Lisa Randall ****

I did my PhD in galactic dynamics - which is an awkward subject when people want to know what its relevance to the 'real world' is. So I was excited when Clube and Napier's book The Cosmic Serpent came out, around the same time, because it provided me with a ready-made answer. It argued that the comets which occasionally crash into Earth with disastrous results - such as the extinction of the dinosaurs - are perturbed from their normal orbits by interactions with the large-scale structure of the galaxy.

I was reminded of this idea a few years ago when there was a flurry of media interest in Lisa Randall's "dark matter and the dinosaurs" conjecture. I was sufficiently enthusiastic about it to write an article on the subject for Fortean Times - though my enthusiasm didn't quite extend to purchasing her hardback book at the time. However, now that it's out in paperback I've remedied the situation - and I'm glad I did.

Dark matter is believed to exi…