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.

Paperback:  
Using these links earns us commission at no cost to you
Review by Brian Clegg

Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

The Decline and Fall of the Human Empire - Henry Gee ****

In his last book, Henry Gee impressed with his A (Very) Short History of Life on Earth - this time he zooms in on one very specific aspect of life on Earth - humans - and gives us not just a history, but a prediction of the future - our extinction. The book starts with an entertaining prologue, to an extent bemoaning our obsession with dinosaurs, a story that leads, inexorably towards extinction. This is a fate, Gee points out, that will occur for every species, including our own. We then cover three potential stages of the rise and fall of humanity (the book's title is purposely modelled on Gibbon) - Rise, Fall and Escape. Gee's speciality is palaeontology and in the first section he takes us back to explore as much as we can know from the extremely patchy fossil record of the origins of the human family, the genus Homo and the eventual dominance of Homo sapiens , pushing out any remaining members of other closely related species. As we move onto the Fall section, Gee gives ...
Post a Comment
Read more

Pagans (SF) - James Alistair Henry *****

There's a fascinating sub-genre of science fiction known as alternate history. The idea is that at some point in the past, history diverged from reality, resulting in a different present. Perhaps the most acclaimed of these books is Kingsley Amis's The Alteration , set in a modern England where there had not been a reformation - but James Alistair Henry arguably does even better by giving us a present where Britain is a third world country, still divided between Celts in the west and Saxons in the East. Neither the Normans nor Christianity have any significant impact. In itself this is a clever idea, but what makes it absolutely excellent is mixing in a police procedural murder mystery, where the investigation is being undertaken by a Celtic DI, Drustan, who has to work in London alongside Aedith, a Saxon reeve of equivalent rank, who also happens to be daughter of the Earl of Mercia. While you could argue about a few historical aspects, it's effectively done and has a plot...
Post a Comment
Read more

Amazing Worlds of Science Fiction and Science Fact: Keith Cooper ****

There's something appealing (for a reader like me) about a book that brings together science fiction and science fact. I had assumed that the 'Amazing Worlds' part of the title suggested a general overview of the interaction between the two, but Keith Cooper is being literal. This is an examination of exoplanets (planets that orbit a different star to the Sun) as pictured in science fiction and in our best current science, bearing in mind this is a field that is still in the early phases of development. It becomes obvious early on that Cooper, who is a science journalist in his day job, knows his stuff on the fiction side as well as the current science. Of course he brings in the well-known TV and movie tropes (we get a huge amount on Star Trek ), not to mention the likes of Dune, but his coverage of written science fiction goes into much wider picture. He also has consulted some well-known contemporary SF writers such as Alastair Reynolds and Paul McAuley, not just scient...
Post a Comment
Read more