Wednesday, October 24, 2007
Jason Zweig talk on Neuroeconomics
Jason Zweig is a senior writer for the Money magazine and has been a guest columnist for Time and cnn.com. He is also the editor of the revised edition of Benjamin Graham’s ‘The Intelligent Investor’. In an interview to Vivek Kaul, Zweig speaks on Neuroeconomics and his philosophy of investing.
I find it striking that in a society with cultural traditions of great patience and acute analytical ability, so many people trade as if their knickers were afire, scoffing at the long term and analysing nothing but the craziness of the crowd.
Dopamine makes us pursue whatever we think will be rewarding. When we earn more than we expected, that generates a “positive prediction error” - a flood of dopamine that signals to our bodies that something good has happened.
After only a few repetitions, the dopamine is released in our brains, not when we earn the actual gain, but when we believe we know that the gain is coming.
It is not the reward but the prediction of it that generates pleasure in the brain. I call this the “prediction addiction.”
You become addicted to your own belief that you are about to make money. Like any addict, when the reward does not come, you will go into a painful withdrawal.
If you do not put policies and procedures in place, in advance, to control your emotions, you will never be able to resist the siren song of the markets when the markets go mad. Common sense and good judgment are vastly more valuable than intelligence.
What makes investors book profits fast, but hold on to their losses?
We do not merely buy stocks and sell them. What we really are buying is pride and prowess, and what we really are selling is pain and shame.
Once a stock earns a large gain, you want to lock in the reason for your pride and the proof of your prowess; if you hang on too long, the profit may disappear.
But, once a stock produces a big loss, you want to hide the source of your pain and shame.
If you sell at the bottom, you will have to admit your error, and that admission will only compound your shame. Whenever humans are ashamed of anything, we cover it up. So we cover our financial losses by pretending they are not there.
The life of a rising professional is busy enough without having to spend precious time and emotion following every momentary rise and fall of every stock you own. If your money cannot buy you peace of mind, why invest at all?
Monday, October 15, 2007
达赖喇嘛的人生智慧:转念
“四依”的佛教信条刚好可以应用在聪慧的修行方法上。这些信条如下:
依循教导的讯息,而不是教师本人; 依循意义,而不是言词; 依循确切的意义,不是暂时的意义; 依循你的智慧之心, 而非常识之心。
"We should follow the teaching, not because of the grand name of the master;
We should follow the meaning of the words, not the words itself;
We should follow the real meaning, not the temporary one;
We should rely on our own experience and enlightenment, not the worldly meaning."
依循教导的讯息,而不是教师本人; 依循意义,而不是言词; 依循确切的意义,不是暂时的意义; 依循你的智慧之心, 而非常识之心。
"We should follow the teaching, not because of the grand name of the master;
We should follow the meaning of the words, not the words itself;
We should follow the real meaning, not the temporary one;
We should rely on our own experience and enlightenment, not the worldly meaning."
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