Study: Brain damaged investors do better -- emotion and investing

[HuckleB]

Study explores links between emotion and investing

http://www.bradenton.com/mld/bradenton/business/12195456.htm

"People with certain kinds of brain damage may make better investment decisions. That is the conclusion of a new study offering some compelling evidence that mixing emotion with investing can lead to bad outcomes.

By linking brain science to investment behavior, researchers concluded that people with an impaired ability to experience emotions could actually make better financial decisions than other people under certain circumstances. The research is part of a fast-growing interdisciplinary field called "neuroeconomics" that explores the role biology plays in economic decision making, by combining insights from cognitive neuroscience, psychology and economics. The study was published last month in the journal Psychological Science, and was conducted by a team of researchers from Carnegie Mellon University, the Stanford Graduate School of Business and the University of Iowa.

The 15 brain-damaged participants who were the focus of the study had normal IQs, and the areas of their brains responsible for logic and cognitive reasoning were intact. But they had lesions in the region of the brain that controls emotions, which inhibited their ability to experience basic feelings such as fear or anxiety. The lesions were due to a range of causes, including stroke and disease, but they impaired the participants' emotional functioning in a similar manner.

The study suggests the participants' lack of emotional responsiveness actually gave them an advantage when they played a simple investment game. The emotionally impaired players were more willing to take gambles that had high payoffs because they lacked fear. Players with undamaged brain wiring, however, were more cautious and reactive during the game, and wound up with less money at the end.

..."


I'm thinking this ought to lead to further study regarding the ramifications of a lack of emotion in making decisions that affect society as a whole. No?

[leveymg]

1. I also observed that when I worked on the Floor of the NYSE. n/t

[cprise]

4. I think you could say that setting is suitable for the brain-damaged. n/t

[leveymg]

7. "The rich really are different from you and I." - F. Scott Fitzgerald

[LaurenG]

2. Hum I should check my investment broker for damage

And yes I agree, unemotional decisions generally work better for society. I worry about the kind of decisions that Solomon made though telling the two woman claiming motherhood, "cut him in half". They then decided emotionally not to do that, what if they hadn't? Just a thought.

[cprise]

3. If anything

...I'd say this proves that finance is out of step with reality.

To think otherwise, one would have to believe that evolution is either false, or that it did not give rise to our emotions.

[phantom power]

9. it's more like a new ecological niche.

Calling it "brain damage" is misleading. It's a variation in our species, that happens to confer advantages, if you are making a living in finance.

[cprise]

11. They leave billions starving or on the brink thereof

..and promote self-interest to the point of destroying the environment and possibly our future.

Except for what goes on at a very myopic scale, it is not working.


OVERemotional decisionmaking doesn't promote survival. But emotionLESS is just as bad.

[imenja]

5. sociopaths do very well in business

for obvious reasons. Four percent of Americans are sociopaths, and most are not criminals. My guess is a lot of them work high up the ladder in corporate America.

[cprise]

6. The psych profile of a corporation

...insofar as you can judge it to be a "person"...

To more precisely assess the "personality" of the corporate "person," a checklist is employed, using actual diagnostic criteria of the World Health Organization and the DSM-IV, the standard diagnostic tool of psychiatrists and psychologists. The operational principles of the corporation give it a highly anti-social "personality": It is self-interested, inherently amoral, callous and deceitful; it breaches social and legal standards to get its way; it does not suffer from guilt, yet it can mimic the human qualities of empathy, caring and altruism. Four case studies, drawn from a universe of corporate activity, clearly demonstrate harm to workers, human health, animals and the biosphere. Concluding this point-by-point analysis, a disturbing diagnosis is delivered: http://thecorporation.com/index.php?page_id=2"">the institutional embodiment of laissez-faire capitalism fully meets the diagnostic criteria of a "psychopath."

[LaurenG]

8. Do you possibly have a link to this information?

I would really love to use it as ammo for a few people I know.

[cprise]

10. Um, there's a link at the end of that quote :-)

The website contains information about the movie on DVD, plus a book as well as movie trailers and info on the issue itself.

And the movie is Very good.

[LaurenG]

12. It won't take me to it. Sorry. nt

[cprise]

14. Try pasting this into your browser -

www.thecorporation.com

[LaurenG]

15. Success!! Thank you for going beyond helpful. nt

[bemildred]

13. Fear makes you stupid. nt

[Ian David]

16. Explains why buying stock in SpaceHab and SpaceDev wasn't my best move

That was back in 1999 or 2000.

I now owe more in brokerage fees than the stock is worth.