Masters in Business
At the Money: Here's Why Investing Is So Hard
Oct 16, 2023
Brian Portnoy, author of 'The Geometry of Wealth' and 'The Investors Paradox,' explains why investing is difficult due to our evolutionary instincts. The podcast explores the challenges of investing, the power of stories and herding, and the role of emotions in decision-making. It emphasizes reframing investing and being aware of emotions for financial success.
15:10
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Quick takeaways
- Our brains are wired for immediate returns and storytelling, making long-term investment thinking difficult.
- Recognizing and understanding our emotions can prevent impulsive investment decisions and lead to better outcomes.
Deep dives
Evolutionary Psychology and Investing
Investing is hard for a reason. Our brains evolved to survive in a wild environment where money did not exist. Our instincts are not wired for wise spending, saving, or investing. For example, our brains are designed to focus on immediate returns, making it difficult to think long-term for investment portfolios. Additionally, our brains are more inclined to process and make decisions based on stories rather than numbers and probabilities. We are also prone to herd behavior, seeking safety in numbers even in modern capital markets. Understanding the influence of evolutionary psychology helps us navigate the challenges of investing.
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