Daniel Crosby, a psychologist and behavioral finance expert, delves into the intricate relationship between our minds and investing. He reveals surprising ways sociology and physiology shape financial decisions, highlighting the dangers of ego and emotion. Crosby emphasizes the importance of simplicity in investment strategies and shares tactics to mitigate cognitive biases. He also discusses how overconfidence can lead to poor choices, advocating for humility and calculated decision-making in the pursuit of financial security.
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insights INSIGHT
Sociology's Impact on Investing
Our collective beliefs shape market value, not objective reality.
These "functional fictions," as Yuval Noah Harari calls them, drive economies.
question_answer ANECDOTE
The Asch Conformity Experiment
The Asch conformity experiment shows how groupthink warps perception.
Participants incorrectly matched lines due to social pressure, changing their actual vision.
question_answer ANECDOTE
Baseball Card Bubble
The 80s/90s baseball card bubble illustrates collective delusion in investing.
Overinflated values, fueled by publications like Beckett, led to eventual collapse.
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This book delves into the biological aspects of risk-taking, especially in the context of financial markets. John Coates, drawing from his experiences as a trader and his research in neuroscience, explains how physiological changes, such as fluctuations in testosterone and cortisol levels, influence traders' behavior. He describes the 'hour between dog and wolf' as the moment when traders transform into exuberant risk-takers or cautious risk-avoiders based on their physiological state. The book also discusses how these biological factors can lead to market bubbles and crashes and suggests strategies for managing these risks, including changes in bonus systems and diversifying trader demographics.
Sapiens
A Brief History of Humankind
Yuval Noah Harari
This book surveys the history of humankind from the Stone Age to the 21st century, focusing on Homo sapiens. It divides human history into four major parts: the Cognitive Revolution, the Agricultural Revolution, the Unification of Humankind, and the Scientific Revolution. Harari argues that Homo sapiens dominate the world due to their unique ability to cooperate in large numbers through beliefs in imagined realities such as gods, nations, money, and human rights. The book also examines the impact of human activities on the global ecosystem and speculates on the future of humanity, including the potential for genetic engineering and non-organic life.
The behavioral investor
Daniel Crosby
In 'The Behavioral Investor', Dr. Daniel Crosby delves into the sociological, neurological, and psychological factors that impact investment decisions. The book is structured into four parts, starting with an exploration of the foundational biases and external pressures that affect investors. It then identifies four primary psychological tendencies related to ego, conservatism, attention, and emotion that drive investment behavior. The book provides practical measures to overcome these biases and introduces 'rules-based behavioral investing' (RBI) as an alternative to passive and active investing. Crosby emphasizes the importance of understanding human nature to make informed investment decisions and improve both financial and psychological wellbeing.
The laws of wealth
Psychology and the Secret to Investor Success
Daniel Crosby
When it comes to investing, your brain can be your best friend or your worst enemy. My guest today explains how, and what you can do to ensure your brain is a staunch ally in your quest for financial security. His name is Daniel Crosby, he’s a psychologist, behavioral finance expert, and the author of The Behavioral Investor. We begin our conversation discussing the surprising ways sociology and physiology influence our financial decisions. We then delve into the psychological factors that cause us to make bad investing decisions, including ego, conservatism, attention, and emotion. Daniel then walks us through ways you can mitigate those factors in your financial choices. We end our discussion outlining what an investing framework looks like based on principles of behavioral science.
While the principles discussed in this show relate to making sound choices in the area of financial investing, they're really relevant to making good decisions of every kind.
The Art of Manliness 
