I finished the book Mean Markets and Lizard Brains, which I originally talked about here. I bought it shortly after I listened to a lecture about neuroeconomics by the author, Harvard professor Dr. Terry Burnham.
The book explores the nascent discipline of neuroeconomics and how it applies to the investment world. Burnham argues that the brain can be divided into two parts - your pre-frontal cortex and your lizard brain. Logic and reason reside in your pre-frontal cortex. It is this part of the brain that is responsible for humanity's advancement. However, humans are still wired as their ancestors were, to react in a setting where the environment was harsh and food was scarce. The part of the brain best suited for survival in such a world is the lizard brain. The lizard brain identified patterns in the harsh environment that helped humans survive. It also releases dopamine in the brain to trigger reinforcement behavior critical to induce future behavior. A financial market is the exact wrong environment for the lizard brain because the lizard brain identifies patterns and reinforces behavior that draws comfort from being part of the majority, a consequence which leads people to overpay for financial assets. Likewise, the lizard brain seeks pain avoidance, and causes people to sell at the wrong time, when financial assets are undervalued. The book also takes a broad swipe at the religious cult of the Efficient Market Hypothesis, which postulates that individuals only act in a "rational" utility-optimizing manner. In my opinion, the iron-clad assumption of rationale behavior is a deep flaw in the discipline of traditional economics, an assumption that will be a curiosity to academics and practitioners a few generations in the future.
I give the book
out of 5 bulls.