Is your Brain a Con Artist?
Neuro-economics shows that large parts of the brain – virtually unchanged since the Stone Age – are quite hopeless at managing money because too often our grey matter reacts to finances by rewarding us for all the wrong things.
In his book – Your Money and Your Brain – Jason Zweig shows why judiciously saving money is less alluring than shopping or gambling because such activities light up the brain like a fireworks display giving us a kick exhilarating enough to lure even the most sensible investor into risky ventures like Ponzi schemes.
Financial gain is the most modern member of the group of ancient feel-good experiences – along with food, drink and sex – so it shouldn’t come as a surprise that the neural activity of someone thinking about making money (or anticipating buying something big) is indistinguishable from that of someone who is high on a drug like cocaine.
Most people would know better than to hand over their financial management to a cocaine addict but if we make decisions about money based purely on what we think will make us feel good then we turn ourselves over to what Zweig calls our ‘inner con artist’.
The mark of the con
This inner scamster is never satisfied because the reward system in the brain is more aroused when anticipating a gain than it is by attaining it. So as soon as you receive that desirable bonus or buy some more rubbish you don’t need, the hot state of anticipation quickly cools down. This means the associations we have with money can never live up to the frenzy created by anticipation and the inevitable disappointment is what motivates the inner con artist to tempt you into the next round of anticipation.
Most people playing the lottery know the odds of winning are a gazillion-to-one but the delicious delirium associated with the idea of hitting the jackpot is enough euphoria to keep queues of keyed up punters pouring billions into lottery machines. Expectation causes the arousal leading Zweig to conclude that when possibility is in the room, probability goes out of the window.
High on possibility
Zweig claims that it is the job of the anticipation circuitry to get carried away (because that’s what motivates us) but while high on the energy of possibility, he cautions us to apply the checks and balances that usually put the brakes on. Financial loss, it seems, is processed in the area of the brain that responds to mortal danger so it’s no wonder gamblers only ever talk about how much they have won.
Duped by Dope
The brain chemical associated with reward is dopamine. When activated this neuro-chemical sends explosive sprays of energy throughout the brain turning motivation into decisions and decisions into action. Experience teaches us that decisions made under its influence aren’t usually the most appropriate but how often do we listen?
Zweig reports that laboratory rats wired up to receive electrical stimulation in the dopamine centres of the brain often begin tapping the reward-dispensing lever nonstop and would rather starve to death than live without the dopamine surge in their brain.
Predictable results produce no such dopamine kick but, when a reward comes as a surprise, the dopamine neurons fire longer and stronger. For shop-aholics this is what makes impulse buying seem more exhilarating than sensibly tucking away regular amounts of money into a humdrum savings account.
The narcotic power of dopamine also makes it hard for most people to learn that money doesn’t buy happiness.
Zweig reports that in 1957, the average American earned about $10,000 and lived without a dishwasher, clothes dryer, television, or air conditioner. But 35% of people surveyed then said they were ‘very happy’ with their lives. By 2004, personal income had nearly tripled and the typical house was bursting with consumer goods. Yet just 34% of people then said they were ‘very happy.’
Apparently, tripling wealth does not make us any happier, it just makes most people want more and Zweig refers to this desire as ‘miswanting’. He warns that if we don’t learn to conquer this illusion we’re likely to continue wasting money buying things that seem to promise bountiful happiness but frequently turn out to be little more than the dreaded damp squib of disappointment … which we now know will lure us into the next round of anticipation … and the next and the never-ending next after that one …