Using the human brain

In some way, I was 'born right'(or wrong, depending on the prism you see this with). The ability to see things differently is a very important life skill; markets are just one application of such an ability. Most people are unable to internalise a thought that is diametrically opposite to what they see happening around, which is why 98 per cent of people get caught at the extremes of a bull/bear market. Even today, it is hard to stand by the seashore, look out over the sea and tell yourself that the earth is really round. There are many such truths in life, which are not immediately obvious. While physical sciences have isolated some of them (the Earth being round is one of them; relativity is another one), the counterintuitive truths embedded in behavioural sciences are far more difficult to disseminate on a wide basis. Take this for example: we have three components of the brain that we work with. In the 'lizard brain' resides the instinct of self-preservation. In the 'monkey brain' rests our herding and social instinct. And in the 'human brain' lie our logical and emotion-processing capabilities. This is not an exhaustive description, but it will have to do for the purpose of this article. The problem is that unlike our physical body, where we know when we are working the left arm and when we are working the right, with our mental state, we don't know when we are using which brain, so we don't instinctively know our own irrationality. Mostly, the 'animal brains' have loud voices and the 'human brain' shuts down under pressure. We tend to think that it is the human brain, but the wrong brain is active at the wrong point

This article was originally published on August 26, 2016.