Episodes
Everyone needs toilet paper! The initial increase in buying of toilet paper (AKA tissue paper) at the start of the COVID-19 crisis was likely due to a hoarding response, which is an instinctive psychological bias response found in nature. Hoarding is not always negative, in this case those that bought lots of toilet paper and hand sanitizer were more prepared. Tissue/Toilet paper made for home use is a different product, then toilet paper made for a public toilet. Although hoarding may not be...
Published 06/25/20
Psychological research can inform our behavior during the COVID-19 pandemic. How do we decide what is the most effective response and how we will act? Follow along with the research article from Nature Human Behaviour “Using Social and Behavioral Science to Support COVID-19 Pandemic Response” (link below). First, as humans we have a tribal response, and we stick with our group and take advice from our group leader. Who we listen too depends on our tribal orientation. Other factors on advice...
Published 06/11/20
Jan. - Feb., 2020 was a period of ‘psychological inoculation’, in that we have heard this before, viruses come and go, like the flu and N1H1, and we will be okay. March - April, 2020 was a period of acknowledgment, that this virus is real and dangerous. Followed by the rapid onset of fear, resulting in a stress response. Fear is usually a quick moment that passes. That has not happened with the pandemic. Stress usually results in action, and there was some actions by individuals and...
Published 05/28/20
Norepinephrine sends signals widely throughout the brain that move us into a task motivated stated. A brain regain called the locus coeruleus located in the brain stem is involved in the release of norepinephrine. As we shift to a more passive state, another type of brain cell called astrocytes take over (they get their name from their star shape). Astrocytes cells support neurons in the brain, and are the most abundant glial cells in the brain. A study by Yu Mu et al, 2019 (link below)...
Published 05/12/20
Global economy has stalled in early 2020 due to COVID-19 and governments have provided stimuli. The stock market has rallied; SMP is up from the bottom which is the most dramatic rise of the market EVER! CONCERN: exuberance in the market does not take into account the return to normal, as there is a new normal, which is still unknown. Narratives fill the gaps of unknown reality, and the narratives are less reliable than ever before, since analogies are made in the context of experience. Many...
Published 05/06/20
African Swine Fever in China has depopulated the hog heard in China. China is responsible for 50% of global production and consumption of pork. The coronavirus was completely unexpected and has further impacted the pork market with meat packing plants closing due to workers and their family members, sadly becoming ill or dying from Covid-19. Closure of meat packing plants to protect the meat packing workers and their families is necessary and the right this to do! The amount of pork in cold...
Published 04/30/20
Our basic human values drive us and drives up our oxytocin levels in our brain. Provided are applied examples of values in the investing world. We consider the basic human values by Shalom Schwartz tying together and the interesting relationships among the different values.We talk conservatism, openness to change, benevolence, universalism, achievement, and power. We discuss how these values are embedded and carried out within the networks of our brain. The pie chart of basic human values...
Published 04/24/20
Analogies help our brains understand a current event often using a past event, but with our brain filling in unknown gaps and creating possible dangerous inferences. Comparisons between the flue, N1H1, SARS, 1918 flu or even 9/11 are likely dangerous for understanding how society and investments will be impacted. Current events are different than past events. Analogies start forming from a ‘target analogy’, such as a believed equivalent past event, then our brains begin a mapping process...
Published 04/15/20
How do we think psychologically about numbers? Especially in relation to the Covid-19 2020 pandemic and the impact on the stock market. Take into consideration the effect of the Anchoring bias and Base Rate Neglect in your mental model and decision making. A recession will come following the 2020 pandemic along with changes in behavior which will unmask unexpected changes. Be prepared, learn more on the topic of Cognitive Biases and how we think to improve your financial gain in the market,...
Published 04/09/20
Mental Models: Recalibrate Biases to Cope with Pandemic: #48 Biases investors need to be aware of include ILLUSIONS OF INVULNERABILITY and ILLUSIONS OF CONTROL. Due to years of investing success investors feel invulnerable and are making decisions from their mental model which needs recalibration, along with the bias Illusion of Control. For more on this topic explore FIVE STAR reviewed book “Understanding Behavioral Bia$” http://amzn.to/2XHtsOE There will continue to be an evolution to...
Published 03/31/20
Motivations that drive us are our basic human values, which are discussed in detail in this episode from investing and psychological perspective. Our mental models of others behavior and our own can helps us to predict steps management might take with a company that we are accessing to purchase their stock. The pie chart of basic human values theory by Shalom Schwartz, will help you navigate Episode #47: "Mental Models: Motivations That Drive You". See here on Mental Models Podcast website:...
Published 03/18/20
Do you have the will power to keep from buying that stock too early? Humans need the will power to delay gratification - how do we get it? Discipline is important to success. Walter Mischel’s, research which is commonly called the “Marshmallow Test” with preschoolers and self-control provides great insight. Video of Marshmallow Experiment https://youtu.be/Rwxf1BTyKz4. Although, discipline is the key, such as waiting to buy or sell that stock at the perfect moment. Some of the toddlers in...
Published 03/11/20
The keys to flexible thinking come from exploring the different solutions to a problem vs. exploiting the rewards, resulting in perseveration behavior. In this episode we explore the ‘set effect’ which is linked to problem solving. An example of successful flexible thinking and over coming the ‘set effect’ is when Warren Buffet realized that investing had changed and it was time to find a new approach and move away from Net-Nets, which he had learned from his mentor Benjamin Graham....
Published 03/03/20
In this episode we consider how our memory systems are organized and what we can do to help become better at remembering in a variety of areas of our lives. We consider memory from a multiple memory systems approach focusing on working memory- our short-term store. Working memory has a clear limit and we can use a “chunking” strategy to group items together allowing us to remember more. We discuss the extreme versions of this tactic described by expertise researcher K. Anders Ericsson and his...
Published 02/27/20
Selection Bias can keep us hunting for what is most present on our mind, Waldo or the new Toyota we are planning to buy. Once we have committed to a decision we will see that specific brand everywhere. We are experiencing selection bias. Our brain is guiding us to what is most present on our minds. “The Invisible Gorilla” book by C. Chabris and D. Simons explores this famous experiment on how your mind actually works - our intuition can deceive us. ...
Published 02/19/20
Be the courageous investor! Fear linked to 3 things: 1: To little information 2: Potential Threat 3: Helplessness Investing is linked to 2 things: 1: Fear 2: Greed The Salience Bias is linked to fear and uncertainty and your primal brain functions in your amygdala. There are 2 types of cognition 1)hot and 2)cold. Hot cognition is primal and linked to lymbic system, while your cold cognition is your rational view. Engage your investing process and training established during cold...
Published 02/11/20
Rationalization and thesis drift is akin to wrestling with muddy pigs... it’s slippery and you will lose $$$. For investors ”thesis drift” is the tendency to rationalize bad news and come up with fresh reasons to still like a stock. Don’t accommodate your viewpoint for a group of facts that you were not previously aware of. Consistency Bias: don’t flip-flop! -Thank you to all who have bought our book “Understanding Behavioral Bia$” - please write...
Published 01/29/20
“Understanding Behavioral Bia$” follow along with book by Dr. Daniel Krawczyk and George Baxter, JD, CFA, (Chapter 8) while listening to this podcast. BUY on Amazon https://amzn.to/2XHtsOE (copy and paste). This podcast is fifth in the investment process series. It is the planning up from the matters. #1 tip to avoid pain is to use stop loss techniques! -BUY BOOK “Understanding Behavioral BIA$” http://amzn.to/2XHtsOE | Behavioral finance advice and solutions. #mentalModels This book...
Published 01/21/20
Recap of general market trends experienced in 2019 and interpret what they might mean for the economy in 2020. The expansion is the longest we have see, we are now beyond what it occurred from 1990-2000. Growth has been tepid so it might continue. We discuss economic indicators and historical trends from the past. BUY BOOK “Understanding Behavioral BIA$” http://amzn.to/2XHtsOE | Behavioral finance advice and solutions. #MentalModels This book will help you overcome the biases that are...
Published 01/15/20
How politics might influence the stock market in an election year! All of this while the standing president of the United States is under investigation for impeachment by the Senate. What are your predictions for the next president of the United States of America? Which stocks do you seeing impacted? @ 11:30 minutes George discusses his stock pick that could be influenced by the election year and why. Listen in. BUY BOOK “Understanding Behavioral BIA$” http://amzn.to/2XHtsOE |...
Published 01/08/20
There won't be any regular episodes of Mental Models Podcast as we take a holiday break. Regular service will resume the first full week in January 2020. In the meantime, enjoy a holiday message and we have recapped a popular podcast on Behavioral Bia$. Join Dan and George at the Center for BrainHealth, Dallas, TX on 1/23/20 as they discuss “Money and your Brain: How Cognitive Biases Impact Investing” based on their book "Understanding Behavioral Bia$" link below. Thanks to everyone for...
Published 12/23/19
“Understanding Behavioral Bia$” follow along with book by Dr. Daniel Krawczyk and George Baxter, JD, CFA, (Chapter 8) while listening to this podcast. BUY on Amazon https://amzn.to/2XHtsOE (copy and paste). Fourth in the series on the investment process - with top fund manager tips of the steps of analysis and execution. Biases to be aware of are recency bias also at minute 6:58 base rate neglect - which is also discussed in podcast #28 on Bill Gates brain. Min. 12:30 Group think biases...
Published 12/11/19
Follow along with our book “Understanding Behavioral Bia$” by Dr. Daniel Krawczyk and George Baxter, JD, CFA, (Chapter 8) while listening to this podcast. BUY on Amazon https://amzn.to/2XHtsOE (copy and paste). Electronic version and paperback. The purpose of fundamental research during the investment process is to understand the cooperative position of the business/stock and devise the value of the business of its ability to generate free cash flow now or in to the future. Create a...
Published 12/03/19
Book review and origin story of "Understanding Behavioral Bia$: A Guide to Improving Financial Decision Making”. This book is a great tool to improve your investing skills. This is not a list of biases, but a guide that provides best practices to overcome biases when investing. Remedies to each bias are included. Learn about these biases and be able to capitalize off of the biases of other investors. Also, included is a summary of the investment process used in a successful hedge fund....
Published 11/25/19