Archive for the ‘Brain Sciences & Psychology’ Category

I’ve heard of V.S. Ramachandran before, but I’ve never actually read or seen any of his work.

I’m glad I changed that.  Below is a talk that Ramachandran gave at a 2009 TED Talk in India.  Ramachandran is a Professor of Psychology & Neurosciences at the University of California at San Diego.

I particularly like how he brings in the discussion of mirror neurons and ties it into Eastern philosophical principles of non-duality.  He calls mirror neurons “Gandhi neurons.”

Definitely a great, info-packed talk by an influential mind on a very important topic.

Chris Martenson just released a podcast where he interviews the popular behavioural economist, Dan Ariely.

As you may have noticed from some of my previous posts, I’ve taken a keen interest in this issue of “human nature” and topics such as psychology, cognitive bias, behavioural economics, and so on.  It seems only prudent that if you want to know what might happen in the future – you really have to (try to) understand human beings in all of their magnificent glory & tragic stupidity.

I’m glad to hear that Chris Martenson will be drawing upon the insights of behavioural economics in his future writings.

To quote Martenson:

The resulting interview is full of fresh, non-intuitive insights and shines light on how the human brain is often hard-wired for irrational action when it comes to money

…If you’re not acquainted with it already, the perspective offered by behavioral economics is a valuable addition to add to your world view. We’re definitely planning to look through its lens more often going forward.

And here’s the podcast – “Dan Ariely Decodes Why Humans Are Hard-Wired to Inflate

Cheers,

– a.j.m.

Additional Resources:

Back in September, I embedded a series of videos of Nate Hagens giving a lecture on the demand/behavioural aspects of the energy issue – “Energy Resources & Human Demand on a Full Planet” – start watching Part 2 around 8:30 (link)

Back in September, I posted a video of a TED talk given by Laurie Santos. Santos is a Yale primate psychologist and behavioural economic researcher who’s work focuses on the ways in which capuchin monkies exhibit remarkably similar economic behaviours to human beings – including many of the irrational choices we make.

The basic lesson to be learned is that loss aversion is a major driving force in markets & in evolution. Although we are motivated by rewards, most of us really, really, really don’t like losing. This shorter version of the longer TED talk that I posted back in September, sums up Santos’ finding nicely:

Cutting edge research on neural networks & cognitive neuroscience.  I’ll try to revisit this at another time in more detail, but for now just wanted to share the video.

I find it amazing how few people take an interest in how their brains work.  We all have one.  Not to mention that never before in history have we had so much knowledge and technology for gaining knowledge about the brain.  The findings & implications of modern cognitive research are enormously broad and, in my opinion, prudent to be aware of.

The fact that modern cognitive research has such far-reaching & wide-boundary implications is why I’ve taken an interest in it here at the Catagenesis blog.  Researchers like Sebastian Seung and others who are mapping neural-networks and studying the brain have a lot to offer those of us looking for a more holistic understanding of the way the world works and our place in it.

A year or two ago, I came across a Wikipedia entry of all the known cognitive biases that human beings are subject to (link).  Rather quickly, I concluded that these were all ways that our brains played tricks on us, and that in order to avoid making poor decisions, understanding this list would be crucial.  Which brings me to the topic of this post.

In the TED talk embedded below, Yale primate psychologist and behavioural economic researcher Laurie Santos discusses her research with Capuchin monkeys who have been trained to use a currency in exchange for food.  The fascinating thing about the experiments is that these monkeys (who split off from the human ancestral line ~35 million years ago), make many of the same mistakes that humans do when it comes to making decisions in the realm of economic calculation.  This suggests that we could very-well be evolutionarily unsuited to make sound financial and economic decisions.

It may come as a surprise to those haven’t studied some economics, but one of the core tenets of this faux-science, is that human beings are “rational, utility-maximizers.”  Findings such as those discussed by Santos (and there are many others) pose a fundamental challenge to this underlying premise, as they show just how irrational we can be, not to mention that this behaviour is evolutionarily ingrained (and hence not easily “fixed”).

Although we are highly intelligent in certain domains (i.e. mathematics, physics, engineering, etc.) and in certain environments, in other domains & environments, we are prone to many psychological biases which cause us to make poor decisions (i.e. socio-economic & political realms, interpersonal relationships, etc.).

It seems as though the domains which we champion as proof our intelligence are those that require the use of abstract concepts & symbolic logic which allow for quantification, whereas the domains that we often accuse of being the source of our irrationality are closely connected to limbic-system functions such as memory, fear, aggression, etc. which do not lend themselves to simple quantification.  Santos work shows that, although we may like to think we use reason & logic to solve economic problems, in reality, our behaviour is influenced far more by our evolutionary biology.

The behaviour that Santos observed in the Capuchin monkeys suggests that there are at least two underlying drivers of poor decision-making in the realm of economics.

The first is that we have a very hard time seeing things in absolute terms.  We constantly put things in relative terms.  We don’t evaluate things in rational terms when it comes to risks & rewards.  As Santos says “we think ‘oh, I’m gonna get more’ or ‘oh, I’m gonna get less” rather than (in my words) – “okay…I have X% chance of outcome A if I chose Option 1 and Y% chance of outcome B if I chose option 2, and if I calculate a probability-weighted outcome, then the rational choice would be to chose Option 1 (or 2).”  Simply put, the idea that we are rational and always seek to maximize our utility in our economic decisions is a myth unsupported by the facts (we seek utility of course; but not rationally as is so often assumed).

The second underlying driver of poor decision making is what is called “loss aversion bias.” Wikipedia describes loss aversion bias as follows: “the disutility of giving up an object is greater than the utility associated with acquiring it.”  Basically, this means that we hate losing more than we love winning.  We hate losing so much that we will actually engage in riskier behaviour just to avoid losses.  The paradox of course is that by trying to avoid losses, people often engage in behaviour which actually increases their chances of loss.

I’m certainly not the first blogger to find this gem of a video.  Barry Ritholtz of the always interesting finance & economics blog “The Big Picture” wrote about it back in June:

Excerpt: “Over the past few years, I have increasingly taken to referring us humans as “Slightly smarter, pants wearing primates.” (here, here and here). When I discussed it in a Forbes interview (Ritholtz’s Monkey Theory)  it generated a ton of email:

What is the greatest financial lesson you’ve ever learned?

You’re a monkey. It all comes down to that. You are a slightly clever, pants-wearing primate. If you forget that you’re nothing more than a monkey who has been fashioned by eons on the plains, being chased by tigers, you shouldn’t invest. You have to be aware of how your own psychology effects what you do. This is why we as investors sell at the bottom, get panicked. All the other lessons I’ve learned have come out of that. As has the field of behavioral economics.

Wall Street clichés, like “cut your losses and let your winners run” come back to prevent the monkey part of your brain from doing what it does. There’s a banana–I want it. That’s how chimps behave. Us humans react to greed and fear in predictable ways. We are predictably irrational. If you understand that you can take steps to prevent that–we don’t own anything in the office that doesn’t have a stop-loss on it. In 2008, we watched the market go down 40%. We figured out we’re chimps, and don’t let the chimp inside us make those chimp-like decisions.

Every good financial decision I’ve made comes from, “Wait a second, monkey boy, step back, don’t do that.” Once you realize how your own brain chemistry works against you, it gives you a chance to not panic at the bottom.

It was (mostly) a glib comment to show how irrational and biased us monkeys can be. (I even made reference to it in Bailout Nation.) It turns out that joke was closer to the truth than anyone believed. Laurie Santos gives a talk at TED that looks at how shockingly similar our biases are to those of monkeys when it comes to hardwired foolishness. The good news, for investors as well as monkeys, is that recognizing our limitations — acknowledging, learning the details of, and contextualizing them — allows us to rise above them . . .

So, is it true? Can we actually become conscious of our own limitations in order to make better investment decisions and, by extension, life or perhaps even societal decisions?  Are we capable of coming to terms with the preponderance of evidence of our irrationality when almost all “progressive” intellectual thought from at least the Enlightenment onwards has been about the the faculties of reason & systems of logic?  Can the ego deal with the notion that “I’m not as smart as I think I am”?  Will we stop turning to “experts” & “specialists” to solve massively complex & wide-boundary predicaments and instead approach these problems with a systems perspective in mind?

It seems to me at least, that it’s going to take a major paradigm shift before we realize that our rational faculties – though absolutely instrumental in our heroic rise to glory, and definitely essential for our continued survival into the future – are also screwing us over in many ways.

Many of the dominant theories upon which our institutions are built, seem to rest upon simplistic or linear assumptions derived from reductionist, rational & utilitarian schools of thought.  These schools of thought are, if not wrong, then at the very least no longer true or woefully incomplete for those of us who wish to comprehend, cope with, and adapt to the bewilderingly complex world in which we now find ourselves.

The findings of researchers like Santos challenges us to fundamentally re-think our underlying economic assumptions – particularly the notion that we are rational, utility maximizers.  It’s a tough pill for our ego’s to swallow, but more and more, it seems like it’s a necessary action if we are to cure ourselves of poor economic decision making.

To close, I wanted to pull a quote from Ronald Wright’s excellent book A Short History of Progress which I thought was relevant to the above discussion:

Homo sapiens has the information to know itself for what it is: an Ice Age hunter only half-evolved towards intelligence; clever but seldom wise.

Let’s hope we slightly clever, pants-wearing (and gun-toting) primates find wisdom soon.

Cheers,

– a.j.m.

Additional Resources: http://www.philosophytalk.org/pastShows/IrrationalAnimal.htm

Embedded below is a series of youtube clips from a talk given by one of my favourite thinkers – Nate Hagens.  The talk was given @ the University of Wisconsin in April 2009.

I’ve said it before, but Hagens “gets it” better than almost everybody I’ve come across in my 3 or so years of pretty intense research on the various global threats in the 21st Century.  The reason that I think Hagens has so much to offer those of us who care about what’s really going on in the world, is due to the relevancy of his background & experience.  Having done his MBA in finance at the University of Chicago and then becoming a hedge-funder on Wall St., it was a significant change of direction for someone like Hagens to then go back to academia and study natural resources by pursuing a PhD in Ecological Economics.  Due to his understanding of finance, natural resources & human behaviour, I take what Hagens’ says as some of the most valuable commentary available on the net.

Check out the videos below to get a good big picture overview of the supply & demand side factors relevant in the Peak Oil/Limits to Growth debate.

Below is a repost from the excellent blog written by economist Robin Hanson – Overcoming Bias:

Futurist George Dvorsky:

A popular notion amongst futurists … is … that we can proactively engineer the kind of future we want to live in. … I myself have been seduced by this idea. … Trouble is, we’re mostly deluded about this. Now, I don’t deny that we should collectively work to build a desirable future … What I am concerned about, however, is the degree to which we can actually control our destiny. While I am not an outright technological determinist, I am pretty damn close. As our technologies increase in power and sophistication, and as unanticipated convergent effects emerge from their presence, we will increasingly find ourselves having to deal with the consequences. …

For example, consider the remedial ecology and geoengineering concepts. …. Breaking down toxic wastes and removing carbon from the atmosphere was not anything anybody would have desired a century ago. …

The Cold War … we have no reason to believe that a similar arrangement couldn’t happen again, especially when considering … nuclear proliferation and … nanoweapons and robotic armadas. … We are slaves to technological adaptationism. … In order to avoid our extinction, … we may be compelled to alter our social structures, values, technological areas of inquiry and even ourselves in order to adapt. As to whether or not such a future is desirable by today’s standards is an open question.

Bravo George. These are hard truths; not the sort to give in keynote speeches to throngs of enthusiastic futurists. I’d say it isn’t so much that “technologies increase in power and sophistication” as that coordination is hard.  Yes it can be hard to anticipate how changes, including new tech changes, will interact.  But even when we can anticipate changes we find it very hard to coordinate to act on such warnings.  Only the most extreme warnings will move us, and we have little interest in funding efforts to find warnings to consider.

So futurists would do well to follow economists’ usual analysis strategy: make your best guess about what things will be like if we do nothing to change them, and then try to sign the gains from moving parameters in particular directions away from that best guess. As I said in June:

When our ability to influence the future is quite limited, then our first priority must be to make a best guess of what the future will actually be like, if we exert no influence. This best guess should not be a wishful assertion of our far values, it should be a near-real description of how we would actually bet, if the asset at risk in the bet wer something we really cared about strongly. And yes, that description may well be “cynical.”  With such a cynical would-bet best guess, one should then spend most of one’s efforts asking which small variations on this scenario one would most prefer, and what kinds of actions could most usefully and reliably move the future toward these preferred scenarios. (Econ marginal analysis can help here.)  And then one should start doing such things.

Once you can guess which directions are “up”, you can work to push outcomes in that direction.  Even if you can’t push very far, you may still have done the best you can, and you may perhaps make an important difference.

Additional Resources:

http://www.overcomingbias.com/

http://en.wikipedia.org/wiki/List_of_cognitive_biases