The Financial Animal

“You and me, baby, ain’t nothing but mammals…”

The human brain is a remarkable thing. We have evolved all manner of traits which set us apart from the rest of the animal kingdom: language, art, empathy, technology, philosophy, law, religion, music, virtue, war, entertainment, history, cookery, medicine, welfare, mathematics. It’s almost enough to fool us into thinking that we’re fundamentally different, made of something better than the organic mush the rest of nature is composed of. We certainly think of ourselves as logical, rational, objective thinking machines rather than primitive, animalistic beasts.

However there is one area where it is apparent to me that we are not half as clever as we think we are; another specific uniquely human characteristic: money.

We think that we make decisions, not just about money, but about life in general, based on the facts. We get a good understanding of the options, weigh up the pros and cons, and make sensible decisions. That’s what we tell ourselves, but it couldn’t be further from the truth. The reality is that we are far more short-sighted and reactionary than that. Ultimately, our decisions are entirely emotional rather than rational.

We struggle with the abstract, arbitrary nature of money. It’s not tangible. It’s counter-intuitive. We have no instinctive grasp of the workings of our financial lives. We’re also very bad at planning. Anything which involves delayed gratification produces a natural reluctance. We want it all, and we want it now. Not to mention the tide of emotions evoked by our relationship with money. Fear, insecurity, desire, self-esteem, vanity, aspiration, guilt, mistrust, excitement, laziness, regret, determination. These are our drivers, not the cold, hard facts and figures.

Hence our planning, decision-making and thinking are flawed and result in irrational and self-defeating behaviour, and this dictates our fortunes.


4 thoughts on “The Financial Animal

  1. Hello Ed
    Nice blog, good aspiration. I fear my comments may paint me as a pendant rather than a deep thinker but… “Planning, Decision-making and thinking are flawed” I would imagine that would rather depend on what your goals are and how the measure success.
    The general set I find myself with is that of procrastination. It seems to work surprisingly well; leaving to the last moment that which can be postponed is a useful strategy. Perhaps this is a symptom of a failure to plan but I don’t think so. I think the “wait and see” approach offers good results in the short term and when it comes down to it the short term is all we really have….

    1. Ah… The old “hard work pays off in the long run, but laziness pays off right now” approach.

      There are certainly cases where waiting until you have as much information as possible before committing resources is a sensible approach. I wouldn’t call this procrastination as that just implies needlessly putting off the inevitable. There is also a lot to be said for deadlines, whether real or artificial, and the way they can focus the mind and motivate action.

      However, there is such a thing as the long term, and there are things which need that time, with pain, hard work and no short-term interim reward, in order to achieve the result.

      For example, winning an Olympic gold, writing a book, starting a business. None of these can be done overnight. They all require something extraordinary to make them possible. In fact, there are a number of ingredients necessary for success: passion, determination and guidance from a coach, editor or mentor – someone to tell you it’s going to be worth it and give you a kick to make sure you’re putting the necessary hours in.

  2. Hummm … you are right“procrastination” is the not a good word. Perhaps what I was thinking was more along the lines of ”if you like Wisteria you don’t need a gardener you need an estate agent”.
    So the greatest achievements tend not be the result of individual plans but the effects of movements in things beyond our control. The inspirational leaders look at their path to greatness and their memories are full of their work, their single mindedness, but it is false premise to think that we can learn about how to be great by looking at what made them great. The multitudes of starters in the race with these leaders are lost in the haze. The participants in the race are slimed down by willingness to work but the final factor that makes the difference is rarely the intellect or the physical attributes.
    Individual achievement requires hard work but human achievement is a numbers game. What is pretty cool is there are a lot of us now, what will happen next? I guess we will have to wait and see?

    1. What you say is true, the greats are usually indebted to luck as well as talent to complement their own ambition and planning. But it’s far from trivial to say that they have to be ready and open to the opportunities that present themselves. You can’t write a bestseller without writing something. You can’t win an election without standing. You can’t be an internet billionaire without starting a website. Major success comprises a string of minor successes. Not only that, but failure and defeat are inevitable. Nothing ever goes to plan, and so the plan needs to adapt and sometimes you need to go back to the drawing board, come up with a new plan and get back on that horse. Even this doesn’t guarantee success, but it does improve your chances. Those who are most determined to succeed will do everything they can to skew the odds in their favour. And there are those who are so talented, hardworking, ambitious, imaginative and visionary that their success is nigh on inevitable. These bastards are normally humble, generous and funny too. But my original point was not to claim to know the secret to fame, glory, power and unimaginable wealth, but to raise awareness to the cognitive shortcomings which we all must overcome if we’re to fulfil our potential.

      What skill we have as planners presumably evolved for survival purposes. Perhaps our ancestors outbred their rivals because they were able to hunt, track, trap, ambush or outthink their prey better. A defining advance in human evolution, but all it really amounts to is planning where your lunch is coming from.

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