Dating, investing & the reptilian brain

My friend ventured on a speed date.

Her logic was impeccable.

To optimize her chances of meeting “Mr Right” she needed to go to where the supply exceeded (or at least matched) demand. Where else will she meet at least a dozen compatible (single) men in one room and get the chance to talk to all of them?

At a speed date session, the men and women have a couple of minutes to chat with and impress each other before moving onto the next prospective candidate. The ones that potentially hit it off indicate that they would like to start dating.

According to economist Tim Harford, research on speed dating indicates that both sexes tilt towards educated non-smokers; but men prefer slim bodies and women prefer fat wallets. Those findings must bear some semblance to reality going by my friend’s experience. She took an immediate fancy to a good looking, well-dressed guy with an apparently hot job. Both are educated non-smokers, she is slim and he seemed well to do. They were keen on seeing each other again. 

The illusion soon dissipated when they met the next time. Once he began to talk, which was instantly and constantly, he had tremendous difficulty shutting up. No doubt, he loved the sound of his voice. He went on an evangelical monologue about anecdotes from his life and times in various countries. His elevated opinion of himself was “nerve wracking”. The guy turned out to be an insufferable oik. The clincher was when he referred to himself as a global citizen, which according to my friend, made him sound like an ageing hippy. She refused to ask him what he meant by that term (he had resided in 4 countries out of the 190+ counted by the United Nations) and branded him a fiasco of style over substance.

Why am I writing about this? Because of my friend's conclusion. She rationalised that her initial attraction boiled down to a reaction of her lizard brain.

Apparently, there are 3 parts to our brain.

The lizard (reptilian) brain is the most primitive part that is concerned with self preservation and survival (we share this with other reptiles). It is known for snap judgments. Have you ever suddenly just met someone and instantly your “gut feeling” is not to trust him or her? The lizard brain is at work. This reaction is based on appearance and mannerisms and happens on a barely conscious level. It is the part of our brain that works on auto-pilot – keeps your heart beating, controls breathing, pumps adrenalin when needed, etc. It is constantly alert to danger and focused on survival.

The limbic system (mammalian brain) allows us to experience our feelings and emotions.

 

The cerebral cortex is the logical part of our brain and is much bigger than the above two parts combined. It is where our speech, writing, math and thought come from.  It is the part of our brain that is conscious, intentional and rational. You are using it right now as you read this post. It helps you decide whether to have a tequila shot or a Bloody Mary and maneuver your way through traffic jams. 

All three parts of the brain are processing information simultaneously. So, if you have been dumped by your boyfriend, you experience the deep survival fear through the lizard brain, the emotion through the mammalian brain and logic (he was a jerk anyway) through the cerebral cortex.

Now what my friend indicated was that when she found herself attracted to this man, it was her lizard brain that kicked into action since it was looking for self-preservation and survival based on primitive instincts – security (capable of taking care of her & her offspring), resources (money & home) and protection (able bodied). What was unsaid was that the rest of her brain apparently switched off in the first interaction (or was probably figuring out which drink to settle upon) and began to work only on the first date when it told its reptilian counterpart to shut up. 

Frankly, I am of the opinion that she laid a mind-blowing trip on me because she did not want to admit she was a sucker for first impressions. Yet, it was not the first time I heard about our 3-part brain. Very recently, Michael Crowley of TIME magazine claimed that individuals processed the US presidential election debates with their reptilian brain when referring to the Obama-Romney debate. No one remembers the 2008 Obama-McCain debate but many would recall the vice-presidential debate between Joe Biden and Sarah Palin where she got infamous for her multiple winks at the camera. I really could not fathom which part of Palin's brain was working when she behaved so ridiculously, but Crowley was not talking about her brain. He claims that the crowd remembers it because the reptilian brain (audience in this case) watches for moments of conflict, wit and fallibility.

In Self interest has to be your only interest, Peter Guber claims that as much as 95% of our decisions are controlled by our subconscious mind. In particular, the reptilian brain actually manages much of how humans behave. It acts viscerally, responding by fight or flight; is ruled by hunger and fear; and is concerned about survival. The reptilian brain makes decisions in about 2 milliseconds, far faster than the 500 milliseconds that your rationale brain requires. That would probably explain why we react so badly when someone rubs us the wrong way and then regret our impulsive behaviour. 

All this has financial implications. Marketwatch.com talks about former Goldman trader Terry Burnham who explained investing in these terms. In his book "Mean Markets & Lizard Brains", he says that our primitive brain was designed to help our ancestors hunt for food and daily survival stuff. For instance, if they knew that animals frequented a particular place at a particular time of day they would work around it. Or, if certain animals or birds were most active before dawn, they would act accordingly. So the lizard brain is designed to look backward. But investing "by its very nature, requires us to be forward-looking, to anticipate events. Thus, the lizard brain (which is backward looking) causes us to be optimistic at market peaks (after rises) and pessimistic at market bottoms (after falls)." So whether it's optimism or pessimism, greed or fear, Burnham is of the opinion that trading and investment is not done rationally. 

Once you realise that your lizard brain is not the best reference point for making monetary decisions, you will tend not to act based on initial reactions. So you won't go and sell all your funds just because the market has collapsed. Neither will you pump most of your money in a sector fund just because that sector is on a roll. You will learn to judge present circumstances objectively which will help you act consciously and rationally. Once you systematically restrain your instinct, you are on your way to becoming a smart investor. 

Keep your "gut instinct" for dealing with bosses and strangers. Whip your cerebral cortex into action where your money is concerned. It's the only part of the brain that will help you get wealthy. 

Mistresses, single women & the economy

Jin Yanshi knows how to get noticed.

Very recently, this Chinese economist came out with a theory implying that a women's marital status is key to a vigorous economy. According to his theory in China Times and Business Insider, the more the number of single women, the better it is for the economy. 

His hypothesis is cloaked with 3 assumptions: 

1) Women love money (as if men do not!)

2) Women love to spend money (and men are misers, is it?)

3) Women are born consumption animals (and men are not?)

Based on those assumptions, he pontificates on why consumption is such a distinctive element of the female psyche. “Women express their desire in competition" (who knew?). "This competition therefore promotes a city’s consumption.”

His theory: The more the "divorced" and "leftover" women (the latter being a term to describe singles over 28), the greater the chance of an economy's prosperity.

His reason: Their jostling with other females for attention and competing with one another only feeds their innate consumption desire. This, in turn, does wonders for domestic consumption. 

If China follows his theory, the decision makers don't have to worry about an alternative to their faltering export model which is hitting growth. They just need to ensure that their women marry late and encourage divorce. 

I was curious to see what he had to say about "leftover" men, if there is such a term. 

According to him, men who have NO spending power will NOT be able to find wives (he obviously is no romantic) and so will NOT contribute to the city's economy. 
His remedy: Kick them out of town (he failed to cite the destination). 

Yanshi surprisingly excluded ernai; a literal translation is second wife but it actually indicates a mistress. Mistresses are neither divorcees nor "leftovers" but are very much part of China's social landscape. According to a report in Yahoo Finance, Chinese men buying gifts for their ernai may be among the best customers for luxury goods. And the young ladies' designer wardrobes play host to labels like Jimmy Choo, Cartier, Versace, Prada, Chanel, Yves Saint Laurent and Louis Vuitton. For instance, a 42-year old property developer called Jian in the southern metropolis of Shenzhen claimed that his 20-something mistress set him back by $6,100/month. He referred to her as being an "expensive hobby like golf". Jian is not my sleight of hand or figment of my imagination. He actually was interviewed by The New York Times. 

So if infidelity is such a big contribution to China’s consumption story, am surprised that this set of women was ignored when concocting such a theory.

More worrisome now, for retailers, is whether this trend is dropping. During the credit crunch in 2009, CNN reported on how a businessman could not afford to keep his 4 mistresses, so he employed the services of a local modelling agency to stage a private talent show and judge the women on their looks, their singing ability and how much alcohol they could hold. The winner would stay his mistress. 
Moneyweek recently reported that nearly half of the 1,000 richest people in China saw their wealth shrink in the past year. While China's boom spurred a market for mistresses, the weakening economic growth is affecting that equation. According to a research note by HSBC, the practice of wealthy men acquiring mistresses is on the wane. Coupled with the fact that there is less official tolerance of wealthy government officials flaunting their "bling", the $12 billion luxury market is being hit. 

Even though the country's growth engine is spluttering and luxury sales are being hit, China's consumption boom is not fading into insignificance. Yahoo cites various reports to prove this point. A World Bank Report envisages per capita income rising to $16,000 by 2030 (from $5,000 now). The report also predicts that domestic consumption will shoot up to 2/3rd of economic activity. A McKinsey report reckons that China's mainstream consumer class will comprise 400 million people with household incomes between $16,000 and $34,000 by 2020. Boston Consulting Group says China will be the world's No. 2 consumer market by 2015. 

The Wall Street Journal says that China has a lot of tools to drive wealth and encourage investments. China is encouraging domestic demand and household spending in a bid to drive GDP growth and speed up economic restructuring. Encouraging growth in domestic consumption to find quality drivers for the economy was one of the key targets of China’s 12^th 5-year-plan. The country is looking at potential reforms to boost investment and consumption in the areas of pension, healthcare, education, agricultural and land ownership, and continuing urbanization. 
Looks like the government is not taking Jin Yanshi too seriously.