What Does Expert Advice Really Do to Our Brains?
I’m loving how cramer is on the cover of this article…..what a great way to start an article about expert advice… Perhaps there is more to investors avoiding so called media “experts”.
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Article Introduction (Via NeuroNarrative)
A new study in PLoS suggests that expert advice causes the brain to “offload” calculations of expected utility (loss or gain) when making a financial decision under risk. This is an intriguing result, but we should take a closer look to see why this study really only examines one aspect of decision-making, and does not suggest, contrary to headlines, that expert advice causes the brain to “switch off rationality” or “shut down.”
Additional Excerpts (Via NeuroNarrative)
In other words, the brain appears to offload the burden of figuring out the best decision when given expert financial advice. At first glance, that’s what the study tells us. But, of course, there’s always a but.
In short, the study does not tell us anything substantial about real-world decision making. What the study really tells us is that the brain defers to the expert when first given expert advice, much as we’d expect. If then immediately challenged to make a decision, we’d also expect someone to go with the expert’s advice. The study evidences that. But we know this isn’t really how decision-making works.
With the backdrop of the financial crisis, this study supplies fodder for critics to lay blame on financial experts, especially those on TV, for the misguided decisions of investors. But that’s a painfully simplistic interpretation that at best applies to people who are not careful decision-makers to begin with. Anyone sitting in front of the TV with stock-happy trigger fingers caressing his or her laptop is playing a game, not making a careful decision.
