Why We Take Risks? It's For Dopamine
I’m so happy to be back and blogging for you guys. In my recent travels I met several investors who told me of their conversion to value investing from trading and speculation. I was rather amazed, mostly because I thought that business schools in Europe taught more useful financial concepts than modern portfolio theory or CAPM. In hindsight I should have known better than to ignore Mr. Markets and the globalization of poor academic theories. Traveling across countries truly helped me understand how widespread and similar human emotions are , particularly, when it comes to financial markets. With this in mind, here is a little piece from Time Magazine I found it via the Finance Professor several weeks ago. Enjoy!
Article Introduction (Via Time)
Risk-taking, by definition, defies logic. Reason can’t explain why people do unpredictable things — like betting on blackjack or jumping out of planes — for little or, sometimes, no reward at all. There’s the thrill, of course, but those brief moments of ecstasy aren’t enough to keep most risk takers coming back for more — which they do, again and again, like a drug.
A new study by researchers at Vanderbilt University in Nashville and Albert Einstein College of Medicine in New York City suggests a biological explanation for why certain people tend to live life on the edge — it involves the neurotransmitter dopamine, the brain’s feel-good chemical.
Article Excerpts (Via Time)
“The findings support Zald’s theory that people who take risks get an unusually big hit of dopamine each time they have a novel experience, because their brains are not able to inhibit the neurotransmitter adequately. That blast makes them feel good, so they keep returning for the rush from similarly risky or new behaviors, just like the addict seeking the next high.”