Last month, we got a terrific response to our posting of the entire first chapter of A Demon of Our Own Design.
I want to start doing this at least once-a-month, and plan on setting up an additional space to discuss the books in more details.
Today’s book is by Dr. Richard Peterson’s Inside the Investor’s Brain: The Power of Mind Over Money.
Long time readers know that I have been a big fan of books that seek top explain how are brains are wired, and how this hard-wiring frequently sends us astray as investors.
Back in 2005, I wrote a column titled Know Thyself. Because Human nature so often runs counter to successful investing, its important to understand — and resist — many of your baser instincts.
The best book on the topic I have come previously across is Cornell Professor Thomas Gilovich’s How We Know What Isn’t So. However, that is a bit of an academic work, focusing purely on human psychology. Some people have found it to be a bit dry, and it requires some imagination to apply the lessons there to investing and markets.
Inside the Investor’s Brain suffers none of these detractions. A few things make the book work especially well: 1) The author, Dr. Richard Peterson, is a psychiatrist who specializes in neuro-science studies; 2) Peterson is also a futures trader, so he has first hand experience as to the psychology pitfalls of trading (Peterson is launching a "Quantitative Psychology based Hedge Fund in 2008); 3) By combining these two disciplines, he has been acting as a consultant to large financial firms.
I found the book accessible and easy to read, filled with amusing anecdotes and illustrative examples.
Barron’s had this very laudatory review, stating simply: "IF YOU READ BARRON’S, AND APPARENTLY you do, read this
I would modify that: If you find the intersection of human psychology, markets and investing, than you should find this book rather intriguing.
Whether or not you Humans are capable of circumventing your own wetware in order to obtain alpha (out-performance) has yet to be determined . . .