Showing posts with label Neuroeconomics. Show all posts
Showing posts with label Neuroeconomics. Show all posts

Sunday, September 21, 2008

Iconoclast


National Public Radio does a surprisingly good job covering behavioral topics. Such topics are typical for science based shows including Science Friday and The Infinite Mind but occasionally one of the mainstream shows like On Point will cover an interesting behavior topic as well.

(Above: Mooby the Golden Calf Idol)
On Point’s host Tom Ashbrook drives me crazy with his hyperbolic comments and questions; however, this Wednesday’s show, “Getting Outside the Box” wasn’t half bad thanks to guest Professor Gregory Berns. Berns packs an MD/PhD and is a professor of Psychiatry and Behavioral Sciences at Emory University as well as of Biomedical Engineering at the Georgia Institute of Technology. He uses fMRI and computer modeling techniques to attack questions of Neuroeconomics. Berns was on the show plugging his new book, “Iconoclast: A Neuroscientist Reveals How to Think Differently.” I have not yet read the book but given its focus on the intersection of psychology and innovation (the whole purpose of this blog) you can bet I will be ordering it from Amazon directly.

Who is an iconoclast in this context? As Berns puts it, iconoclasts are those rare individuals that have “truly novel ideas that tear down existing ways of thought and put something new in its place.” Obviously, most people are not iconoclasts. Professor Berns gives one explanation for this rarity by pointing to brain physics and psychology’s efficiency principle. Our brains have limited hardware. For example, the human brain apparently gets by on only 40 Watts of energy. Similarly limited, the bandwidth of the human eye is slower than a cable modem at only 10MBs per second (from researchers at my dear old Penn. The show claimed 1MB/s). To function on such limited capacity we need to use thinking short cuts; however, to be creative the brain has to get out of this efficiency mode. Iconoclasts have this capability and exercise it.

One of the show’s callers, a fan of Harvard’s E. O. Wilson, provided the additional insight that iconoclastic behavior in animals tends to get them killed. For example, the maverick iconoclast in a school of fish that turns right when everyone else turns left is the one most likely to be eaten. Evolution itself is against iconoclasts.

Nonetheless, at a cultural level (Ashbrook’s one good comment) we value iconoclasts (or at least we think we do) and many of us want to be one. Berns spends most of the show explaining three primary factors related to iconoclasm and innovation along with a few hints at how to enhance your own iconoclastic behavior.

1) Perception: The mental images in our imagination are usually based on past experiences. It takes novel stimuli and juxtaposition to trigger the perception shift necessary for new thought.

2) Fear: As Berns puts it, the “fear of loosing the status quo is one of the greatest inhibitors of change and innovation.” To be an iconoclast you must suppress fear. Fear resides in the amygdala and Berns believes its impact can be overridden by conscious thought. “Cognitive Reappraisal” can control fear by reframing the view of the problem.

3) Social Intelligence: To be a proper iconoclast you have to be able to sell your ideas. People don’t like change so iconoclasts have to sell them on changing their minds.

One could question this list. Does an iconoclast really need all three of these abilities? An organization could exhibit iconoclastic behavior without any one individual who possesses all these abilities. For instance, a creative genius coward could be paired with a fearless leader spokesperson with the social intelligence to sell the ideas. In practice this too seems a rare combination yet it is not clear how Berns’s observation apply at the organizational behavior level. Iconoclastic behavior of teams seems like a great topic for further research.

Friday, April 18, 2008

Neuroeconomics: Testosterone and Trading

The Wall Street Journal recently published an article on the possible impact of testosterone on stock traders. The study is by John M. Coates, a senior research fellow at Cambridge. His general finding is that higher levels of testosterone are correlated with higher levels of risk taking and (during the course of the study anyhow) better trading results. Increased risk taking behavior seems intuitive; however, the one percentage point gain in financial performance is not as clear cut. One could dig into the original study to see how Coates tried to account for this but I do not see a clear way to determine if the trading decisions were good or bad ones based only on the outcome. Taking really risky bets can sometimes yield high returns. However, could those same returns be generated (on average) with more certainty and less risk? Would they have a higher risk adjusted rate of return?

The more interesting study mentioned is that of MIT Sloan’s Andrew Lo. He wired up traders to monitor their psycho-physiological state in real time while executing real trades. It seems he would have much tighter paring of the independent variable to the actual decision making moment. However, this study may suffer the same issues with the outcome measure. Some time ago Professor Lo presented his experimental design in a class I was taking at the MIT Media Lab (Sandy Pentland’s Digital Anthropology Class). I was an MBA student at the time and playing a lot of Texas Hold’em with buddies from the Muddy Charles -- so perhaps that was the inspiration but I suggested he run a similar experiment on Black Jack players. Unlike with the stock market, the expected value of given Black Jack hands can be precisely quantified. On a hand by hand basis you could determine if the subject made the decision that maximized his or her expected value from playing the hand. I would guess that a higher testosterone level and/or greater excited psycho-physiological state would cause subjects to make suboptimal decisions, even if on occasion they got lucky and won.