57 episodes

All about your brain & obtaining real-world behavioral finance knowledge! Listeners have access to original and engaging discussion of behavioral finance and cognitive bias.

Mental Models Podcast It's not a brain in a jar, that's the gist! Dr. Daniel Krawczyk & George Baxter, JD, CFA

    • Business
    • 5.0, 17 Ratings

All about your brain & obtaining real-world behavioral finance knowledge! Listeners have access to original and engaging discussion of behavioral finance and cognitive bias.

    Mental Models: Will Toilet Paper Stock Surge During Pandemic?: #57

    Mental Models: Will Toilet Paper Stock Surge During Pandemic?: #57

    Everyone needs toilet paper! The initial increase in buying of toilet paper (AKA tissue paper) at the start of the COVID-19 crisis was likely due to a hoarding response, which is an instinctive psychological bias response found in nature. Hoarding is not always negative, in this case those that bought lots of toilet paper and hand sanitizer were more prepared. Tissue/Toilet paper made for home use is a different product, then toilet paper made for a public toilet. Although hoarding may not be continuing, more time is being spent at home has changed the needs for public vs home toilet/tissue paper. Thus, there is an increase in tissue products for at home use, and likely an increase in private label AKA store brand use of tissue. Why? Once you have tried private label tissue you may not feel there is much of a difference, and you can save money. With more people out of work, private label brand tissue will be one way they can save money. However, the ‘status quo bias’ also known as the default effect will keep us buying name brand tissue products over private label. It avoids us having to take a risk of an unknown product, which might result in money wasted if we don’t like the private label product. Stay safe and healthy out there! For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE

    • 20 min
    Mental Models: Psychology of Pandemic be Physically Distant while Socially Engaged: #56

    Mental Models: Psychology of Pandemic be Physically Distant while Socially Engaged: #56

    Psychological research can inform our behavior during the COVID-19 pandemic. How do we decide what is the most effective response and how we will act? Follow along with the research article from Nature Human Behaviour “Using Social and Behavioral Science to Support COVID-19 Pandemic Response” (link below). First, as humans we have a tribal response, and we stick with our group and take advice from our group leader. Who we listen too depends on our tribal orientation. Other factors on advice we follow, is if the advice is relevant to us - ‘think globally, but act locally’. Which can lead to group effects, see the link below on the study of the longest lines, which is linked to group conformity. Third, we will also follow modeled behavior of those we respect. Also, it is important that leaders reach all people through a diversity of perspectives, think MORAL behavioral and the benefits to all. Most important be wary of ‘idea inoculation’. Which is when the initial idea is presented in a weak argument, resulting in people not following the advice. For example, think of individuals who might wear a recommended face mask on their chin, vs. over their mouth and nose. A better argument to encourage engagement with wearing face masks, and protect from ‘idea inoculation’ is: “when you are wearing a mask, it protects you from me”. Final thought, keep physically distant and stay psychologically engaged for stress reduction and positive health outcomes. For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE

    • 23 min
    Mental Models: Psychological Timeline of Pandemic: #55

    Mental Models: Psychological Timeline of Pandemic: #55

    Jan. - Feb., 2020 was a period of ‘psychological inoculation’, in that we have heard this before, viruses come and go, like the flu and N1H1, and we will be okay.
    March - April, 2020 was a period of acknowledgment, that this virus is real and dangerous. Followed by the rapid onset of fear, resulting in a stress response. Fear is usually a quick moment that passes. That has not happened with the pandemic. Stress usually results in action, and there was some actions by individuals and governments that were surprisingly bipartisan and encouraged safety measures. Although these government responses across the world were confusing at times, which increased stress from more unknowns. Continued stress response can be physically and emotionally damaging. Read more on stress in #1 bestselling stress book “Why Zebras Don’t get Ulcers” by Robert M. Sapolsky (link below). For many people there are continued unknowns associated with job loss and financial and or food insecurity which may continuing the fear and stress response long past the current time period.
    May - June, 2020 is a period of psychological relief from virus concerns in that there is a period of predictability. Good health practices and ‘physical distancing’ are being setup and implemented.

    Links:
    “Why Zebras Don’t get Ulcers” by Robert M. Sapolsky https://www.amazon.com/Why-Zebras-Dont-Ulcers-Third/dp/0805073698
    Guide to stress and stress related diseases.

    • 31 min
    Mental Models: Brain Effects While Working From Home: #54

    Mental Models: Brain Effects While Working From Home: #54

    Norepinephrine sends signals widely throughout the brain that move us into a task motivated stated. A brain regain called the locus coeruleus located in the brain stem is involved in the release of norepinephrine. As we shift to a more passive state, another type of brain cell called astrocytes take over (they get their name from their star shape). Astrocytes cells support neurons in the brain, and are the most abundant glial cells in the brain. A study by Yu Mu et al, 2019 (link below) with Zebra fish shows that Norepinephrine was released when they are moved to actively swim. Meanwhile, astrocyte activity increased when the fish moved to a passive state. When workers get tired, just like the Zebra fish who felt they were not getting anywhere with their swimming, a passive state sets in the brain. To overcome this passive state and increase Norepinephrine release into the brain, take a break or change up work pattern to increase productivity again. Other ways to increase task-engaged brain activity include getting early light exposure and exercising. Stay safe and healthy out there! For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE
    Links:
    Glia Accumulate Evidence that Actions Are Futile and Suppress Unsuccessful Behavior https://www.cell.com/cell/pdf/S0092-8674(19)30621-X.pdf
    Decision Fatigue Mental Models podcast….
    Russell Foster book on sleep. https://www.amazon.com/Circadian-Rhythms-Short-Introduction-Introductions/dp/0198717687
    Video of Dr. Daniel Krawczyk and George Baxter on ETFguide Which Behavioral Traits are Hurting Your Investment Results? https://youtu.be/34VnOUyNgcA
    Investors are often their own worst enemies. That's what investing great Ben Graham once concluded. In this episode, Lynn Dolan @ETFguide TV talks with Authors Daniel C. Krawczyk and George H. Baxter, JD, CFA about their new book Understanding Behavior BIA$: A Guide to Improving Financial Decision Making. Both men also host the Mental Models Podcast. https://youtu.be/34VnOUyNgcA
    Other resources for ETFguide TV viewers:
    1. Free ETF Guides https://tinyurl.com/y2gep5kj
    2. Habits of the Investing Greats https://tinyurl.com/y6cg9n4v
    3. Index Investing Show https://tinyurl.com/y3862uaa

    • 11 min
    Mental Models: COVID-19 Stock Market Rallies: #53

    Mental Models: COVID-19 Stock Market Rallies: #53

    Global economy has stalled in early 2020 due to COVID-19 and governments have provided stimuli. The stock market has rallied; SMP is up from the bottom which is the most dramatic rise of the market EVER! CONCERN: exuberance in the market does not take into account the return to normal, as there is a new normal, which is still unknown. Narratives fill the gaps of unknown reality, and the narratives are less reliable than ever before, since analogies are made in the context of experience. Many business will be gone, or have take on significant indebtedness. Largely what has driven the stock market to rally is corporations borrowing at low interest rates, then buying more expensive equity. TWO trillion $ of equity expansion! “Punctuated Equilibrium” by Stephen J. Gould explain the evolution of ecological system of the stock market and the global business system. In the current business world the environmental shifts in business have created a ‘disequilibrium’ due to breaks in business and lifestyle. This alteration in business ecological system is looking for ‘Equilibrium’, which is not likely to occur very soon, and possibly not without a vaccine for COVID-19! Stay safe and healthy out there! For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE

    Links:
    Robinhood to track individual investors on individual stocks. https://robinhood.com/us/en/
    Punctuated Equilibrium by Stephen J. Gould. https://www.hup.harvard.edu/catalog.php?isbn=9780674024441
    Peppered moth of UK. https://www.bbc.com/news/science-environment-36424768
    Have you heard ‘Mental Models: Reflexivity: #20’ by Mental Models Podcast | Behavioral Finance https://soundcloud.com/user-682136294/mental-models-reflexivity-20

    • 25 min
    Mental Models: Global Protein Chain Breaking/Broken: #52

    Mental Models: Global Protein Chain Breaking/Broken: #52

    African Swine Fever in China has depopulated the hog heard in China. China is responsible for 50% of global production and consumption of pork. The coronavirus was completely unexpected and has further impacted the pork market with meat packing plants closing due to workers and their family members, sadly becoming ill or dying from Covid-19. Closure of meat packing plants to protect the meat packing workers and their families is necessary and the right this to do! The amount of pork in cold storage has decreased as of the recording of this podcast from 4 weeks to 3 weeks, and may have dropped further. The breaking of the Global protein chain, is an event that was never expected to be seen in the modern world and is a solid reason for continuing to reinvestigate the markets. For more on best investing strategies, avoiding bias and learning about your brain BUY 5 star reviewed “Understanding Behavioral Bia$” on Amazon - link here: http://amzn.to/2XHtsOE

    • 14 min

Customer Reviews

5.0 out of 5
17 Ratings

17 Ratings

Left Tail Hedge ,

Useful nuggets of insight

The fundamental role of the investor is to process information and make decisions. One of the big hurdles to overcome in making good decisions is cognitive bias. Even with good information, people make bad decisions. Why? Who better to explore this than a SCIENTIST at the forefront of brain research and FUND MANAGER in the trenches?! I’ve found these short conversations enlightening and relevant, and I think you will too. RECOMMENDED.

double down ace ,

Great strategies for investors bonus brain info

I really enjoy listening to this podcasts, as a value investor who is interested in the why and how of bias and decision making, this is my go to podcast. Looking forward to their upcoming book!

Dough_Roller ,

Great Points

I'm a (overly) seasoned institutional equity investor, and this podcast provides great points for improvement. I particularly liked discussion about avoiding "default decision" making, how to think about the value of an asset and the role group-think plays in decision making.

Delivery is style of the speakers is great, and the quick, to-the-point content is easy to consume.

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