From the FINANCIAL TIMES:
… Rogue traders’ behaviour is financially stupid – traders are trained not to double their losses but to set risk limits and to retreat from risky positions when they face danger. Biologically, however, doubling is sound. Starving animals should gamble in search of a food windfall, even though each has only a small chance of success. Most will fail, but some will survive and reproduce.
Gambling even at bad odds pays because of the pattern of sexual reproduction – a few survivors produce a lot of descendants. “Living organisms, including humans, tended to propagate rapidly,” writes the anthropologist Azar Gat. “The small founder groups that arrived in the Pacific islands in the last two millennia rapidly filled up their new habitats, increasing in numbers to thousands and tens of thousands.”
It feels implausible that rogue traders are driven by Darwinian instinct, but humans have been found to use the emotional and instinctive regions of their brains when opting to gamble, instead of the prefrontal cortex that controls intellectual reasoning. The culprit is the amygdala, a part of the brain predating Homo sapiens and some great apes, which produces the “fight-or-flight” reflex…
Click here to read the full article.
EDITOR: This is an extraordinarilly revealing article concerning influences upon all of us in making decisions. If you can’t get it directly through the URL link above, access it by title through Google.
