The Mind of the Market by Michael Shermer. Why humans evolved to trust and verify, why misunderstandings of economics made sense in 12,000 BC, and how misguided ‘folk economics’ is today. Also a tour de force on the modern neurology tools used to distinguish areas of the brain when people lie, choose, enjoy, or evaluate others’ motives.
Nuggets worth evaluating:
- Majority of people fear losing 10 dollars 2 times more than they value gaining a new 10 dollar item. We share this common fear of losing with higher order monkeys. Most people work 2 times harder to save what we have, than to gain some new thing, of similar value. It makes sense (in evolutionary terms) that majority of people are like this, and we also need the rare person who reverses this math. Shermer posits this to explain clinging to losing stock and most people rejecting new ideas.
- Humans evolved different systems for wanting something (food, sex, security) and liking something (spicy food, marriage, housing). The ‘Want’ system is shared with nearly all mammals. The Liking system we only share with the highest order relatives. Addictions tap into our wanting system, which makes them hard to break.
- Trust is required for market economics. Humans are the only species he found willing to trust-and-see into the future. this behavior involves risk, but also enables huge rewards to the species. Social networks and public institutions recently (12,000 years or so) have enabled us to institutionalize trust with people we do not know. This expanded trade and trust greatly. The 2% of populace which break trust easily, "Psychopaths", actually play an important role in punishing people who cannot trust accurately, says Shermer, using an interesting proof.
- The productive origins of ‘group-think’ and effectively combatting its destructive powers when mob-rule occurs to kill people or ideas.
If you like this book, I would also recommend: Stumbling on Happiness, Freakonomics, Blink, The Tipping Point, and Why We Buy.