Meet Your Three Brains

Why "just be more disciplined" is bad advice, told by the part of your brain that already lost the argument.

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There is a video, taken by a researcher at NYU named Joseph LeDoux in the late 1990s, of a person reacting to a snake. The snake is rubber. The person knows the snake is rubber, because the person was just told the snake is rubber and watched the researcher hand it around the lab. Then the researcher places the rubber snake on a table, asks the person to pick up a pen next to it, and films what happens.

What happens is that the person flinches. Hand jerks back. Shoulders come up. There is, on slow-motion playback, a small involuntary gasp. Then, about three hundred milliseconds later, a different expression crosses the person's face: a kind of sheepish, embarrassed half-smile that says "right, of course, it's rubber, what's wrong with me."

Nothing is wrong with that person. That person has a perfectly normal, functioning, healthy brain. What you just watched is your brain too. It is, more importantly, your trading brain. The flinch is the first three hundred milliseconds of every losing trade you have ever taken. The sheepish smile is what you do at 4:00 PM when you're reviewing your trades and trying to figure out what the hell happened.

Here is the thing that the rubber snake video proves, and that you need to internalize before we go any further:

The part of your brain that flinched is not the same part that knew it was rubber.

There are, functionally, several different decision-making systems running inside your skull at any given moment. They run in parallel. They do not always agree. And in a fight between them, the older, faster ones almost always win, because they get to vote first.