Last week, we looked at how the human brain is hard-wired to make poor decisions. Whilst we think of ourselves as rational and level-headed, consciously making choices driven by self-interest (system 2 thinking), we’re often kidding ourselves. Instead, our decisions tend to be emotional and instinctive, preferencing groupthink and the status quo (system 1 thinking), much as we’re unlikely to admit it.
We also learnt that the brain functions like a muscle, that it becomes tired with use. Acknowledging this, we argued that making your investment decisions is best done early in the day, in a distraction-free environment.