This Is Your Brain on Money
“One day I could drive a Mercedes and the next I could sleep in it.” -Archie Karas on his legendary run
In December of 1992, Archie Karas lost 2 million dollars gambling, leaving him with nothing. For most people, that would have ended their relationship with gambling.
For an addict, it was just the beginning.
Archie returned to Las Vegas 6 months later with a $10,000 loan and started the greatest documented gambling run of all time. Over the course of 3 years, he played Poker, Craps, Billiards, and Baccarat and ran his winnings up to $40 Million. This, of course, wasn’t enough.
Within a year, he was broke again.
Karas later said: “You've got to understand something. Money means nothing to me. I don't value it”. What he didn’t say was that the rush was worth more than anything.
“Behavioral Finance” is probably the greatest factor in an investor’s returns
Yet… is still being defined. People’s relationship with money is still more of an art than a science.
Dopamine is wrongly identified as a reward molecule. “The Molecule of More” is actually released in anticipation of a reward. It’s why most people find themselves thinking about their next vacation rather than enjoying the one they’re currently on. They like the rush of something new.
Addicts of every type usually have an abusive relationship with their dopamine:
“You know, the best part of the best drug in the world isn't the high. It's the moment just before you take it. The dice are dancing on the table. Between now and the time they stop, that's the greatest high in the world.”- Al Pacino in Two For The Money
Dopamine isn’t inherently bad. It can be controlled and used for good; Artists, builders, and investors all harness that anticipated reward to take the initial leap. But like most things in life, it’s important to stop pursuing more and take time smell the roses. Enter, Serotonin.
Serotonin levels are high when there’s contentment, happiness, and focus. It’s often written that happiness is simply reality minus expectations. That’s Serotonin at work.
When it comes to money, the most successful investors do three things:
1. Define their goals.
2. Build their plan to meet those goals.
3. Stick to the plan, regardless of the temptation to chase shiny objects.
“Easy money” investment opportunities are found everywhere, and ads for those “opportunities” are designed to hack your dopamine. Penny stocks, crypto and NFT projects, “alternative investments” etc. are vying for your attention and money.
Buyers beware; there’s no such thing as easy money, only hidden risks.
Meanwhile, slow and steady approaches like diversified stock, bond and real estate portfolios have been proven for 100 years.
They are often unsexy, but that’s ok.
The plan you’re at peace with beats the one you can’t stick to every time.