How outsmart your brain

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Your brain will make you poor

Our brains are a problem. We’re wired to respond to the immediate threats and gratifications of a simpler and more dangerous world. Our short-term bias inhibits our ability to deal with longer-term issues—challenges that won’t become real for 30 to 50 years. Challenges like preparing for a financially secure retirement. Shlomo Benartzi, a professor at UCLA’s Anderson School of Management and co-chair of its Behavioral Decision-Making Group, told me this: Brain imaging shows that we use the same parts of our brains to think about our future selves that we use to think about strangers. If we are so estranged from our future, how can we be taught to care? If our brains are the problem, how can we trick our brains into better financial behavior? This is the province of behavioral economists. Traditional economists tell us what we should do—how much to save and how to invest. Behavior economists investigate how to get us to do it. ….[READ]

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