Nature vs. nurture — it’s an eternal debate, and, as Jason Zweig shows in his most recent Wall Street Journal column, scientific research shows it’s a question that can have a great deal of impact on your investment style and decisions.
Zweig writes that he recently volunteered as a guinea pig in Dr. Ahmad Hariri’s lab at the University of Pittsburgh, undergoing several different DNA analyses and brain scans. Hariri’s tests measure a variety of genetic predispositions to certain types of attitudes and behaviors regarding different risk/reward scenarios. Among the things Zweig learned:
- He has the “385A allele” of the “FAAH” gene, which tends to dampen fear circuitry and intensify the reaction to the prospect of making money (about 25% of people with European ancestry have it);
- His version of the DRD2 gene includes an allele that “can make [people] respond more intensely to gambles, even when no skill is involved”;
- A test in which the patient lies in an MRI tube and tries to guess the value of different face-down cards revealed that Zweig’s ventral striatum, a reward center of the brain, responded twice as intensely as that of Hariri’s average subject.
“That suggests I may get an even more visceral rush out of making money than other investors do,” Zweig wrote of that last finding. “Dr. Hariri has found that people whose brains respond like mine tend to crave the immediate gratification of a quick profit. ‘Controlling this kind of impulsive response to reward,’ says Dr. Hariri, ‘is crucial to success in many aspects of life’ — like investing, where impatience often lowers returns.”
Other tests — including one in which the subject must decide whether to take a smaller amount of money now or a greater amount later — showed, however, that Zweig’s often overcomes his bad instincts. “The contrast between the raw material of my genes and the final output of my behavior isn’t unusual,” Zweig writes. “Perhaps 20% of the variation in risk-taking among individuals is genetically determined; the rest comes from our upbringing, experience, education and training. So, while my genes bias my brain toward spooking easily and trying to make a quick buck, that isn’t how I actually behave.”
Zweig says that, according to Hariri, stressful times like these can unmask genetic biases. Zweig’s conclusion: “Bear markets give nature the upper hand. It is now harder than ever to stick to the disciplines that can override your genetic impulses, but it also has never been more important.”