I have this thing I keep saying to myself: “Make people think and they will just keep thinking. But make them feel and they will take action."

I know I often write about this and maybe it’s a form of therapy after banging my head up against the wall for so long, observing how most people keep trying to insert all those complicated graphs and rational thoughts straight into the heads of investors.

If your investor’s brain was a popular nightclub, those academically crafted ideas would be very much like all the suckers lining up in the cold. All dressed up and freezing to death.

Here's a little secret for you: the VIP entrance to the investor’s mind goes through the heart. More specifically, to get a strong cerebral response, you need to create an even more powerful emotional impulse first.

No matter how you look at it, investing is always emotional. It is driven by fear and greed. These are the feelings that influence the vast majority of people when they execute investment decisions.

I say the ‘vast majority’ because there are also a few investors amongst us who have the sensitivity of a test pilot.  In addition, we have the rapidly growing hordes of investment robots, relentlessly trading 24/7. I like to call them ‘The Cylons’. Truth be told, even though I am a tech geek, the trading bots really scare me!

To better understand how emotion trumps rational thinking for most investors, we need to take a closer, albeit a simplified look at how the brain operates. I’m going to put on my ‘amateur lab coat’ for a moment and offer you a very short neuroscience 101 lesson:


How the brain thinks

The human brain has 3 main areas, listed in order of hierarchy:


1 - The reptilian complex - The reptilian brain, the oldest of the three, controls the body's vital functions such as heart rate, breathing, body temperature and balance. The reptilian brain is reliable but tends to be somewhat rigid and compulsive. It’s not very open-minded and essentially calls all the shots (I like to think of it as a hopelessly old school CEO or a paranoid dictator).

2 - The limbic system - The limbic brain emerged in the first mammals. It can record memories of behaviours that produced agreeable and disagreeable experiences, so it is responsible for what are called emotions in human beings. The limbic brain is the seat of the value judgments that we make, often unconsciously, that exert such a strong influence on our behaviour.

3 - The neocortex - This is the new part of the human brain. It assumed importance in primates and culminated in the human brain with its two large cerebral hemispheres that play such a dominant role. These hemispheres have been responsible for the development of human language, abstract thought, imagination, and consciousness. The neocortex is flexible and has almost infinite learning abilities. The neocortex is also what has enabled human cultures to develop.

To geek out more, have a look at The Brain from Top to Bottom

So, how did you wind up in a lesson about the brain!?

It’s important because any emotion or thought happens there (duh!).

What it has to do with business is that whatever the neocortex ‘thinks’ about is first filtered through the limbic brain as an emotion.

Furthermore, anything that gets processed by the emotional part of our brain only happens on the orders of the ‘lizard’ in our head. That reptile ultimately runs most of the show.

What it also means is that the stronger the emotion, the more attention the neocortex will pay to it…

Are you starting to understand why all those academic-style white papers or presentations with slides that look like blueprints aren’t really getting you the kind of attention nor action you’d hope for?

If you try to appeal directly to the thinking part of the brain, you might as well stand in line, out in the cold, unremarkable just like everybody else.

By crafting stories that people can feel, resonate with and enjoy, your connection with investors will become more instinctive.

In the next article in this B2H series, I’ll focus on fear and greed, how they behave like a couple of exhausted toddlers in the back of a car. We’ll also look at why they are evil twins and explore the dangers of over-rationalising investment decisions.

Thanks for your time!