From Of Dollars and Data: History is riddled with investor after investor who couldn’t quit while they were ahead and eventually ended in ruin. Jacob Little, Jesse Livermore, Isaac Newton, Mark Twain … shall I continue? But the bigger question remains: why does it happen to so many people from so many different backgrounds? It’s because of biology. It’s because we’re human. Neuroscientists have found that the same area of the brain activates when someone is on cocaine or winning a lot of money. Capital gains is a hell of a drug. So don’t forget your humanity if you get a windfall. You may think it is easy to resist, but the record of history suggests otherwise. The problem with thinking we can resist temptation is that we have no information on what it actually feels like to be in that situation. It’s outside of our realm of experience. It’s beyond all expectations. As a result, our ability to imagine how we will react is faulty. For example, while I can say with high certainty that...
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