We Study Billionaires - The Investor’s Podcast Network - TIP321: Investing & The Brain w/ John Gald (Business Podcast)

Starting point is 00:00:00 You're listening to TIP. On today's show, we have neuroscientist John Gould. John has over 15 years of experience practicing on the brain in various specializations like epilepsy and numerous others. During the show, we cover some really fascinating topics like how you process information subconsciously and how to take advantage of it, how reflexive functions between your conscious and your subconscious portions of your brain work, how certain tricks of the brain can cause investing mistakes and much, much more.

Starting point is 00:00:30 So without further delay, here's our interview with John. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. Hey, everyone, welcome to The Investors Podcast. I'm your host, Preston Pish, and as always, I'm accompanied by my co-host, Stig Broderson. And like we said in the introduction there, we got John Gault with us, John. Welcome to the Investor's podcast. Hey, it's great to be here.

Starting point is 00:01:11 Thanks so much for having me. I'm super excited to have this candid conversation about a topic that I'm really passionate about. In fact, my wife was in my office the other day, and she came out and asked me when we were on a walk. She goes, why do you have so many books about the brain on your desk right now? And I said, well, I'm getting ready to talk to a guest that really knows. this stuff inside out and I've got to be up on my game. So she was laughing. So really excited to have this chat with you, John. Yeah, me as well. So I want to start off the conversation by reading a passage out of a book that was very influential to me that I just thoroughly enjoyed.

Starting point is 00:01:55 The name of the book is Consciousness in the Brain. And here's the particular section that I want to read to the audience and then kind of get your thoughts on it. So here's how it goes. Learning who we are is a statistical deduction from observation. Having spent a lifetime with ourselves, we reach a view of our own character, knowledge, and confidence that is only a bit more refined than our own view of other people's personalities. We remain largely ignorant of the actual unconscious determinants of our behavior, and therefore we cannot accurately predict what our behavior will be in circumstances beyond the safety zone of our past experiences.

Starting point is 00:02:32 Our self is just a database that gets filled in through our social experiences in the same format with which we attempt to understand our minds. And therefore, it is just as likely to include glaring gaps, misunderstandings, and delusions. For me, this was just such a fascinating paragraph in this book because it's really getting down to conditioning in the environment that you're in. Talk to us about some of the stuff that's going on in this. So you're right. There's a lot to unpack there. And what I would say is that Stan De Hain, he's an incredibly intelligent individual. I mean, this gets down to deep philosophical stuff. I think when I initially heard you read that, I thought, we're bombarded by stimuli every day. We don't know how these stimuli always affect us. Do they form strong or weak connections? Are they going to continue to be strengthened? Do they reach our consciousness or just our subconsciousness and things like what areas of the brain are involved in processing this stimuli? When I hear that particular passage and I think about claims like this, I think it can get really technical. I think claims like

Starting point is 00:03:50 this in my mind greatly disagree with our logical understanding of our self. I think the greatest challenge in neuroscience is that we still don't understand some of the basics of the central nervous system. But when you get into consciousness, I think, you know, from a lot of the reading that I've done, the dispute about the function of consciousness seems to be based on a dichotomy. Either consciousness is a useless byproduct of brain activity or we evolved it as an extra function to solve certain tasks. And I certainly think it's the latter. And I know Dr. DeHane would agree with that. You know, DeHane argues that the function of consciousness is to transform incoming data points into a clear summary. And then that information can then be carried forward

Starting point is 00:04:49 in time, manipulated sequentially, and communicated to others. So when I read that book, you know, I'm thinking about the passage you just read. One sentence that really stuck out with me was it was at the very end of the book. And he said, as you close this book to ponder your own existence, ignited assemblies of neurons literally make up your mind. And so I remember reading that and then thinking and asking myself, well, what happened to me thinking? or me making up my mind in certain situations. Because you're getting at whether it was a subconscious opinion or if it was a conscious opinion or reflexive in nature.

Starting point is 00:05:38 Exactly. I mean, you know, you think about those number of sentences that you read at the beginning and you think about all of the information that we got from that book. And, you know, I think some of the main things that we learned as we went through is that neurons act entirely outside of our knowledge, right? Just like they do in artificial intelligence if you're like designing a deep neural network. Exactly. Yeah.

Starting point is 00:06:03 And so if ignited assembly of neurons are somehow what we are, then we have no idea what we are or what it is we are supposed to be doing. And so when I think about that paragraph, I mean, this stuff is deep. It's incredibly deep. That's kind of my thinking on those particular sentences. I'm a huge fan of his and I think that he is an incredibly deep thinker about this stuff. But I think there's a lot to be learned here. And it further illustrates the fact that this is still a working hypothesis. I mean, we're still trying to figure out a lot about consciousness. We were so lucky to be speaking with Robert Chaldini, author Influence and Persuasion. And we talked with him about Kahnman's book thinking fast and slow,

Starting point is 00:06:52 and Chaldeen just couldn't believe that Kahnman didn't talk about the powerful concepts like prospect theory that he won Nobel Prize for. He instead focused on the simple yet powerful concept like being able to hold only one thought of the time. Could you talk to us about this idea? What is happening? And at the same time, what is happening in the brain

Starting point is 00:07:12 as we are processing all that information? I think that's incredibly fascinating. And I think that it really speaks to, how much our brain processes all of these individual stimuli and how it really has to hyper-focus on certain things in order to figure them out. The idea, I think, here is that our brains need cooperation across networks or entire regions of the brain. I think any given problem must be split into tiny fragments to be dealt with in parallel

Starting point is 00:07:46 across the entire densely interconnected network. I think this implies that the networks make one large coordinated step at a time, running at several oscillations per second. And not only are we restricted to attending consciously to only one problem at a time, but we cannot even unconsciously be thinking about another. there can be no background processing or clever unconscious thoughts. So as Conneman said, we can't have two thoughts at once. And so I know from like my own experience, sometimes it might seem like we can be thinking

Starting point is 00:08:33 about more than one thing at once because the frequency of change of thought can be so rapid and may seem as though it came all at once, but it is always just one thought after another. And so one way I think you can think about this is utilizing optical illusions, for instance. My kids are really into optical illusions right now, especially my older daughter. There's an older optical illusion where you see this picture and there's essentially two animals in it. There's a duck and there's a rabbit. And when you look at it, you can either see the duck or you can see the rabbit. But no matter how hard you try, you can't simultaneously see the duck and the rabbit at the

Starting point is 00:09:14 time. And so I think this is a really good example of how our brains are only kind of able to hold on to one thought at a time consciously. And from a subconscious standpoint, I think that there's probably a lot of stuff that's going on. But even that subconscious thinking is a separate entity than the conscious thinking that's going on. It's interesting that you brought up this idea of the optical illusions because in this book that we originally were talking about this consciousness in the brain by Stan, he provides this amazing example of binocular rivalry in this study that was conducted. The original study was conducted by Charles Wheatstone, but what he was talking about in the book was, I think, the variations on this original study for the audience. this is what we're talking about that he describes in the book, if you take two toilet paper tubes so that you isolate each eye so that one eye would have a toilet paper tube, the other I would have

Starting point is 00:10:20 a toilet paper tube so you're only able to see one thing in each of your eyes and you were able to basically split everything else out. And he put two different objects. Let's just say one was a rabbit with a white background and then the other one would be a flashlight with a white background. And when your eyes are isolated and can only see one of the two, he was curious as to what you would see consciously. Would you see a mixture of the two or what would it be? And what was so fascinating about this study is only one of the two images would be seen by the observer. So, you know, I might look at it and see a flashlight and you might look at it and see the rabbit. And what was interesting was is the person would look at it.

Starting point is 00:11:05 it would change from one to the other at whatever frequency, maybe every five or 10 seconds, it would oscillate what you were seeing. It would be almost like poof instead of seeing a flashlight, now you're seeing the rabbit. Where this really got interesting in that he talks about in the book is he then put the two different images on a screen that had a certain refresh rate. And on one of the images, it would flash something different, but it would do it in such a short frame. It'd be like one out of every 60 frames per second, it would change the pictures ever so slightly, but it would only do it on one side. And what he was able to do is they were able to prove that in this example where only one of the images was being changed, the person who was observing it would always

Starting point is 00:11:51 just see that one image. So like, let's say the image with the flashlight was being tampered with. when the observer was looking at both images and the ones being tampered every 60 frames, but if you were looking at it normally just by itself, you would never even notice that the one frame is being tampered with. But in this situation, the oscillation from one picture to the other, as the person had the binocular test set up on there, it went away. The back and forth went away and the brain became fixated on the one that was just having the one frame that was being altered. And even though the person wasn't consciously aware that there was some type of tampering being done, they were unable to see the other object under this tampered situation.

Starting point is 00:12:35 So the brain was picking it up, but yet it wasn't conscious to the observer. I found that totally mind-blowing, that processing is actually happening. And it's proof that the processing is being done, even though it's not consciously aware to the observer. So when I first read that, I was kind of thinking to myself, what else is happening behind the scenes that my brain is picking up? And what was also fascinating about this, John, and I'm curious to hear your thoughts on this, is in that exact scenario, they were able to observe that, let's just say the person was fixated on the flashlight. They asked them, hey, did you ever see a rabbit at any time? The person said, no, just emphatically never saw it, right?

Starting point is 00:13:15 But they could tell by brain imaging that the person's subconscious was actually seeing the rabbit. they have proof of that through the brain imaging. So talk to us a little bit about some of this stuff. That stuff is incredible. What I would be curious about, too, is how often is that your dominant eye that's actually picking up, you know, that's focusing in on one image versus the other? And I would guess that it's a lot of the time, right? So this basically boils down to conscious axis hypotheses. And the conscious axis hypotheses emphasizes an important property of consciousness, which is the global axis of information in the cerebral cortex. So the brain has multiple cerebral networks doing different things in parallel. And many of the systems do unconscious

Starting point is 00:14:08 processing of information. When a mental object becomes conscious, many systems, will synchronize their processes around analyzing and manipulating that mental object. So I think in that situation, that's probably what's going on where the person has become extremely conscious of one object versus the other. But the way this works is information becomes conscious through something that's called a top-down attention, whereby depending on whether we are absent or present mentally in the situation, and then the strength of the stimulus is going to determine how much those inputs will be assumed by our brain. So, for example, in the situation that you're talking about,

Starting point is 00:14:57 we have this visual stimuli that's coming in, and the stimuli is exciting our retinal receptors in the back of our eyes. And these messages are then relayed on to the thalmus. And then from the Phalamus, it's sent back way back of our brain because that's where our primary visual cortex is. From here, there's a lot of stuff that's going on. If there's interference from previous or subsequent stimuli, and if it's great enough, the response to the stimulus weakens as it passes on to other cortical areas, where it may weakly encourage behaviors in ways called subliminal perception. However, in the absence of strong inhibition, the prefrontal and pridal cortices will send messages back to the primary visual cortex. And then the messages will continue to reverberate and amplify throughout the brain.

Starting point is 00:15:58 So this stuff actually gets into a lot of the stuff that DeHane actually discusses quite a bit, which is that global workspace network and really subjectively dictates. the experiences that we have and whether they're going to be conscious or unconscious. So there's so much going on there. You know, I think it's so fascinating when you think about the fact that clearly there are two totally different images that are being displayed to your eyes, but your eyes are only really focusing on one. And why is that yet, like you said, and if they're able to represent that in a way where it shows that the person is still actually able to see the other object,

Starting point is 00:16:46 it's just not becoming something that's conscious to, you know, or higher cortical areas. So, I mean, that's kind of what I'm getting from it is if you look at the study, I think a lot of it really kind of boils down to, again, where are we at? Are we present? Are we focused? Are we in the moment, as they say? and then what kind of strength is there in that visual stimulus in that case.

Starting point is 00:17:14 So, John, what I'm thinking about as you say this, what pops into my head is this reflexivity property and what is happening between the subconscious and been filtered even before I have conscious access to it. In this example, it could be a rabbit that's not even in my conscious access. So you have this filtering mechanism that is taking place in this reflexivity of the conscious and subconscious mind. What is being filtered and how much am I controlling it? When I first heard you say that, the first thing that I thought about was, you know, sleeping at night. And I'm sure you have probably had this experience in your life where

Starting point is 00:17:56 you're trying to work through something that is extremely difficult, right? And you're trying to wrap your mind around it and you just can't seem to figure it out. And then you're like, you know what, I'm just going to sleep on it, as they say, right? So you go to bed and in the middle of the night, and this has happened to me a number of times, you'll wake up and you'll be like, I know exactly what I need to do or I totally understand what's going on there. And you're not consciously thinking about it because you're sleeping, right? But yet, like you said, we have these reflexive loops, these subconscious loops that are continuing to process that information. And and help us try to figure out what's going on.

Starting point is 00:18:41 You know, I think the difficulty in life is that there's so many distractions out there, right? And so our brain has to deal with a massive amount of information that constantly floods it from all the senses. And it's incredible that we can focus on what's important and tune the rest out, right? I mean, to me, that's just amazing. You know, our prefrontal cortex, for instance, would just get completely overwhelmed if there weren't particular circuits within the brain that inhibited certain signals and then allowed other signals to be able to continue on for us to be able to really hyper-focus on those things. And so I think the main thing that I really think about with regard to that question

Starting point is 00:19:30 is a person's ability to focus on something and their ability to filter those things so that, like I said, they can allow certain stimuli to have a more prominent effect and then other stuff to just kind of fall to the wayside, I guess if you want to say that. The way I kind of think about it is that every time we think or feel or do something in our life, we strengthen a particular pathway. And, you know, from a psychological standpoint, you can see how that can have such a profound effect. I mean, if you've been told your whole entire life that you're not good at something and you just continue to subconsciously allow those things to cycle through your brain over and over again, you might not even know that

Starting point is 00:20:18 those things are happening. And yet they're having a profound effect on your life. And so, as they say, habits are well-traveled pathways, right? So I think that a lot of times that's what it is. Like if we're studying a particular scientific phenomenon like I've done in the past and we're likely, deeply thinking about these different ideas and are trying to figure them out, the more we work through and think about them, the more we strengthen those pathways, the more reflective, I think, that thinking becomes. And it gets to the point where, like I was saying, with us hearing, you know, what a horrible person we are earlier in our life, it reaches our subconscious and it almost becomes automatic. And so these same examples have been written about

Starting point is 00:21:07 thousands of times over the years. I mean, I know in us talking in the past, you had mentioned Einstein. And, you know, that's a perfect example of how he was able to kind of think through some of these really complex ideas that he had to work through to basically achieve all of the brilliant things that he was able to achieve in his life. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord,

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Starting point is 00:25:57 and he was in grad school at this point. He told me, he goes, Preston, I had a weird dream last night. I said, oh, yeah, what was that? And he goes, for whatever reason, so and so that we used to fly with in South Korea, it was in the dream. Well, a little bit more context on my friend. So my friend was a company commander. He was in charge of the entire company of Apaches that we were flying, and then he had a whole organization of pilots that worked for him that were his soldiers in his organization. And the particular person that he had mentioned, I knew right away because he did not think very highly of this person, right? And I was kind of one of the lazier pilots in his organization. And I said to him immediately, I said, are you working on a group project?

Starting point is 00:26:44 in grad school and is somebody being lazy on the project? And he just paused. There was like dead silence. He didn't say anything. And then he just started laughing really hard. He says, how in the world did you come to that? And I was like, that person is in your subconscious and represents some sort of label, right? And then his experiences that he was having right now are getting stitched or getting put into

Starting point is 00:27:14 his subconscious in order to allow for quicker reaction time or whatever. And it's just how your brain wires itself at night for whatever reason. And so when I said that to him, he started a laugh and so hard. And I'm kind of curious because this is an observation that I've had through the years is it seems almost like at night that the experiences that we're having are that we're pondering a lot through the day in kind of our frontal lobe and our neocortex, right? It almost seems like it's wiring itself or stitching itself to these past experiences, these past labels that we have saved deep into our unconscious mind. And it seems like it happens at night.

Starting point is 00:27:52 Is this something that you've heard other people talk about or is this something that's documented? I've never read this anywhere. I'm kind of curious if this is something that's actually documented. I actually have not read a lot about it either. It's just from my own understanding of the nervous system and then, you know, thinking about all of these situations like you were just saying where for whatever reason, subconsciously, you're able to just figure out these unbelievable things as you're sleeping at night. I mean, it goes back to essentially that at the beginning of our discussion when we were talking about, you know, that paragraph from Stan DeHane's book where our self-exam, is just a database that gets filled in through our social experiences, right? I mean, in that case, like you talking about your friend and having this experience

Starting point is 00:28:47 where one of the individuals that he was in charge of was just not pulling their way, was lazy or whatever, it obviously had a profound effect on him. He wasn't able to kind of squash that, you know, get that under control. And then it was revisited in, you know, his own experiences that he was dealing with presently. So, I mean, it's just crazy stuff. Let's talk about some of these concepts in relation to investing. What are the most important concepts for investors to understand as they want to understand how the brain is processing information? There's a couple to come to mind. One that I think is really interesting that I've been doing more reading about is

Starting point is 00:29:28 neuroeconomics. I also think biases are really, really interesting. Focusing first on the idea of the neuroeconomics. One study that I read recently, it was a study that was focusing on 15 brain damage participants that had normal IQs and the areas of their brain responsible for logic and cognitive reasoning were completely intact. What they found is that when they conducted the study, the study suggested that the participants that lacked emotional responsiveness actually had a significant advantage when they played a simple investment game. The emotionally impaired players were more willing to take

Starting point is 00:30:12 gambles that had high payoffs because they lacked fear. And then the players with undamaged brains were more cautious and reacted during the game and wound up with less money at the end. And then Daniel Conaman has run some really cool studies with a number of different neuroscientists. One that I thought was pretty fascinating, dealt with players who were given $20, and then they were asked to play a simple gambling game that involved 20 rounds of basically tossing a coin. And if they won the coin toss, they earned $2.50. If they lost the coin toss, they had to give up a dollar. So they could choose to not play in any given round, in which case they just kept their dollar.

Starting point is 00:31:03 So from a logical standpoint, you know, if you had to think about it, obviously the best strategy with a coin toss would be to do every single round of the game, right? Because since the return on a win has a much higher reward, obviously, than the potential of loss, the risk and the risk in each round was 50-50. It just makes sense that you would just continue to do each and every round. the players with emotion-related brain damage took a more logical strategy like I just talked about, and they invested approximately 84% of the time, while the non-brain-damaged individuals invested just 58% of the time. And so, as you can kind of guess, the emotionally impaired individuals outperformed the non-brain-danged participants.

Starting point is 00:31:49 And so what did they extract from this? Well, the researchers obviously initially believed that fear had all. lot to do with the poor performance from the non-brain damage participants. And then when they took all that information and went a step forward with it, what they found is that many of the brain damage players who did well on these specific studies actually did not perform well when it came to making financial decisions in the real world. Many of them went bankrupt.

Starting point is 00:32:21 Their lack of fear and judgment led them to get mixed up with people who, took advantage of them. So I think what they found was it indicated that emotions can play an important role in protecting us as well, even if they sometimes interfere with rational decision making. Humans develop this fear response as a survival mechanism to protect ourselves from predators. You know, if you're out running along a path out in the woods and you come upon a curly branch that's laying on the ground, you know, I'd venture to to guess that a lot of people would probably, you know, jump in excitement or jump out of the way because they thought, you know, is that a coiled snake that's sitting on the ground? And there's a

Starting point is 00:33:05 reason for that that we have those automatic responses to protect us. However, in a world where people are constantly trying to take advantage of you, this fear system can be oversensitive, reacting to dangers that don't actually exist and tend to push us toward decisions that don't make a lot of sense. So I really, really think the neuroeconomic stuff is pretty fascinating. And then from the other stuff that I was kind of talking about dealing with biases, I mean, they play such a incredible role in investing decisions that people make every single day. I'm sure yourself can think of a number of situations where you let your own bias affect the way you made a particular decision

Starting point is 00:33:53 in an investment that you did. The decisions that we make as humans show that we tend to try to oversimplify and make irrational choices. Our brains tend to default to fast, intuitive, automatic, and emotionally charged decisions. And these are mostly due, again, to our survival instincts that we have.

Starting point is 00:34:16 When we look at the world with our biases, is we tend to place filters up that can alter our perception and our decisions. So part of becoming an investor, and you know, I'm obviously not a incredible investor by any stretch of the imagination. I enjoy doing it. You know, I've done it quite a bit. But becoming an investor, you have to educate yourself, right? You have to know how different investments work, but you also have to try to overcome your biases

Starting point is 00:34:44 because they can derail you really easily and your investment strategy. You know, there's a number of different types. I'm sure a lot of people have heard of the number of different biases that are out there. You know, one, confirmation bias, you know, you can flip on any news stations, CNN, MSNBC, Fox News, and know that there's an incredible amount of confirmation bias going on and fear. You don't have to look too far. But confirmation bias plays a big role in investing, too, because we tend to put more weight on opinions that help to support our own opinions on things.

Starting point is 00:35:16 So there's the gambler's fallacy. That's another perfect example of bias. So let's say you as an individual watch the S&P close on the upside five trading sessions in a row. So you place a short on the spider because you think there's a good chance that the market will drop. But the thing is that past events don't connect future events, right? So the market being up, five consecutive days in a row is basically irrelevant. Another one that I think is really, really interesting and I think is part of the reason why Buffett was so successful in Munger is the whole bandwagon effect.

Starting point is 00:35:57 You know, they didn't follow that path. There's a ton of bandwagon effect going on right now in the markets. I mean, you don't have to look too far to see that. And Buffett and Munger just resisted that. Their big philosophy, I know there's lots of quotes out there, but one that really sticks to my mind is be greedy when others are fearful and fearful when others are greedy. So I think that really speaks to our biases. And then one that really stands out in my mind because I certainly have run into this same issue in the past is the loss of version bias where, you know, we have a stock in

Starting point is 00:36:28 our portfolio that is down so much, but you just don't want to sell it, right? Because you don't want to admit that you made a poor decision and you're thinking yourself, all this is bound to go back up. But the reality is, in a lot of these situations, you'd be better off taking your money out, go and put it in a different invest than maybe a higher quality stock or something, and your outcomes would probably be infinitely better. So, John, recently I saw a video of David Eagleman, who also just has some incredible books on the brain. I highly recommend pretty much anything he has written, and he's written quite a bit. He was wearing a jacket that provided inputs on his back. And then the inputs that were being put into his back, it was almost like these

Starting point is 00:37:14 plastic, I'm going to call them needles, but they're not needles. It was like these, it was like poking them in the back. It was like a matrix of them. And it was based on the stock market's performance, these inputs somehow correlated to stock market performance. Then I've also read, and David talks about this in some of his books, where they're using these sensors, for example, the tongue. They're using these sensors on the tongue in order to create vision for people. And so I just find this totally crazy. Talk to us about what's going on. Like, how is that even possible? And then just like how the brain is wiring itself off of something like this. David Eagleman is a brilliant Stanford neuroscientist. His belief is that there should be more

Starting point is 00:38:07 to the human sensory perception than just our traditional senses of sight and touch and sound and taste and smell. Eagleman has dedicated his career to studying how the brain takes in signals and constructs consciousness. And during his career, he became really interested in something that's called synesthesia, which is essentially a neurological condition in which stimulating one of our five senses creates a simultaneous perception of another one, such as individuals who can hear color. And so I think he kind of took that, continued to study a lot of that.

Starting point is 00:38:49 I mean, a lot of his work on synesthesia showed that human sensory perceptions are not an objective reproduction of reality, but instead an inference that the brain draws from the signals it receives. So about a decade ago, his research led him to this really fascinating piece of technology that you were talking about, which he called Vest or the versatile extrasensory transducer. And it's a wearable device that these individuals wear over their torso and it has a number of different vibrating motors in it. And what's really fascinating is that the Vest can take in a number of different vibrating motors in it. take in a number of different types of real-time data, such as sound waves or, you know, as you said, stock market trends. And it turns that data into dynamic patterns of vibrations in the motors.

Starting point is 00:39:49 And so he studied the heck out of this stuff. And within just a few weeks of studies with his patients, Eveleman was able to help train his subjects to learn to associate those vibrations with specific inputs like teaching the sound of a letter for an individual that's deaf or the news of a particular stock increasing in value. So it's Eagleman's opinion that the data received through this vest will become second nature subconscious like we've talked about in the past and it's going to give us almost a sixth sense, you know?

Starting point is 00:40:30 That's just using touch. I couldn't imagine if you're doing something like LiDAR and then that's being somehow programmed into your subconscious. Eagleman's just really kind of leveraging the five senses that we already have and then kind of tapping into where that's getting wired into the brain via adding sensors to the touch specifically. That's exactly it. touch is one of the most important senses that we experience as humans. I mean, it has a profound impact in our lives. And there's been tons of psychological studies that have revolved around touch and its importance, you know, for children and adults alike. And so, like you said, I think he's really kind of hitting on that, but focusing more on different avenues that are

Starting point is 00:41:19 taking advantage of that particular stimulus. Let's talk about Ilam Musk's NeurLink. And And Elon, as we know, Ken overpromise at times. But he was suggesting that they were going to have two to 300 people working on providing stimulation directly into the brain. What are some of your thoughts on this NeurLink project? Some of the things that Musk wants to accomplish with his electronic brain computer interfaces, he wants to cure blindness and paralysis and deafness. I know that there's a heavy emphasis on mental illness.

Starting point is 00:41:53 He wants to help people be able to do activities without fear or discover the nature of consciousness, any number of things. It sounds incredible. I think, you know, my take have kind of pointed toward it being in its early stages. I think a lot of people were kind of disappointed, to be honest with you, on kind of the rollout of the whole neural link. They kind of said it's speculative at best at this point. The implants have been attempted in the past. and they've had kind of a mixture of results in animals. So what I would say is that Musk just doesn't have enough evidence that really kind of points to its effectiveness at this point.

Starting point is 00:42:34 But with that said, I think if we've learned anything from history, it's that we can't rule out human ingenuity. And Elon Musk is just incredible. I mean, I remember watching the whole SpaceX launch with the two American astronauts and just, basically being in awe by the absolute precision of that rocket landing on the International Space Station. And the two astronauts were essentially just sitting there in their seats. I mean, I don't think they were doing a whole heck of a lot. I think, you know, it was all programmed into the computer systems and the rocket. So I think it makes you really appreciate how amazing all the things are that he's trying to accomplish.

Starting point is 00:43:17 And, you know, my philosophy in life is that whenever people say things can't be done, I say, you know what? You just wait because you might be proven wrong. I mean, I remember my dad talking about the World's Fair in Seattle in the early 1960s. And some of the demonstrators that were there were talking about two people communicating with each other on video screens at a distance. You know, I mean, that's what we're doing right now. And so I think the difficulty here with Neurrelink is that, as I've said before, the brain is incredibly complex. And to have, you know, we need to probably have more of an understanding in order to better understand how these can actually perform.

Starting point is 00:44:02 And so it's my opinion that we have a ways to go. He had to raise some money, though. Yeah. Let's take a quick break and hear from today's sponsors. No, it's not. not your imagination, risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're

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Starting point is 00:47:19 Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. So, John, recently you recommended a book to me privately. We've been talking for a little bit now, And you recommended this book called Self Comes the Mind. And the really big point that I got out of this book, which I had never even thought about this idea before, was biological value. And as a value investor, this really struck a chord with me and how our bodies are conducting this biological value. So talk to us about biological value and why it's important. So Demoscio's book is incredible. Biological value is essentially how we manage life. Like the cells are able to self-regulate through homeostatic mechanisms. We all operate on that same exact principle. In the book, he takes a modern retake on neural correlates of consciousness. The most important idea in his book, in my opinion, is the functional role of homeostasis and how it, creates the biological value of life regulation. These principles are extremely important because as organisms grow in complexity to the point of possessing a brain, they are able to construct maps

Starting point is 00:48:51 of the body in order to monitor those homeostatic ranges among a number of other things. And then eventually these maps begin to correspond to events and ideas rather than simply the organism itself. This centering self-process allows the organisms to better adapt to their environment, to plan ahead, to make decisions, and eventually reflect on themselves in more abstract terms. Consciousness helps us figure out these principles and helps us understand how they influence so many aspects of our minds and our culture. So when I heard you, you know, initially say the question,

Starting point is 00:49:36 And I'm curious from your investment background, how do you see biological value as a foundation in macroeconomics? If I was just going to simplify it all, and I'm thinking about a thermostat in my house. And let's just say that it automatically will turn on the heater when it gets to a certain temperature and it'll turn on the air conditioning when it gets to a certain temperature. What people mostly focus on are those limits, the bottom limit and the upper limit. But I think a lot of people fail to think about are the units that are being used to measure the amount between those two limits and how we just automatically assume that they're fixed, that we're counting with one and then it turns into two and then three, right? And I think that's just not such a given in reality, specifically with where we're in the economy.

Starting point is 00:50:31 But what I found fascinating in the book when I was talking about the brain is how important this is in this regulation process of those units that are measuring how the cells are going to respond, how the neurons are going to weight their response, and how they integrate with the rest of the network. And it really got me thinking, and I know you and I talked previously in private about some of this and how it relates to the macroeconomy. And so I know that's why you were asking me. But when I look at the world right now, what we have is a fundamental change in those units

Starting point is 00:51:07 that we're using to measure everything. And it really comes to the cost of capital and how much we think interest rates should be because that unit of account that we're measuring everything in, these Fiat units are getting debased constantly. And so when we're relating this back to biology, one of the things that was talked about in this book Self Comes to Mind is when a person does not. not have a good biological value system. The life form typically doesn't make it very long, or that it has major disfunctions in the way that it's able to just perform its normal lifestyle

Starting point is 00:51:41 or the life that it's living. It just wrecks havoc. And I guess when I'm looking at our global economy and central banks coordinated across the globe are adjusting their unit of account or that biological value system that we just kind of take for granted. And it's getting inflated. and the base, the system can't function appropriately. And that's kind of where we're at. And I think that's right. I mean, I think like you said, it all comes back to homeostasis. When we continue to give too much of a good thing, obviously there's a lot of people

Starting point is 00:52:16 that argue that it's not a good thing. But, you know, in their eyes, I'm not certain they even know what they're doing sometimes. Or maybe it's become, as we've talked about privately, it's become such a habit. that it's just reflexive, right? They're just seeing a certain problem and they're dealing with that in a reflexive way in order to help bring the system back to midline, if you want to say from that standpoint. That's great segue into my next question. What is a common misperception about the brain? One thing that I think is commonly misconceived and I've had conversations with people about this in the past is the idea that we only use 10% of our brains.

Starting point is 00:53:03 It's pretty fascinating to think that the human brain has so much untapped potential. Our brain represents essentially 3% of our body's weight, and it uses 20% of our body's energy. So it's an incredibly active organ. To think that at any given moment, we're utilizing such a small portion of our brain, I think, is silly and it's been disproven. And John, you are talking about the conscious axis. We only have conscious access to 10%. But in the background, the subconscious mind is literally running around the clock. But it's not filtering everything up to the conscious mind.

Starting point is 00:53:41 Is that a better way to frame it? That's a great way of thinking about it. There's so many processes that are going on, right? I mean, just think, you know, when we're out walking and, you know, at the same time, we might be listening to music and we're also, you know, trying to observe the environment that's all around us, you know, at any given moment, which aspect of that is consciously accessible to us, right? Well, it depends, again, on what part we are focusing on. At any given moment, are we focusing on the music we're listening to or the podcast or are we focusing on our cadence or, or, are we focusing on our cadence or, Are we focusing on beautiful rainbow in the sky, right? Perfect example is today I had to run out to this place and get a sandwich, which I really like the sandwiches here. And I'm in my car.

Starting point is 00:54:40 And when I'm in my car, I'm listening to audiobooks. Like, that's just what I do. Well, I got this sandwich and I sat down in the car and I was like, you know what? I'm not turning on the audiobook. I'm not turning on music. I'm going to sit here and I'm going to eat my sandwich before I go anywhere. because I want to enjoy the sandwich. And I knew that if I turned on the audiobook,

Starting point is 00:55:00 I would have eaten the sandwich and not even realized or tasted it or anything. It would have just been done. And all I would have heard was the book. So it's a perfect example of what you're describing. Yeah. And I think when you talk about that, what it really brings up in my mind is this whole idea of mindfulness and meditation because this has become something that's been studied quite a bit in the last.

Starting point is 00:55:25 number of decades. I mean, obviously, the practice is something that's been around for a long time, right? But being more present and actually being more aware of all the sensations that we're exposed to is, you know, something really interesting to think about, especially when we look at the topics that we've discussed so far, you know, and are conscious and subconscious because you wonder how much would that alter every single day if we've trained ourselves to be hyper-focused on particular things that we're doing and not be distracted by what's going to happen in the future or what's going to happen in the past. I mean, you think about, I can't tell you how many times I've gotten to the shower

Starting point is 00:56:12 and then got to where I thought I was done and then thought, did I wash my hair yet? You know, I mean, it's the same exact thing. And, you know, I don't have a lot here, but, but, you know, it's the same exact thing that you're talking about with regard to the sandwich. I've had that happen to me so many times. I'm just, I'm with you on that. That was a perfect analogy because I can totally relate to that one. Getting back to this whole idea of us utilizing only 10% of our brains, I think, you know, even from an evolutionary standpoint, I think it would be a pretty terrible idea in my mind to spend so much time and energy growing such a large brain if it wasn't.

Starting point is 00:56:49 used, right? I don't know. I mean, I hear people say that. You know, a lot of it has been perpetuated by movies like Limitless with Bradley Cooper back from, you know, 2010, 2011, whatever it was. But that's one of the common misconceptions that I think I hear from a lot of people that don't know a lot about the nervous system. John, I know you looked into a really interesting study of probiotics, and I think it really highlights an interesting aspect about the brain. Could you please talk to us about that? They're obviously a supplement that you hear people talking about quite a bit. It's no surprise, I think, to most individuals that gut bacteria can influence gut health.

Starting point is 00:57:30 But it probably comes as more of surprise that they might have a profound influence on the brain and our behavior. Because they're finding this incredible connection between the gut and the brain. It's been known for a long time that there's, you know, a significant component of the nervous system that's found. in the gastrointestinal track, but they're finding a lot of links with the central nervous system. Parkinson's disease is a neurodegenerative disorder that affects neurons that produce dopamine in the substantia nigra in the midbrain. And scientists appear to have found a link between Parkinson's disease and the gut. Misfolded proteins called Alpha Synucleon are the primary hallmark of Parkinson's disease. And these proteins, what they do is they clump together and

Starting point is 00:58:20 they destroy dopamine-producing cells in the brain. And the destruction of those cells causes all the different symptoms that we see, such as tremors with Parkinson's disease. There was a study that was done a little while back in the journal called Neuron, which showed a model of Parkinson's disease. And what the researchers did is they injected that protein, that alpha synuclion protein into the muscles in the mice's gastrointestinal tract. And in the experiment, these clumps traveled from the gut to the brain through the vagus nerve, which is cranial nerve 10. And within a few months, the mice developed symptoms that mirrored Parkinson's disease in humans.

Starting point is 00:59:07 It's incredible. And after these studies, some researchers have begun asking the questions about whether, pre or probiotics might help to avert Parkinson's disease. And they've done some studies with roundworms, a roundworm model that basically suggests that this theory might be worth pursuing. So really fascinating stuff. So let me ask you this on the stomach. So we have all this gut bacteria, which is just fascinating in itself because they've got their own genome. And I mean, there's trillions of them, right? The different bacteria that is helping the, you know, digest the food. And so then they're breaking down the food and then as the food is passing through

Starting point is 00:59:50 our gut lining, mucosa, your spinal cord, which also has gray matter, the neurons down there in a similar geographical area as your stomach is conducting sensing. It's making subconscious decisions as to the secretion in your stomach. And so I guess I get frustrated when I hear there's five senses. Because I think about all the sensing that's happening just in your stomach alone, and then it's hitting that neural net that's down there in your spinal cord and then making all these types of decisions. And it's all outside of our conscious access. I just find it fascinating. It's crazy. Yeah, it's incredible. And as I'm sure you're aware, I mean, all the way up and down our spinal cord, we have gray matter. And so there's a lot of reflexive loops that are going on

Starting point is 01:00:40 there that are, you know, receiving this information and then sometimes just sending information right back out on how to deal with that information that's coming in. So tell us a really cool story about the brain. Like one of the coolest stories you've ever heard because anytime I read a book that's like, I uncover a really neat or interesting story that I just had never heard and it just fascinates me. So as a person as well read as you are on this topic, I'm kind of curious what one of the neatest stories is that you've got?

Starting point is 01:01:11 I don't know why this story kind of sticks out of my head. I don't know. I just think the whole idea of these, they're called mirror neurons, is just so fascinating to me. There's a story that I've talked about in one of my lectures in the past, and it revolves around a physician from Mass General Hospital in Boston. His name is Joel. And he has a condition that's called Mirrenor.

Starting point is 01:01:40 touch synesthesia. And it's basically the ability to feel other people's touch, pain, and emotions as if it was happening in his own body. So if Joel sees someone scratch their head or frown or sees someone else get punched in the arm, he feels it. It's incredible to think about that. It's almost like he's hyper empathetic. If Joel is injecting a person with something, he feels a sensation of the needle going into his own arm. If he sees someone with an amputated arm, he feels a sensation or feels as if he also has an amputated arm. And, you know, to take it a step further, he feels other people's emotions too. So, you know, have almost like this ultimate form of empathy. And the interesting thing about it is that we all experience another

Starting point is 01:02:37 person's world to some extent in our lives as well. I mean, I can just think of any number of situations where this phenomenon has happened to me, you know, when I've taken my kids out for ice cream or whatever. But we have our mirror neurons to thank for those responses. And these are neurons that are found in a number of different regions in the brain. And they help us to act in the same way as Joel. But the difference is that most of us receive veto signals from other cells that help to dampen the mirror neuron activity and allow us to distinguish what's happening to us versus what's happening to someone else around us. And when I think about this, you know, I think like I was saying, you know,

Starting point is 01:03:23 when I go and have ice cream with my kids, let's say I opt out and having ice cream. And my, my child is sitting there, you know, eating a delicious bowl of ice cream from some ice cream shot that we decided to go to. You know, I'm sitting there and I'm observing them eating it and I'm understanding that particular action. And I mean, I've caught myself actually almost imitating, taking that scoop ice cream and putting my mouth like I see them eating it. I have my mouth open like, you know, I'm going to do it myself, right?

Starting point is 01:03:52 But yet we're able to kind of reduce that activity from those mirror neurons and allow us to say, no, that's not me, that's my child eating the ice cream. Whereas in this patient's case, you know, in Joel's case, he can't do that. And so I don't know. I mean, like you said, there's a lot of different examples out there of really, really cool studies. You know, I'm sure you're aware of the patient Eugene or he's known as EP who had the lesion from viral meningitis he had in his central nervous system that it basically knocked out a portion of his meteorological temporal lobe and he was no longer able to create new memories or have any short-term memory. This is a guy who's been studied to no end in neuroscience, but it actually further illustrates

Starting point is 01:04:47 the whole idea of the 10% portion of our brain that's being used. Because, I mean, if you have a small little area in our brain that when it gets knocked out, it has such a profound effect, I mean, I think it really speaks to how powerful all these little tiny areas are in our brains. And so in Eugene's case, this patient that had this spiral encephalitis, I mean, it drastically changed his life to the point where he had breakfast in the morning. He wouldn't remember. So he'd have like five, six breakfasts, right? It's interesting. I read a study, and the person was talking about criminals and people who just do just the most heinous crime.

Starting point is 01:05:29 And the person who was being interviewed, they were asked, well, what's the common thread amongst these people? And the common thread was that they lacked empathy, that they had no empathy for anybody other than themselves. So I find it really interesting, your first comment there about the mirror neurons and how, forget the person's name that you had mentioned, but basically he was overly empathetic. And it almost seems like maybe there's some type of neurological condition for some of these folks that are, you know, serial killers and whatnot, that they have literally no mirror neurons.

Starting point is 01:06:03 Like, it's being dampened so much that they don't have any type of mirror neuron response. Fascinating, though. You wouldn't be hard pressed to find that a lot of these individuals that are having this lack of empathy, they most likely had some kind of stressor early in life, some traumatic event that significantly impacted them. And so, again, it probably impacted them so much that. subconsciously, like you were saying, their empathy was dampened significantly to the point where they can do things that blow you away and you would think to yourself, how could anyone

Starting point is 01:06:42 do that? But for them, it doesn't seem like it's a big deal. And then we get into reflexivity again, so what they don't have conscious access to is just further reinforcing that lack of empathy. Exactly. John, if someone's found this conversation fascinating, they want to learn more about the brain, could you point to two or say three books? Well, honestly, I think one is self comes to mind. You know, I think Antonio Damasio's book that I recommended to you is a fabulous book to read.

Starting point is 01:07:14 You know, as we talked about, it's incredible from a biological standpoint, but yet it has so much applicability to the macroeconomics like you discussed. Stan DeHane's book that you basically opened up our conversation with is another, it's mind-blowing. I mean, it's an incredible book. There is so much to kind of think about as you kind of go through that book. And then, you know, another one that I really enjoyed is the brain that changes itself. It's by an author, his name is Norman Doidge, I believe. and it touches on a topic in neuroscience called neuroplasticity.

Starting point is 01:07:59 And I think it's a really fascinating area. There's been a lot of study on it and kind of essentially overturns a very old idea that our brains are immutable. So I think those three are a great start for people that may find this stuff interesting and kind of want to delve in more to it. All right, John, I know you don't have a website, but you are active on Twitter. and you are posting about things brain related, also investing related. So give people the handle of your Twitter account. And we'll also have a link to that in the show notes. My Twitter handle is at Newt Dog.

Starting point is 01:08:39 That's K-N-U-T-D-O-G-G-19. And my username is John Gault. Well, John, we really appreciate having you on the show. And this has just been a really fun conversation for us. us and hopefully we have an opportunity to do it again in the future. Gosh, I would love it. I had a great time and I really appreciate the opportunity to sit and have these discussions with you guys. All right, John, thank you so much. And for everybody else, we'll see you guys next week. Thank you for listening to TIP. To access our show notes,

Starting point is 01:09:12 courses or forums, go to the investorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP321: Investing & The Brain w/ John Gald (Business Podcast)

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