CFI Blog

Monkey Brain’s Common Weapons

If you haven’t read the first article in this series, Answering the Question Why About Your Money, I recommend you read that first.

In this article, we’re going to explore some of the most common psychological biases that people face and go through some exercises to prepare you for the times when Monkey Brain throws his bananas out of his cage.

In the last article, we went through the results you desire in your life, why those results are important to you, and why you weren’t achieving those results. If you had a little voice in the back of your mind telling you “But I can’t do this,” then you heard Monkey Brain prattling on. Monkey Brain loves throwing out limiting scripts, keeping the status quo, and going for long walks on the beach (OK…I made the last one up).

A Refresher on Monkey Brain

A Refresher on Monkey Brain

The reality is that parts of our brain simply aren’t adapted for modern-day living. They worked fine when we were chasing wooly mammoths and living in a cave. When fight or flight was a legitimate response to the threat of being eaten by an animal much larger than us, our limbic system, or Monkey Brain as I like to call it, was perfectly matched for the job.

However, over time, as we became more cultured, learned how to farm, settled down, got civilization, and gained an appreciation for the finer things in life like Gangnam Style, a different part of the brain took center stage. The cerebrum is the part of the brain that we use to think with. It thinks rationally, logically, and coolly, and considers the future. Our cerebrum is what enables us to be different from the rest of the animal kingdom, or, as some would put it, an evolved species.

Monkey Brain didn’t like being forced to take a back seat. Putting seeds into the ground to have food later wasn’t fun for Monkey Brain, who wanted to eat all of the seeds now. Drying meat to eat when meat wasn’t plentiful meant that Monkey Brain couldn’t gorge at the fresh kill buffet today. Being put (literally) in the back of your mind – the limbic system is physically behind the prefrontal cortex in our heads – means that Monkey Brain has had to be more cunning in his efforts to get his way.

Let’s take a look at what’s important to Monkey Brain so that we understand the signals he sends us in an effort to get his way and lead us off course in our long-term planning efforts.

  • Monkey Brain wants fun now. “Eat, drink, and be merry, for tomorrow we die” may be attributed to Epicurus, but it was scribed by Monkey Brain. Back in the days of yore, that may have been true, since we probably didn’t know where the next meal was coming from. However, now, it’s not such a primary issue. Since we rarely got old way back when we didn’t really care about ensuring we could make it to old age. Now, we have to consider old age, a place Monkey Brain doesn’t want to go.
  • Monkey Brain wants to avoid pain. I’m not just talking about hand-on-the-stove pain here. I’m also talking about mental pain. We occasionally do things that don’t cause physical pain but light up the same pain receptors in our brains. A good example is the use of cash versus the use of credit cards. When we pay in cash, we fire up those pain receptors, causing Monkey Brain to scream and run to the back of the cage. When we pay with credit cards, we don’t fire up those receptors. Guess what Monkey Brain’s answer is when asked “cash or credit?” at the store?
  • Monkey Brain doesn’t care about the future. Again, because we likely weren’t going to be around in the distant future, Monkey Brain never contemplated it. No point in thinking about something that probably wasn’t going to happen, like being alive 40 years in the future. Now, though, we have to think about our futures, which means taking away from current consumption to fund our future needs, which drives Monkey Brain bananas.
  • Monkey Brain thinks he’s better than anyone else. Monkey Brain is the smartest, funniest, best-looking monkey around. He has never met something he can’t do better than anyone else. He is the epitome of a Stuart Smalley pep talk – he’s good enough, he’s smart enough, and gosh darn it, people like him. He knows what he’s doing and doesn’t need anyone else telling him what to do.

If you have ever told yourself that you’ll just sneak in a little dessert today and it’s not that bad for you or that you have only had a couple of desserts this week, then you have fallen victim to Monkey Brain’s siren song. He likes to tell you “Just this once” or “We can deal with that later” whenever you’re faced with a decision that involves some sort of sacrifice of current pleasure for future needs.

Psychologists don’t like to use the term Monkey Brain. It’s not politically correct. People really don’t want to be compared to monkeys, and they certainly don’t want to be told that they have the brains of monkeys. So, psychologists use terms like “biases” to describe what’s happening when Monkey Brain tries to get his way.

Let’s look at some of these biases.

Know Thy Enemy

Selection bias

Selection bias occurs when we pick one random event out of the past and use it to justify our future actions. Let’s take slot machines as an example. If you’ve ever been to Vegas, you’ve probably seen people who sit down at a slot machine and go through some sort of weird ritual, rubbing the machine, saying something, and uttering prayers to the casino gods before they actually push the button to make the machine work. Most of the time, the slots spin, and nothing happens. Lather, rinse, repeat. At some point in the past, though, the person going through this ritual probably did the ritual and won some money. That person remembers the ritual, associates the ritual with the win, forgets about all of the times that the ritual didn’t work, not to mention the mathematical laws of probability, and continues, like a robot, to go through the rituals, which have absolutely nothing to do with the chances of winning on the next spin. This is selection bias at work.

You are most likely to see selection bias in your life in your investments. Unless you’re a savant-like Warren Buffett, you probably have had up years and down years in your investment portfolio. However, if you had a particularly good year or had one investment that worked out really well, then you’re much more likely to remember that particular investment more than any other. It was the best one, and it sticks out in your mind. Never mind all of those other years and investments which didn’t go quite as well.

The best way to overcome selection bias is to intentionally question yourself. Ask questions. It’s the 5 Whys again!

To better identify where selection bias is occurring in your life, let’s do another exercise. This time, list out where in your life you think you might be falling victim to selection bias – where you’re letting one remarkably memorable outcome color your perception of what’s truly happening in your life, and also to identify what information you’d need to either justify your belief or to come to grips with truth and not Monkey Brain’s version of the truth.

Where’s the Selection Bias What Information Do I Need

Confirmation bias

Have you ever noticed that you tend to hang around with people who have the same opinions that you do? It’s because you’re so brilliant and your ideas are right, isn’t it? Sometimes this might be the case, but oftentimes, it’s because we’re looking to avoid what is called cognitive dissonance. Our brains have a view on how the world works, and when we’re presented with information which contradicts those views, then Monkey Brain gets in a snit.

Since Monkey Brain doesn’t like to be in a snit, he will seek out opinions which validate his own and avoid ones which challenge his view. When presented with an opposing viewpoint, even if it’s a valid one, Monkey Brain will come up with a reason why that view is wrong. How many times have you thought “yeah, that worked for [NAME OF PERSON], but it won’t work for me because [INSERT REASON HERE]”? How often are those reasons actually valid instead of being excuses and limiting beliefs because accepting them might cause us to have to change how we think about the world?

Even if we see information which would otherwise cause us to change our minds, we can let Monkey Brain play spin doctor and manipulate that information in a way which keeps us from changing his mind. Once our neural pathways are built, Monkey Brain doesn’t like to change them.

How can we fight confirmation bias? By critically thinking about all information which is presented to us. In line with this, it helps to try to place yourself in the shoes of the opposing viewpoint to see why they might think the way that they do. Ask yourself “in what situations would this opposing viewpoint be true?” You may find that there are more situations than you think.

It’s time for another exercise. Think about situations where you may be subjecting yourself to confirmation bias – where you have an opinion which is being validated because you’re only considering information which supports your opinion. Then think about what information you’d need to determine what you should truly think – whether you’re right or need to change your stance.

Where’s the Confirmation Bias What Information Do I Need

Status quo bias

As I mentioned, Monkey Brain doesn’t like having to rewire his circuitry if he can at all help it. Because of this inherent brain rewiring laziness, he will fight tooth and nail to prevent change in his life (unless it means more of the good stuff like all the chocolate he can eat and adding more TVs to the man cave). Because of our desire not to change, Monkey Brain will convince us to make decisions which cause the least amount of upheaval in our lives.

“It’s always worked before,” you’ll tell yourself when faced with a decision about whether or not to change your habits. Even if it hasn’t worked in the past, you’ll tell yourself that whatever it was that you were doing was right, and that other factors caused results you weren’t expecting. Why change a good thing, and if it ain’t broke, don’t fix it. To prevent us from having to change, Monkey Brain will tell you that the alternative is worse, no matter what. Unquestionably, undeniably, irrefutably worse, even if it’s actually a better alternative.

One of the biggest reasons that we fall victim to status quo bias is that we have limited mental ability to make decisions. Once we’ve had to think about enough decisions, we exhaust our brainpower and mental energy and revert back to routine. Sometimes this is good; once you build a habit, like brushing your teeth every morning, you do it by rote and don’t have to think about it. However, when this routine causes us not to improve ourselves, status quo bias can drag us down.

A good example of status quo bias in action is when you get bad service at a mega bank. You know that the credit union offers just as good terms and probably has better service, but you tell yourself that it’s too much of a hassle to change banks, making a mountain out of the 15 minutes of work molehill involved in changing banks.

Now, it’s your turn. Identify five areas in your life where you’ve succumbed to status quo bias and what the alternative outcome could be.

Where’s the Status Quo Bias What is the Alternative

Loss aversion

Let’s say that you’re offered a coin flip. Heads, you win $100, and tails you lose $100 (not that you’d take such a bet, but let’s just pretend). The coin comes up heads. You win! Yay! Now, you’re offered a second flip: heads, you win $201, but tails, you wind up back at $0. What does your gut tell you to do? Take the money and walk away is the most likely answer.

Now, let’s revisit that first scenario, except this time, tails came up and the sad trombone music played. This time, you’re offered a second coin flip: heads and you’re back to $0, and tails, you’re down $201. What does your gut tell you to do? Most people will take the second coin flip to try to get back to zero.

Loss aversion is the phenomenon where we become risk averse to avoid losing, but if we’ve already lost and are trying to catch back up, we’ll take even more risk so that we can get back to break even.

The most common ways that loss aversion affects us involve our investments. We will put money in CDs at far too young of an age because we don’t want to lose the money, even though, if we frame the decision differently and think about retaining purchasing power, we’ll realize that we’re in a losing situation. We sell our winning investments to be able to say that we’ve booked a gain on the investment, but stick to losing investments far too long because we want to avoid saying that we took a loss on the investment.

The way to fight loss aversion is to think about sunk costs. The concept of sunk costs means that you don’t think about how much you’ve already spent. Act as if you’ve spent zero money on something and then ask yourself this question:

Would I put more money into this investment?

If the answer is yes, then don’t sell what you have. If the answer is no, then sell what you have.

Negativity bias

Bad news sells advertising and keeps eyes glued to the TV sets, the websites, and (decreasingly so) the newspapers. As I mentioned previously, even though Monkey Brain thinks he’s omniscient and omnipotent, we really do have limited mental processing capabilities. Rather than process every piece of information which comes our way, we focus on what stands out. Bad news is synonymous with danger to Monkey Brain, so he pays attention to the bad news and remembers it long after he’s forgotten the good news.

About to go on a flight to DFW? You probably think about the one time in 1986 that wind shear caused a crash of a Delta plane and suddenly start tensing up as the plane makes its approach to the runway. If you were bitten by a dog as a child, you probably have more fear of dogs than the normal person, even if the dog is well behaved and friendly.

Sometimes this negativity bias causes us to take action which we wouldn’t otherwise (and probably shouldn’t take). When we see news that the stock market is down, we sell all of our investments, forgetting about the days when it’s up, and keeping us from participating when the market rebounds. When we see news about unemployment being up, we start to panic about our jobs, even if we have no indication that our jobs are in danger. When we hear about the Chinese economy, we start buying gold bars because pretty soon the U.S. dollar will be worthless.

The answer for how to fight negativity bias is pretty simple. Stop watching the news. If there’s something truly important in the world that’s happening, you’ll find out. News organizations tell you that news affects you because they want you to watch it so they can sell ads. They’re wrong. Let someone else worry about the news.

The list goes on. Your next exercise is to make a personal list of where negativity bias is affecting your life and how you should be reacting (or not reacting) to negative news.

What News Am I Paying Attention To How Does This Really Affect Me
Mental accounting

Monkey Brain wasn’t particularly good in math class. He likes small numbers with few calculations. Because of this dislike of math and because he wants to sneak in purchases without you knowing or realizing what he’s doing, he comes up with all sorts of convenient categories for your money rather than treating it as one pot of money from which you do all of your spending, saving, giving, and investing.

The most common place where this happens is when we spend with credit cards. According to Monkey Brain, credit cards are a different type of spending, so the rules don’t apply with them. Plus, the Future You can deal with the credit card bill. Monkey Brain doesn’t have time for bills when there are man cave activities to attend to. We’ll also still carry a big emergency fund when we have a bunch of high interest credit card debt even though we should be paying off that debt first rather than worrying about the emergency fund.

Another area where we see mental accounting is in tax refunds and bonuses. We treat those differently than we do our normal paychecks, even though it’s all money which goes into our accounts.

We also see mental accounting happening quite a bit when couples use separate checking accounts rather than joint accounts because one doesn’t like the scrutiny of being told what to do with “his” or “her” money rather than “our” money. So, we create mental accounts which say that certain accounts are for bill paying and certain accounts are for spending.

Furthermore, research shows that we spend more money when we have multiple accounts than we do when we have one account.

The way to overcome this is to think about all money as one great big pot. Combine multiple checking accounts into one account except in creating a side account for budgeting irregular expenses like Christmas shopping, which we’ll talk about in a subsequent article. No matter what label you put on the money, it all contributes to your net worth and your spending reduces your net worth. It’s all money, no matter what label you put on it.

Now, we’ve seen Monkey Brain’s favorite weapons that he uses to try to get you to live the hedonic lifestyle today and worry about paying for it tomorrow, regardless of the financial hangover that it might cause.

Related articles:

The next article in this series is Money Comes and Money Goes.

Author Profile

John Davis
John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.

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