“The brain you have is the brain you were born with.”
What sounds like a one-sentence horror story (at least for neuroscientists and behavioral scientists) is thankfully not true. Otherwise, we could probably expect everyone to walk & talk like a toddler – until they are 80 years old.
While it is true that most of the brain development and neural wiring happens before we are even born, it is the stimuli we are exposed to after our birth that shape those connections.
Roughly speaking, one can think of brain development like this: during pre-natal development (i.e. before birth), our nervous system makes an abundance of neural connections with the consequence of many connections being functionally redundant (only to some degree of course, though, otherwise our ears would be wired with the visual cortex). After our birth, a myriad of sensory stimuli assails our nervous system. This, in turn, causes it to evaluate which connections are necessary – and which should even be strengthened.
This phenomenon of our nervous system eliminating, reinforcing, and reorganizing its connections is called neuroplasticity. Neuroplasticity is most present (and inducible) during childhood and slowly diminishes subsequently, simply because our nervous system is still quite “unrefined” during our early years and has more potential for change.
It is very important to highlight, though, that neuroplasticity never quite disappears and enables us to learn new things and adapt to novel stimuli throughout our lifetime!
So, what does that have to do with behavioral finance, you think? Quite a lot!
It essentially means that you are not stuck with the biases, heuristics, and thinking traps influencing your financial decision making until the rest of your life, without any chance to avoid all those “money traps” out there. Next time you think that you will never understand this Finance-stuff being babbled about on this blog – think again. Rather, actively seek and expose yourself to new learning opportunities and you will start to master things you have never thought were even possible.