Buffett Watch

This Is Your Brain ... This is Your Brain on Greed

One hallmark of Warren Buffett's incredibly successful investment style is that he tries to keep his emotions out of it. His musician son Peter told me recently that the value of "dispassionate consistency" is one of the most important things he learned from his father .. make a financial decision based on facts and not emotion, and then stick to it.

Buffett gets a substantial mention in USA Today's review of a new book on how money, and more importantly the prospect of money, physically affects the brain. The title is Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich. The book was written by Jason Zweig, a senior writer at Money Magazine. (He's also the editor of the revised edition of The Intelligent Investor by Buffett's mentor Benjamin Graham.)

Neuroeconomics involves using brain scans to see oxygen flows that help pinpoint what "part" of your brain is responding, and how strongly it's responding, to different aspects of money and investing.  The two warring sides: the "reflexive" emotional side and the "reflective" analytical side.

The unfortunate truth: "Your brain treats potential investing profits as a broad class of basic rewards, like food, drink, shelter, safety and sex." As a result, "Making money feels good .. it just doesn't feel as good as expecting to make money" .. and that results in disappointment, time after time.  As the review's headline puts it: "Greed feels good, so watch out."

Zweig cites Buffett as the triumph of "reflective" over ""reflexive" .. recounting the story that Buffett waited 25 years for Anheuser-Busch stock to come down to a price low enough to justify buying it.

Questions?  Comments?  Email me at buffettwatch@cnbc.com