Self-cultivation of the Cryptocurrency Community (Part One)
As a child, I was very happy watching Stephen Chow's movies, but I realized when I grew up that he was actually portraying tragedies. He really immersed himself in (The Actor's Self-Cultivation). This book is not just a movie prop but his heartfelt voice. As a Web3 practitioner at the bottom of the industry pyramid, with capital, VCs, project parties, market makers, and exchanges above me, and lacking resources and timely information, if I do not enhance my skills and grasp some rules, it will be very difficult. The following is for reference only!
1⃣. Regarding cognition of self and human nature
Three things influence the roots of human behavior: the first is brain neurons; the second is hormones; the third is our genes and culture. There are many factors that influence human behavior. These three are the most important factors for our financial and economic decisions.
A. System 1 and System 2
If you have studied traditional economics, you should know that one of the most important assumptions in traditional economics is that people pursue maximum utility. But there is also a more implicit assumption that people have unity of knowledge and action; they will do what they want to do, at least in economic models. But I want to tell you that it is actually very difficult for people to achieve unity of knowledge and action.
Daniel Kahneman, the Nobel Prize winner in Economics, wrote a very famous book called (Thinking, Fast and Slow). In it, he mentions a concept that there are two systems of thinking: System 1 and System 2. System 1 is relatively effortless, very fast, and uses intuition to think; System 2 is more rational, uses logical thinking, and is more laborious to consider problems.
So encountering problems without independent thinking is a very common issue. Imagine in ancient times, you were walking on the African savanna last week, surrounded by many bushes. Suddenly, you see a bush move and discover that a lion is chasing you. You are lucky and escape. A week later, you go to another place and see a bush moving again. At this moment, your amygdala's first reaction is to feel fear and run away; you won't use rational thinking to consider this issue. It could just be the wind blowing, and you made a mistake. No worries, if you make a mistake, you just ran a few extra steps, which is good exercise. But think about it, if you were to use rational thinking at this moment, considering it was a different place and maybe it was just the wind, using Bayes' theorem to deduce and carefully thinking with your prefrontal cortex would take a long time. If a lion really appeared, you could be eaten.
B. What influences our ‘knowledge’
The amygdala in the brain basically controls our emotions and reacts quickly. For example, if I show you a photo, especially an angry photo, for 0.01 seconds or 0.05 seconds, you may not even realize you've seen this photo, but your amygdala will have a significant reaction, especially to the angry photo. This indicates that our System 1 may be related to the amygdala.
The second part is more related to System 2, which is our prefrontal cortex. This part is relatively late in evolution. This area is responsible for our rational logical thinking. However, thinking with this area is more laborious and consumes more energy. Basically, we find that the more social animals are, the larger their prefrontal cortex is. If this area is damaged, it becomes very difficult to make long-term plans, and it's easy to lose motivation and be satisfied with current pleasures.
C. What influences our ‘action’
Well, what we just discussed were some problems and errors that occur in the dimension of knowledge in the brain. Next, we will talk about some problems that occur in action. Earlier, we talked about the disconnection between knowledge and action. Even if you are very hungry and see prey in front of you, you know you should go hunt, but if there is a substance in your brain that is not secreted or projected, you may not go hunting. What is this substance? It is dopamine.
So what role does dopamine play? It has played an extremely important role in evolution. It is the source of our motivation to work hard. Some scientists have conducted similar experiments on gorillas, and I will share some details about these experiments.
It goes something like this: when the light comes on, the gorilla needs to work, pull the lever ten times, and then a raisin will appear, which the gorilla can eat. Later, it was found that when the light comes on, the gorilla secretes a lot of dopamine, while working, there is not much dopamine secretion; it secretes a little when eating, and can be greedy. However, the highest dopamine secretion occurs when the light comes on, and then it goes to work.
There is an experiment where a part of the gorilla's brain, the nucleus accumbens, is damaged. After the damage, dopamine can no longer project. When the light comes on, it does not secrete dopamine. At this time, it is found that the gorilla does not work hard, and it does not get raisins to eat. Of course, if the experimenter gives a raisin to the gorilla at this moment, the gorilla still likes it and shows a smile. So this experiment tells us that dopamine is indeed a motivation for us to work hard and overcome difficulties.
However, as humans have evolved to the present, society has changed too quickly. We inherently have some genetic mismatches that do not adapt well to the changes in society, leading to many judgment errors. This point was also mentioned by Charlie Munger in (Poor Charlie's Almanack) regarding human misjudgment psychology. I suggest friends trading cryptocurrencies read this first to arm their minds before entering the market.
You will find that people make many mistakes, such as the halo effect, representativeness bias, reference point dependence, blind confidence, herd mentality, loss aversion, and even the impulse to buy lottery tickets. Often, they do not even realize they are placing money in different mental accounts.