Book review and giveaway: The Secret Language of Money

Posted by on October 13, 2009 in Uncategorized

How we react to many day-to-day situations is instinctive. When we run for the bus, our body sends oxygen to our legs. If we feel stress, adrenaline is produced to bring about a fight or flight response. If we disinterested in the conversation at hand, we cross our arms and avoid eye contact. Given that much of our day-to-day existence is hard-wired by instinct, does it stand to reason that our financial decisions are often unconscious and driven more by chemicals than economic data?

The study of neuroscience into our decision making, especially in the personal finance context, fundamentally opposes the traditional economist’s assumption that economic units (individuals, groups, businesses, government) act rationally. Instead, even if it were possible to strip out personal experience from our decision making process, behavioral theorists would argue that our “reptilian brain,” the oldest part of our brain concerned utmost with self-preservation, would over-ride the rational part of our brain if you allow it to. The result is often short-term decisions without any rational basis other than for us to survive to live another day.

This all makes for some fine academic debate but how does this help you?

David Krueger and John David Mann’s book The Secret Language of Money attempts to boil down hard science into an action plan to deal with money in a constructive and healthy manner. Part science text for the masses and part work-book, the authors enlighten readers by first discussing what meanings we abscribe to money (love? power? freedom?), build upon this base by outlining how many of our decisions are not rational and, recognizing¬† our irrationality about money, sets out an action plan on tame ourselves.

Does the Secret Language of Money give you the secret sauce to success? The answer is no simply because the underlying assumption to the question is incorrect.¬† A silver bullet solution would presume that one step could wipe out a life-time of meaning given to money or to over-come centuries of human instinct. What the authors recommend instead is “story busting”: a conscious examination of why we do what we do and using self-reflection to make decisions consistent with what we want rather than allowing ourselves to be in the comfort zone (as an added bonus, a study which subjected its participants to changing their daily routine consciously- think of the Seinfield episode “The Opposite”-¬† resulted in the participants losing weight even though the study was about changing routine and not weight loss).

The book succeeds by reproducing a pattern popularized by Malcolm Gladwell; find social science studies, summarize it concisely and draw a lesson from it. The authors one-up Gladwell by proposing possible solutions (true to his journalist training, Gladwell likes to explore the problem more than provide the solution). If nothing else, many of the studies poke yet another hole into the assumption that highly-educated managers of money have an inherent edge over you and I; in the first chapter, the authors tells of a study conducted at Harvard where investment specialists and economists bids over the face value of a $20 bill repeatedly.

If you are not a big believer in money/life coaching, certain sections of the book, filled with personal reflection by the authors’ clients, may feel a bit like an Oprah episode. The target audience is not the folks who wake up and read Standard & Poors’ reports; rather, the approach is much softer. Thus, be forewarned. Having said that, this is an eye-opening read for all investors.

Michael James on Money and Million Dollar Journey have also recently review the book.

FREE STUFF! If you have not won in either of their giveaways, I have one copy to give away (the 2nd copy was awarded as part of my 500th post). All you have to do is provide a comment to this post by the end of this week. Good luck.

18 Comments on Book review and giveaway: The Secret Language of Money

By Caitlin on October 13, 2009 at 8:36 am

Thanks for the review! Please count me in.

By Tom on October 13, 2009 at 8:44 am

As always, excellent post and this sounds like an interesting book. Keep up the good work.

By Brian C on October 13, 2009 at 8:50 am

Try try again! Pls count me in!

By Nick on October 13, 2009 at 10:51 am

Please count me in for the draw! Thanks!

By Sanjeev on October 13, 2009 at 11:06 am

Count me in

By Lulu on October 13, 2009 at 11:19 am

I would love to win this book (and will then pass it on from my blog) as I love getting new insights on financial management. Please enter me in the drawing!!!!!!

By Jordan Bryant on October 13, 2009 at 11:32 am

Good post

By Mike on October 13, 2009 at 12:31 pm

crossed fingers

By Erick on October 13, 2009 at 4:23 pm

Sign me up!

By viennatech on October 13, 2009 at 5:00 pm

looks very interesting! please add me to the list.

By David on October 13, 2009 at 7:51 pm

Sounds like an interesting read.

By dirtbikenut on October 14, 2009 at 1:44 am

Great post! I currently am not happy with how my financial advisor is managing my investments so I am hoping this book will help me understand my relationship to money and how to improve on my personal investments and general use of that “green stuff”.

By Tony on October 14, 2009 at 12:19 pm

Count me in!

By Allison on October 15, 2009 at 10:49 am

With more and more people switching to self-directed investing, informative books like this one will be INVALUABLE for us to understand how to invest wisely!

By Tony Paskell on October 15, 2009 at 11:06 am

I’m currently working on a spreadsheet that attempts to redress some financial problem areas mentioned in the above article and comments. So I’d appreciate getting the book.

By Marianne O on October 15, 2009 at 11:52 am

Thanks for the review and an enjoyable blog. I’m in.

By Lisa Hallman on October 17, 2009 at 12:12 am

This book seems unique and I’d love to take a good long read at it. :P

By Pacific on October 20, 2009 at 7:01 pm

I want to say “I won!”

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