Minding the Markets: An Emotional Finance View of Financial Instability

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The 2008 financial crisis showed that human emotion has a critical impact on financial markets. Until now, economic theories have failed to take this into account. At the heart of the worst financial crisis in world history was a failure to organise markets in a way that adequately controls the very human emotion and behaviour which trading unleashes.



The newly established discipline of 'emotional finance', pioneered by David Tuckett, draws on principles of psychoanalysis to enable financial markets to be understood in a completely new way.



By recognising the crucial role played by unconscious needs and fears, the influence of groups and the nature of uncertainty in all investment activity, Minding The Markets provides a deeper understanding of the markets and timely ideas about how to incorporate that understanding into policies to make markets safer.



Based on candid and in-depth interviews with over 50 fund managers internationally, this groundbreaking book not only presents a fresh academic theory, but also reveals the truth about what happens in the emotionally-charged real world of financial trading.

Minding the Markets: An Emotional Finance View of Financial Instability Review

Tuckett's research takes the psychology of the financial market to a new level. He simply asks fund managers to tell their story about managing money. He sifts through them to get us to the crux of the enduring and toxic problem of all financial markets: instability.

The book is serious but it is also massively entertaining taking us inside not just the glass fronted buildings of the city banks, not just the trading room floors inside the buildings but also inside the minds of those who have our money (pensions and other investments) in their hands to invest - so long as they do so profitably.

Mathematical models of the financial markets are best at explaining the past but say little that will predict crises in the future. In the absence of predictability, these exceptionally intelligent and imaginative individuals develop 'products' and theories around these which ultimately turn out to be largely wishful fantasies which permit the illusion of certainty but also fulfill the perpetual human dream of profit without risk. The stories they invent and tell others as well as themselves are highly persuasive and imaginative and become, for a while at least, self-fulfilling -- no one can afford not to believe them. Not until the bubble bursts and 'dot-com' and 'high risk mortgages' turn from 'fantastic (cornicopic) objects' to objects of derision.

Tuckett's book is crammed full of psychological insight as you would expect from one of the world's greatest psychoanalysts. What you might not expect is the economic sophistication and the sociological scholarship. This is a book destined to be a classic and to start a complete new line of inquiry into the psyche of those trading in Wall Street or the City, Frankfurt or Zurich, Honk Kong or Tokyo. These markets work the same way because the minds that work the markets are the same: human.

A great and highly entertaining book. Waiting for the next one.

Peter Fonagy

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