The lizard brain extrapolates from the past and applies it to the present. You think you have found a reliable relationship between two factors, so that when the Federal Reserve decreases the gold supply you go out and buy gold-mining companies. You think when a company’s share price is going up it will continue to go up.

I have had the opportunity to talk with some great investors—Paul Tudor Jones, for one. He had a handwritten sign over his desk that said “Observe that the blade of grass that resists the lawn mower gets cut down, while the blade that bends remains uncut.” I took that as his reminder to control the lizard brain. The right course requires us to swallow our pride, take a loss and move on. Those who appear to have a knack for timing the market actually have figured out that others are reacting with their lizard brains and they have to be one step ahead, going short when everyone else is long. In that sense, trading is a zero-sum game.

Precisely because people buy when markets are rising, they themselves push asset prices to the point that returns must stop rising and disappoint us.