Decling Decision-making ability - It's not age, it's disease that matters

"Age is not a disease"

Phew! The third richest man in the world, legendary (and still active) investor 82-year old Warren Buffett will be relieved. Health Brains, Health Decisions puts an important new slant on the issue of the vulnerability of seniors to financial fraud or merely self-inflicted harm from poor decisions. The study found that age per se is not the problem, as men and women in their late 70s did as well as 50 year-olds in making financial decisions. "Older decision-makers were as logically consistent as younger decision-makers. Increased age alone — from the early 50s through the late 70s — was not a key factor in predicting impaired decision-making capacity".

Note for the regulatory folks like the Ontario Securities Commission, the Canadian Securities Administrators, etc > "... policies aimed at protecting those most vulnerable to poor decision-making should focus on disease, rather than age itself, as a risk factor". To which I would add, in particular, dementia and Alzheimer's, the disease that will become more and more prevalent in seniors. Throwing a big protective blanket over seniors, 87% of whom (among those 65+) are cognitively healthy according to the National Institute of Aging as cited in the study, would be un-necessarily broad. But for the cognitively diseased segment, whether over or under 65, I would guess present protection isn't sufficient. Worsening financial decision-making is often a sign that cognitive impairment may be starting.

The study also offers a hopeful message. We can help ourselves by paying attention to and cultivating two key skills that they found improves decision-making: 1) Strategic Learning (the ability to determine and use a strategy to sift more important information from less important information); 2) Conscientiousness (being careful and organised in regard to finances). We need to exercise our brains, just like our muscles, to keep them strong.

How exactly that can be accomplished, that's not addressed, but the study authors claim so - "prior research has also shown that short-term intensive brain training can strengthen and even restore abstract thinking and strategic learning capacity in cognitively healthy adults". (Some healthy brain suggestions at The Science of Learning blog: healthy food; physical exercise; practising the activities you want to be good at, like music or, ta-da - managing your finances and investments! ... but not watching lots of TV or incessantly playing video games)

It's not just Warren Buffett as an old fart who's rather good at financial decision-making. The Forbes list of billionaires on Wikipedia seems to have a strong preponderance through the years of over 50s, 60s, 70s and 80s, all of whom seem to be vastly increasing their wealth year by year instead of frittering it away.