OUR SHORTER, HAIRIER ANCESTORS

were equipped for running from predators and clubbing prey, not managing investments. We've lost much of the fur (some more than others) since then, but our biological tendency is still fight-or-flight, not fight-or-dollar-cost-average. Michael Mauboussin, chief investment strategist at Legg Mason Capital Management in Baltimore, finds more insight into the investment world in these evolutionary vestiges than he does watching CNBC for an afternoon.

In his new book, "More Than You Know: Finding Financial Wisdom in Unconventional Places," Mauboussin casts his net wide, finding bits of wisdom in everything from the behavior of slime mold to horse racing that can be applied to the investment world.

Mauboussin is a firm believer in a multi-disciplinary approach to learning about investing. That's probably why his book reads like a cross between a stock market manual and the Discovery Channel. "You have to think across disciplines to deepen your understanding of how things work," he wrote in his introduction. "Cross-disciplinary collaboration will provide the deepest insights into the workings of companies and markets."

For example, Mauboussin titles one essay in his book, "Why Zebras Don't Get Ulcers" (so named after a book by neurobiologist Robert Sapolsky). In it he draws a parallel between them and human money managers based on evolutionary science, psychology and brain chemistry. He posits that a loss of predictability and control in the markets causes money managers psychological stress. And like a zebra responding to a hungry lion approaching, managers' reactions are short-term oriented instead of maintaining a longer horizon the zebra's version of a quick escape. And that, he wrote, "can lead to suboptimal portfolio-management decisions."

Here are more lessons for investors from what Mauboussin terms a "consilience" among disciplines.

SmartMoney.com: Can you explain your cross-disciplinary approach to thinking about investing?

Michael Mauboussin: What the book is really about is a celebration of the idea that to really become a successful investor, or a successful businessperson or even a successful person, it's important to not only look at your own discipline, but to look beyond that at other disciplines and learn from them. That can give you a broader framework to help you make better decisions. If you're reading the same stuff and listening to the same programs as everyone else in your industry, more than likely [you won't get anything new out of it].

SM: You write in your book that if all investors were long-term oriented, the market would suffer a "diversity breakdown" and hence be less efficient than today's market. Why?

MM: First of all, for markets to be efficient, you need three conditions: diversity of investors, aggregation (a market), and incentive (monetary would be obvious, or something like reputation). Diversity is the one that gets violated the most. Diversity can be characterized in different ways: It could technical vs. fundamental investing, growth vs. value, long term vs. short term. Diversity is one of the keys to thinking about market efficiencies. Inefficiencies arise when we all act in concert with one another.

SM: What's really happening when market action causes investors or money managers stress?

MM: It's timely today, given the swoon we've had in recent weeks in the markets. Here I lean on Robert Sapolsky, a neurobiologist. He makes the point that stress happens in the animal kingdom. All your stress mechanisms come out if you're an animal, say, if you're a zebra and you're going to be attacked by a lion.... If you elude your threat you settle back down to stasis. For human beings, most of our stress is not physical, it's psychological. It's about deadlines, money, relationships. But those things trigger the same physical responses. That's OK, too. But the main point is that we often turn on that psychological stress and don't turn it off; our bodies think it's an emergency everyday.

One of the main responses to stress is you become very short-term oriented. When you're a zebra being chased by a lion, there's no use thinking about next week. With humans, it's the same thing. A portfolio manager worries if a stock will work out in the next three days; he doesn't think if it will work out in the next three months or three years. That almost encourages one of these diversity breakdowns. In day-to-day life, you have tactics to reduce stress. So, too, in investing, when you feel that short-termism, recognize that it's a long-term process, that markets tend to go up over time.

SM: And is that, in part, the reason for the increase in turnover in mutual funds that you tracked in the last 15 years?

MM: There are strategies that are short term, like taking advantage of short-term arbitrage opportunities. And I have no problems with that. There's nothing inherently wrong with a short-term strategy. When it becomes a problem is if you suggest you're taking a long-term view and you're actually using short-term tactics. Saying one thing and doing another. Why does short-termism matter? There's a very documented phenomenon that people more active in trading incur more costs. That means lower returns for shareholders. Also, if you're operating in the short-term realm while espousing a long-term strategy, you're operating in the world of noise.

SM: What's wrong with the majority of investment theory?

MM: When you think about the development of theories, how is it done? You collect data, sort the data out, form a hypothesis, test it, seek anomalies. And based on the anomalies, you recategorize the information. I cite Clayton Christensen in the book, who says that often when we're getting going on something, it tends to be attribute-based. There are huge buckets of investing that's attribute-based. For example, low P/E is good. They're considered to be truisms. But really good theory rests on circumstances. In other words, sometimes P/E is good, sometimes it's not. It shouldn't rest solely on attributes, rather under what conditions is this true? For a lot of different reasons, the investment industry has largely migrated to an attribute-based approach I'm a value investor, I'm a growth investor.