Did you know that it is the default settings of our brain that often drive us—despite past experiences—to do things that make no logical sense, though they make perfect emotional sense?
That, however, does not make us completely irrational; it makes us human.
As consumers, for example, we routinely escalate our purchases, hoping that new stuff would make us happier because “This time it would be different.” But sadly the feeling is—the same as before—only temporary.
Still, we expect the next car, the next house, or the next promotion to make us happy—even though the last ones didn’t, and even though others keep telling us that the next ones wouldn’t.
Why don’t we learn to avoid these mistakes in the same way we learnt to avoid warm diapers? If practice and coaching can teach us to keep our pants dry, then why can’t they teach us to predict our emotional responses?
Unfortunately, those emotional circuits deep in our brains make us instinctively crave whatever feels likely to be rewarding and shun whatever seems liable to be risky.
Moreover, the fact that the least likely and most extreme experience is often the most likely memory can wreak havoc with our ability to predict future experiences. Exactly that tendency of our adapted brain—to recall and rely on unusual instances—is one of the reasons why we so often repeat mistakes.
That of course is good to know; nonetheless, knowing the right answer and doing the right thing are miles apart.
So, what can we do to escape the emotional trap that is set up by our biased brain?
Well, we could check out the right ways of how Money Can Buy Us Happiness.
And this scientific finding might be useful as well:
One key to changing the adaptation process would be to interrupt it.
People would suffer less when they do not disrupt annoying experiences and would enjoy pleasurable experiences more when they break them up.
For example, test candidates mentioned that they would pay twice as much for the same but interrupted massage in the future. Or, one could get more “happiness buying power” out of one’s money, if one limited the purchases, took breaks, and slowed down the adaptation process.
On the other end of the spectrum, it would be better not to take any breaks when tearing off that super adhesive band-aid from your skin.
Talking ourselves out of irrational and dangerous judgments/decisions remains our responsibility and cannot be delegated—clearly another area where we have to take care of our own business, where we have to Tacomob.
How do you ensure that you learn from your money mistakes?
Do make us richer (at least in knowledge) and share with us your secrets in the comments section below.
“Emotions are great, the spice of life, but don’t let them rule your decision-making process. Don’t just feel, think!” — Guy P. Harrison
“If you are supposed to learn from your mistakes, why do some people get married more than once? Because of the triumph of hope over experience.” — Samuel Johnson (back in 1791)
“A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.” — John C. Maxwell
“Stock data is always different this time. Valuation metrics are always different this time. How the economy grows is always different this time. But human emotions—greed, shortsightedness, overconfidence, extrapolation, and overreaction—are timeless. They’re never different this time.” — Morgan Housel