The factory default settings of the human brain were essential in the past to secure our survival.
In modern times, however, that inner con man plays tricks on us that can end quite costly.
Most of us have a good reputation with ourselves. You associate all of your financial successes with skill, but all your financial failures with bad luck or the “unfair” market. Rather than admitting and learning from your mistakes, you ignore them, bury…
This is the tendency to avoid taking an action due to the fear that—in hindsight—it will turn out to have been less than optimal. Like leaving money in a bank account, rather than putting the cash in an investment with…
Have you also observed that many people behave as if not all dollars are created equal? By assigning relative values to different moneys that in reality have the same buying power, they run the risk of being too quick to spend,…
What kind of treadmill is that? You say, “I know only the treadmills from Horizon, Epic, and Lifespan.” Like so many of us, I am quite sure that you have spent some time on the Hedonic Treadmill. The Hedonic Treadmill is one that some people are constantly running…
Social scientists have proven that—emotionally—a loss “weighs” at least twice that of a similar gain. That might be great for aspiring body-builders, but not so great for us regular Joes. It’s the actual gaining or losing and your feelings about it that…
Back in 1995, researchers from Harvard asked students/staff which they preferred: Earning $50,000 a year when everyone else around them makes $25,000. Earning $100,000 a year when everyone else around them makes $200,000. Prices of goods and services would be…
Irrationally wanting things to stay the same, also called inertia. We do this in part because we want to avoid costs, even when they’re offset by a larger gain, a process psychologists call “Loss aversion”. You hold onto a mutual fund…
Believing that something is true only because other people think it is. Whether politicians or stocks, people like being associated with things that are winning, so winners build momentum, not because they deserve it, but because they’re winning. This is…