According to a recent study in the Journal of Consumer Research, a University of Sydney researcher–Elizabeth Cowley–found that people often engage in too much positive thinking, selectively focusing on one win among hundreds of losses when they think back on the overall experience. According to Ms. Cowley, “When we want to justify engaging in an activity which could potentially be irresponsible–like gambling–we may need to distort our memory of the past to rationalize the decision…people who have frequently spent more money than planned on gambling edit their memories of the past in order to justify gambling again.”
This may explain why the free market, which is based on rational human behavior, is fundamentally flawed. It may also explain why I continue to attempt to play golf despite having a very large handicap–just one good shot keeps me coming back for more!
Source: University of Chicago Press Journals (2008, April 22). When Positive Thinking Leads To Financial Irresponsibility Like Compulsive Gambling. ScienceDaily. Retrieved April 21, 2008, from http://www.sciencedaily.com /releases/2008/04/080421111630.htm
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1 jason // Apr 24, 2008 at 8:12 am
That is a great point. I occasionally invest in the stock market, sometimes ending in disastrous results. But sometimes I come out with modest gains. If I were to review my overall results, I would most likely be in the hole. But it’s those times where I make gains that keep me investing and I just seem to forget those past losses. Human nature, I suppose.
Love the blog. Keep up the good work. Looking forward to the free ebooks.
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