Better decisions through blindness
Category: Wealth Management
If you knew you could be happier and make better decisions by blinding yourself, would you do it? Ok, not complete blindness, but just to those factors you decided in advance were irrelevant.
This idea – intentionally blind yourself to irrelevant information – has serious merit. There is convincing evidence that we are strongly influenced by factors that should be completely irrelevant to the decision we’re making. For example, US psychologists
conducted an experiment where they repeatedly left a fake college application in an airport, supposedly forgotten by a traveler. The answers on the application were always the same, but each time they included a different photo of the fictitious applicant. It turned out people were more likely to mail in the application if the applicant was attractive. This is perhaps not surprising, but it illustrates just how thoroughly we’re influenced by appearances; we favor attractive people even in a situation where we’ll never meet them.
Attractiveness, gender, or other irrelevant information can be more than a harmless distraction – it may be actively leading us to make worse decisions. We have to spend brain power and time processing useless information. This crowds out useful information, or analysis we could have done. The irrelevant information may unconsciously bias us as we evaluate the wrong question. Which brings us to this: when irrelevant information ‘on’ by default and harmful, it may be worth actively blinding yourself to it.
There are many ‘defaults’, set by nature, for what information we perceive and pay attention to. They’re usually not bad, but we also usually accept them uncritically.
Suppose you could design the interface for your own financial situation. You’ve got limited space, and you’ve got to decide what you always see when you log in. What would you put on that first page? For mine, I’d intentionally not show most of what shows up on DIY brokerage sites today:
These aren’t just useless for making forward-looking decisions – they’re actively harmful.
So what do I really want to know:
Such an interface probably wouldn’t be exciting. I might not be motivated to log-in as often, but it would empower me to make better decisions.
There are, of course, valid objections to intentional blinding; beauty is pleasurable; knowing you’re ‘up’ feels good; and sometimes, we don’t know what information is irrelevant until after we’ve seen it.
All true. But we could all benefit from being more intentional in separating out our short term emotional biases when we are making long term decisions.
Inspired by Daniel P Egan
Written by Joshua Drake, Private Client Adviser and Director, Crosbie Wealth Management.