The Two Big Strategic Mistakes That Investors Make
Research finds a discrepancy between what people plan to do when trading—and what they actually do.
The Two Big Strategic Mistakes That Investors MakeThis transcript is taken from an interview conducted March 30, 2020.
When we think about the effect of social distancing on people’s mental health, we are clearly concerned about those who are lonely. While some of us are at home with other people, others are stuck alone or are not with the people who matter most to them. Loneliness is a modern disease that has concerned social scientists, governments, and health providers for a long time. We are particularly concerned about older people.
These days, that’s the situation for many people, and what we have are online substitutes, which are nothing like the real experience of being with someone. Digital connection is one thing that our modern life offers, which is great. If we’d had to socially distance ourselves prior to the internet, things would have been much harder. But online communication is not like physical connection. In our evolution as humans, we didn’t learn to connect over a single medium such as voice or text. We need to be with each other, touch each other, so that we feel connected.
In my own research, I’ve looked at the effects of having a meal with someone. My coresearchers and I find that people tend to have much better relationships, work better with each other, and feel less lonely if they eat with other people. People now have started to have meals with others over online meetings. It’s clearly better than nothing—not to mention that it’s super creative—but it’s a poor substitute. You can’t share your dish or smell theirs.
Many people don’t quite feel the same about online connection. I can say from my own experience that doing yoga with an app is nothing like going to a class and being with other people. It’s just not the same type of connection.
When we think about who is going to feel lonelier during these times, this might be older people, and those people who don’t have family with them. Unfortunately, those are also the people who are more at risk to begin with. In general, when we study loneliness, we are concerned about effects on people who live by themselves, on older people, and that’s tough, even if they master technology.
Reminding people that this is temporary and will not last forever will help them to be patient.
If you think about people who live by themselves, there is normally a small part of the day when they are going to have online communication. They may love to interact with their kids, their grandchildren possibly, in the way that we usually interact with people. We sit next to them, we read next to them. We touch them, hug them. Conversation over the internet is something, but it’s not really the thing that social psychologists believe keeps people healthy.
We are working together, as a society, to keep people healthy. For researchers such as myself, who have been studying coordination, this is a fascinating problem. We can see how humanity is handling this problem, what people and leaders try, and what actually works. We learn how to better coordinate.
We should expect policy makers to give us answers for how they see this problem, this disease, unfolding—in that way, they can help us deal with uncertainty around loneliness. Patience is hard, and being patient when you face a lot of uncertainty is even harder. Reminding people that this is temporary and will not last forever will help them to be patient.
My colleagues and I are running a few experiments to understand what makes people more patient and what makes them feel better about uncertainty, and exploring the way policy makers can communicate social-distancing policies in ways that reduce panic without reducing alertness. I believe this is the part we can play—doing research on how to get people to be more patient, helping people understand some ways by which we can all become more patient—and that it is the responsibility of public-policy makers to help people know what to expect, and how long to expect it. This is not something that we should expect medical providers to do. This is not on the professionals who are already in over their heads with trying to save people’s lives.
We should understand that this is not the new life; this is a temporary solution. We are all coping with something. It will go away, and it will be better.
There are many uncertainties at the moment. We are not sure how long the health crisis will take to get resolved. We don’t know what the economic impact is going to be. We don’t know how it will affect our personal lives. If we have kids in schools, we don’t know what will happen to their education. There is a lot of concern that goes beyond just worrying about getting sick, which is clearly a major concern in itself.
I would not give US policy makers high grades for how this has been handled so far. We don’t see a clear message. We see a few who are reacting with clear instructions and messages that could make us feel more comfortable, but mostly we see lots of contradictory messages and nothing that addresses the concerns about loneliness, about the long-term economic impact, and so on.
I would suggest policy makers offer some discussion on how they see things unfolding in the long run. What are the possible scenarios? How should people prepare? We should have some assurance that we, as a society, are going to help people, that this is not something that will take forever.
When we think about this period of social distancing, we are also concerned about patience. We need research on how to get people to be more patient and a better understanding of what makes it difficult to be patient. Think about the well-known marshmallow test. [This was described in a 1970 psychology paper by the late Walter Mischel and University of California at San Diego’s Ebbe. B. Ebbesen.—Eds.] What makes it really hard for a child who’s waiting to get a marshmallow is that she doesn’t know how long she’s going to wait. Is it going to be one minute or half an hour?
Many people face an unresolved question: How long will I have to wait before I can see my family and my friends? The uncertainty people are experiencing might make them feel that it’s going to take forever. This is a scary thought. Policy makers should explain that there is a solution. They should say: We are working together, we are making progress, and we will resolve it. We are going to get our lives back.
The whole discussion is, how soon we can get there? We will get there. I don’t hear enough of policy makers showing people that this is temporary, that we are fixing things. I also don’t hear enough reminders that we are strong, that we have the resources, and that this country is rich and educated. We can cope with a health crisis. I want to hear that from policy makers.
Social psychology reminds us that it is surprisingly easy to go back to our old habits. It’s also surprisingly easy to go back to feeling satisfied and happy with our lives.
Consider studies about the psychology of job loss. Survey respondents said that if they lost their job, life would never be the same. Guess what? It was the same, if not better. My prediction, reading the research that we have in psychology, is that people are going to get back to hugging each other and spending time together and shopping in supermarkets much faster than they anticipate once the crisis is over. Our human nature is designed to bring us back together; we are just not good at being alone. We like to touch each other. We like to be with each other.
In terms of the consequences of this crisis in the long run, maybe there will be a few good outcomes. Maybe there are things we figured out we can do as individuals. Obviously, we are now all familiar with some new technologies we were unfamiliar with a few weeks ago. Also, I personally learned that I’m a capable math teacher for second graders. I can cook. These were revelations.
My prediction is that we are going to go back to our old ways as soon as we’re allowed to.
But this is certainly a traumatic event, and there will be negative consequences. We will have to look around us and help the people who are suffering more than us from this. People are going to lose their jobs. Some are going to lose people that are close to them, and obviously that is going to be hard.
I’ve heard the argument that after working from home, people are going to discover that this is amazing, and no one will go to the office again. This has not been my personal experience. I do not like working from home. I miss my office very much. I miss my colleagues very much, and the insights and information that I get—not in an official meeting that we set online but just by knocking on someone’s door, or running into him or her in the hall, or getting coffee. This is a huge field experiment: let’s have everybody work from home and see if they like it. We’re collecting the data. Right now, I only have one data point, which is me, and I can’t wait to go back.
Building on the assumption that this is a crisis that is going to last for several months, I think we will rebuild faster than people anticipate. It will be a shock, but we will come out of it and work harder and basically go back to the work, if not the jobs, we had. If that takes much longer, it will take longer to rebuild. But I am optimistic that whether it’s in the short run or in the long run, life will go on, and we will go back to having social interactions with people around us—that is, physical social interactions.
On the mental-health crisis that is unfolding, clearly some people are struggling with just surviving. There are some people with jobs they need to do now from home while taking care of their children, so they can barely add more stuff to their plate. But we do need to check in with the people around us. We do need to talk to older people, people who are alone. The concern is that for a person who is lonely, often the experience is too overwhelming to keep in mind that it is short, and there might be negative health effects just by not being able to interact with other people, even if it’s only for a few weeks.
It’s an interesting question to see what will happen with our consumption habits as a result of this crisis. We basically moved everything online. Are we going to go back to the movies, or is our movie watching just going to be online? Are we going to go to concerts again, or just listen to music on Spotify? And what about malls, what about the type of shopping that people do, either because they have to or for fun?
Anything that’s about social interaction—such as going to the movies, the theater, concerts, or the mall on a Saturday—my prediction is that we are going to go back to our old ways as soon as we’re allowed to.
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