The psychology of clinging to bad strategies

Here are some excerpts from Tim Hartford’s excellent piece in Fast Company:

While poker can be analyzed rationally, with big egos and big money at stake it can also be a very emotional game. Poker players explained to me that there’s a particular moment at which players are extremely vulnerable to an emotional surge

The economist Terrance Odean has found that we tend to hang on grimly, and wrongly, to shares that have plunged in the hope that things will turn around. We are far happier to sell shares that have been doing well. Unfortunately, selling winners and holding on to losers has in retrospect been poor investment strategy.

Most of the examples in this article deal with money, so what’s this to do with fraternity and student leadership? The closing paragraph offers a hint:

All four examples — poker, Paris, Deal or No Deal and share portfolios — show a dogged determination to avoid crystallizing a loss or drawing a line under a decision we regret. That dogged determination might occasionally be helpful, but it is counterproductive in all these cases and in many others. Faced with a mistake or a loss, the right response is to acknowledge the setback and change direction. Yet our instinctive reaction is denial. That is why “learn from your mistakes” is wise advice that is painfully hard to take.

Can you or your chapter relate to this instinctive emotional response to setbacks? Leave your stories in the comments section below.

Read the full story here.

 

One thought on “The psychology of clinging to bad strategies

  1. Maybe not the kind of story you’re looking for, but I’ve spent the last 20 years up to my eyeballs in credit card debt. It wasn’t until someone sat down with me and pointed out the hole I was digging for myself that I really came out of denial and realized I had to stop spending and start paying. Even with that information it took getting married and facing the truth together that we BOTH had this problem (and, let’s be honest, two salaries certainly helped) to actually begin to make a real dent in it. It took a lot of work, a lot of sacrifice and accountability, but facing my mistakes and literally PAYING the consequences has taught me how much I don’t want to repeat old behavior. After 20 months of hard work, we’re hoping to be done paying off more than $35K by the end of September!

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