Interesting Ways That We Can Fool Ourselves

In the diavlog between Joshua Knobe and Laurie Santos titled "Stupid Primates", Laurie Santos describes a test where two groups were paid to lie. On group was paid $20 while the other was paid $1. The group that was paid $20 openly admitted that they lied because they were paid well to do so. The $1 group actually convinced themselves to believe their lie as truth because psychologically they did not want to admit that they would lie for such a small amount of money.

Dr. Vaughen Bell in his "Mind Hacks" blog describes a study by Hilke Plassman where a group of people will rate a cheap wine as high quality if they are first told that the wine is expensive. In a similar study by Francesca Gino , when two groups are given the same advice, but one group gets the advice free while that other group pays for the advice, the group that pays for the advice gives the advice a higher rating than the group that got it for free. In other words, we humans consider paid advice of a higher quality than advice that we get for free, even though the advice is of the same quality.

I am sure that there are many psychological reasons for this phenomenon. One reason is that we just do not like to admit that we made a mistake or have been cheated. Refusing early to admit that we made a trading mistake can be costly. We must first realize and openly admit that we all possess this psychological flaw in our thinking. Then we can tackle the problem of not wanting to limit our losses when the market turns against our position.

Charles