The Financial Crisis And Human Psychology: Cutting Off Your Nose To…

MIT Professor and behavioral economist Dan Ariely (who’s excellent book "Predictably Irrational" I have referenced or quoted a number of times on this blog in recent months) was interviewed via phone on CNBC a few days ago, and he pointed out something very significant:

When social trust is violated, as has been very broadly and shockingly the case over the last month or so, the instinctive psychological reaction of human beings is revenge.

And while that may still sound rather pedestrian, the corrolary is where the proverbial rubber meets the road. Because the emotional state of revenge includes an element that says, "we want to hurt the perpetrator(s) of this breach of social trust, EVEN if it ends up hurting us in the process."

If you take this to be the definition of revenge in contrast to say "normal" anger or even rage – which do not include this self-destructive element outright, though they may of course often go down a similar path -, then it is clear why our instinctive response to this financial crisis and the various remedies such as bailouts (whether they be perceived or actual) is so dangerous:

We are literally prepared to undergo further pain personally, if only there could be revenge taken on the "greedy Wall Street executives" et al. by letting their companies go under, and so forth. The sentiment is very much like that captured in the old proverb: Cutting off your nose to spite your face.

I am not trying to make an economic or political case either for or against anything that has been going on since at least September 15 (though there is much to be in disbelief or even cynical about), but the reality is that revenge (or anger) is a very poor basis from which to operate or from which to make important decisions for your business, your loved ones, or yourself. Because it clouds our judgment.

If you have any means to do so (Business Mind Hacks coaching is one of the ways), it would best to let go off the anger and/or feelings of revenge, or to at least set them aside while you are trying to make important decisions or take important actions.

Best wishes in "interesting times"

– Alex Schleber