Wishes, Hopes and Desires

Janice Dorn sent in nice feedback:

Without realizing it, people tend to perceive things according to how they want to see them, suggests a new study, soon to be published in the Journal of Personality and Social Psychology. In five separate tests conducted by a graduate student from Cornell, participants regularly labeled an indistinct figure in a way that would lead to their obtaining a taste reward.(in this case fresh-squeezed orange juice as opposed to a lumpy gelatinous veggie smoothie). In other words, when faced with ambiguity, the subjects made the choice which would result in something pleasurable for them. This gives credence to the age-old hypothesis that wishes, hopes and desires actually influence what a person sees. The analogies to trading are clear. We see whatever is happening in light of our expectations of reward, and will use all manner of neural trickery to rationalize “why” something is happening rather than to deal with the reality that it is actually happening. We want the orange juice, and will lie to ourselves about what we are actually seeing, in order to attempt to obtain that reward. Just as we feel uncomfortable in our personal lives when faced with “uncertainty” or not knowing, so do the markets. We want to get the orange juice, and this tends to distort our perceptions and lead to an insidious kind of self-deception. Sigmund Freud said that neurosis was the inability to tolerate ambiguity. Do we bias the outcome of ambiguous situations in favor of hope and away from fear? What do you think?
Janice Dorn, M.D., Ph.D.