Money Psychology 18: When you'll believe anything
Appealing fictions and stories are more powerful than statistics.
Take a short example.
Ali Hajaji’s son was sick. Elders in his Yemeni village proposed a folk remedy: shove the tip of a burning stick through his son’s chest to drain the sickness from his body.
After the procedure, Hajaji told The New York Times: “When you have no money, and your son is sick, you’ll believe anything.”
Another one.
During the Great Plague of London, people went to ignorant fellows for remedies. They saw ‘Infallible preventive pills against the plague.’ ‘Neverfailing preservatives against the infection.’ ‘Sovereign cordials against the corruption of the air.’
After all, you’ll believe just about anything when the stakes are that high.
Now think about how the same set of limited information and high stakes impact our financial decisions.
Most people when confronted with something they don’t understand, don’t realise they don’t understand it. Instead, they create a narrative based on their perspective and experiences in the world.
The more you want something to be true, the more likely you're to believe a story that overestimates the odds of it being true. Once you pick a strategy or side, you become invested in them, financially or mentally.
[The Psychology of Money: Lesson 18 of 18]
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