SOM THAPA | INVESTOPAPER
Christopher Chabris and Daniel Simmons in their experiment – The Invisible Gorilla Test – showed that how people could miss the ordinary details when they are too focused on one thing. In the experiment, the subjects were allowed to watch a short video. In the video, there were two groups of people, dressed in black and white T-shirts, passing basketballs around. The subjects were requested to count the passes made by either of the groups or count the number of bounce passes vs. aerial passes. After the video, the subjects were asked whether they noticed anything unnatural. But 50 percent of the subjects did not report seeing the gorilla in the video although it is evident that a person walks through the scene wearing a full gorilla suit. This phenomenon is known as ‘Inattentional Blindness’ or ‘Perceptual Blindness’. It refers to the blindness not because of vision defects but rather due to the psychological lack of attention to the external stimuli other than the task on which one is focused on.
Why am I writing about a weird gorilla experiment which neither seem interesting nor related to our field of Investment ? It would rather be exciting to discuss about some hot stock that will double its price in a month. Millions of investors would become rich overnight. But I do not have an expertise in predicting what a stock price is going to do in a month’s time. To be brutally honest, I can’t even figure out exactly what I am going to do tomorrow. In this regard, I sense, the Gorilla experiment, has a deep insight into the understanding of the human behavior and could be beneficial to the investors in general in their investment careers and lives as well.
Market Price & Investors’ decision
Investors always try to maximize their wealth through investments and they perceive that the price inherent in the stocks of their holding is a major indicator of their wealth. Following the market price every day, minute by minute, is increasingly commonplace. Price of the stock has always been central to the decision making of an investor. The heartbeat of the investor too is determined by the direction in which the stock prices move. It is not unusual that the slightest rise in the prices of the stocks brings joys to the investors in a way that they fancy millions of rupees coming into their pocket in a rosy future full of hope and prosperity. Similarly, the fall in the prices bring sadness and frustration in their faces and forces them to believe in the imminent future – dark and gloomy – full of uncertainties. This immense impact of market price in investor’s life baffles me. How is it possible that a mere change in the price could have such a huge influence in a person’s life?
I think all of this has to do with the convictions of the person that his entire life depends upon the financial security – deeply ingrained in the society – which in turn is determined by the market prices of the shares he holds or intends to hold. Both of these views, though correct, are only partially correct. ‘Financial security’ does not mean that you need to feel financially secure every minutes and seconds of your life. This is virtually impossible. Even Bill Gates may not feel that he is financially secured all the time. Rather, Financial security is about your wealth providing you with means to live throughout your life. So, if you are rational, you want to maximize your wealth over a long period of time rather than gaining millions in a short span and losing everything later. This is why, to me, it appears surprising when a person reacts to volatile market prices that change every second. But his financial goals seem to last a life time i.e., his investment period is long. So, Is it rational to confuse a long term goal with the short term consequences and get excited or depressed when the market prices are changing so frequently?
Invisible Gorilla & Investor’s psychology
Having made these explanations what I am doing here is, trying to establish the relationship between the invisible gorilla and the investor’s psychology. When an investor is too much focused on price change of the stock, even a small change might lead him to make a rash decision – to load up by buying shares or to exit from the market by selling shares. The market, on the other hand, may move in the direction opposite to the investor’s action because there are many other factors that influence the market in longer term. Therefore, if one focuses only on the prices ignoring all the other aspects of the investment, he goes into the ‘Inattentional blindness’ mode. This is likely to distort his astute decision making skills. It may lead to a bad decision of which he might have to regret as the events unfold.
The same applies to our life as well. In this modern world, money is the primary motivator for almost all. Most of the people are focused only on obtaining money. They are unaware of all the other good things happening around them in their life – love, friendship, work, nature, inventions, knowledge, mystery of human life and the universe, and so forth. Many people often regret not being able to see their children grow because they were too busy somewhere earning money. It is true, money is an essential part of human life but it is not the only one. Money is only one among various factors that helps us to live a decent life. Money is a means not an end to a happy life. When money becomes pervasive in every aspects of life, then the real life slips from the corner without letting you be aware of it.
Many spiritual leaders and motivational speakers tell people to focus only on the present. It seems true because past has gone and future has not arrived yet. The excerpt from a dialogue in an animated movie ‘Kung Fu Panda’ corroborates the statement. It says: “Yesterday is a history, tomorrow is a mystery, and today is a gift; that’s why it is called present.” But I do not completely agree with these statements albeit they seem brilliant and profound. If you are too focused on your present you will neither learn from your experiences of the past nor will you be prepared for the future that is full of uncertainties and contingencies. Therefore, it is better to have a broad view of the life that includes your past, present and the future because they are indispensable part of your overall life.
# For Invisible Gorilla Test, watch ‘Monkey Illusion Business’ on YouTube
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