Ask Ariely: On Sticking to Stocks, Stopping the Struggle, and Stifling Smoking

June 21, 2014 BY danariely

Here’s my Q&A column from the WSJ this week  and if you have any questions for me, you can tweet them to @danariely with the hashtag #askariely, post a comment on my Ask Ariely Facebook page, or email them to AskAriely@wsj.com.


Dear Dan,

How can we get people to follow their long-term strategies when investing in the stock market? Many of my clients say they’re willing to take risks, but when the market goes down, they change their minds and ask me to sell. How do I get my clients to stick to their game plans and not break their own rules?


I suspect that you are asking about is the so-called “hot-cold-empathy gap,” where we tell ourselves something like, “I can handle a level of risk where I might get gains of up to 15% and losses of up to 10%.” But then we lose 5% of our portfolio, panic and want to sell everything. In such cases, we usually think that the cooler voice in our head (the one that set the initial risk level and portfolio choice) is the correct one, and we think that the voice that panics at short-term markets fluctuations is the one causing us to stray.

From this perspective, we can think about two types of solutions. The first option is to get the “cold” side of ourselves to set up our investments in ways that are hard for our “hot,” emotional selves to undo in the heat of the moment. For example, we could ask our financial advisers not to let us make any changes unless we’ve slept on them for 72 hours. Or imagine what would happen if our brokerage accounts had a built-in penalty every time we tried to sell right after a market dip. Such approaches recognize that our emotions flare up and make it harder for us to act on them.

A second option: You could try not to awaken your emotional self, perhaps by not looking at our portfolio very often or by asking your significant other (or financial adviser) to alert you only if your portfolio has lost more than the amount you’d indicated that you were willing to lose.

Either way, the freedom to do whatever we want and change our minds at any point can be the shortest path to bad decisions. While limiting our freedom goes against our democratic ideology and faith in human nature, such tactics are sometimes the best ways to guarantee that we stay on the long-term path.


Dear Dan,

My boyfriend and I keep having terrible fights, with lots of verbal and emotional abuse on both sides. After each of these fights, we really hate each other. But a few days later, we become loving again—until we have another awful blowup after a few more days. I keep hoping that things will change and that these fights will stop. Am I being naive, or can people change?


I’m sorry — this sounds very painful. You may be experiencing the ostrich effect: burying your head in the sand despite the accumulating evidence. Of course, this is hardly unique to your difficult situation. We all sometimes overestimate very small probabilities — hoping against hope that the real nature of the world (and people close to us) will be different from what we’re experiencing.

It is not easy to overcome the ostrich effect, but here’s one approach: Distance yourself from the situation and try to take “the outside view” — the perspective of someone not personally involved in this problem. For example, imagine that someone else was having this exact problem and described it to you in great detail. What advice would you give them? What if the person was someone close to you, like your sister or daughter?

Take the outside view, make a recommendation to this other person—and then follow your own advice. And good luck.


Dear Dan,

What’s the best way to get people to stop smoking?


The problem with smoking is that its effects are cumulative and delayed, so we don’t feel the danger. Imagine what would happen if we forced cigarette companies to install a small explosive device in one out of every million cigarettes—not big enough to kill anyone but powerful enough to create a bit of damage. My guess is that this would stop smoking. And if we can’t implement this approach, maybe we can get people to start thinking about smoking this way.

See the original article in the Wall Street Journal here.