Monday, November 17, 2008

Framing Bias: Market Movement

I just checked Google Finance and say that the markets are down about
2.5% today. My first thought was "Nothing interesting or unusual

I was about to move to something else when I realized the absurdity of
my thoughts. Any time before this summer, a 2.5% drop in markets
would have been something to think about and comment on. But now I
accepted it as being normal. This shows how easy it is to let our
thinking, and our perception of normality, be influenced by recent
history. This chronic failure in human thought is referred to as the
'framing bias.' We judge things in the context of the immediate
situation, or what came just before.

It takes great knowledge, skill, and discipline to escape the
short-term mindset and see things with an extended awareness. But it
is very important to do so.

No comments: