An article in a recent TIME magazine looked into why people invest in self-destructive ways. I read it and thought, “They do all kinds of self-destructive things–from the way they invest to how they eat and vegetate on the couch and express their anger on the highways to neglecting their spiritual lives.”
“What Was I Thinking?” is the title of the TIME (October 4, 2011) article, written by Gary Belsky and Thomas Gilovich. Subtitle: “Why we often have trouble acting in our best financial interests.”
I was hooked by the title.
According to the authors, people are willing to walk several blocks to save $25 when buying an item selling for, say, $100. However, if the purchase is in the neighborhood of this time, say, $900, they are unwilling to walk the same distance to save the same amount of money. Why?
The answer lies in the field of “behavioral economics,” a relatively new area of study which considers how and why people make financial decisions. Since people often behave irrationally, behavioral economists look into the reasons why.
The reason people will walk blocks to save $25 for a small purchase, but will not do the same for a costlier one is also the reason people who are buying a $25,000 car will casually add on an optional feature costing $750, because, “Hey, what’s a measley $750 compared to the cost of the car as a whole?” And what’s $25 when compared to a $900 purchase?
Blind spots, the authors call them. Working against our own financial best interests.
Since the authors wrote the book, Why Smart People Make Big Money Mistakes–and How to Correct Them, we may assume the three reasons for the self-destructive investing patterns of people in the TIME article are just the tip of the iceberg.
After giving the three reasons, let’s draw some parallels in the spiritual realm.