The Hindu Business Line : Experience or regret

My friend’s client buys stocks based on the recommendation that he receives from a brokerage firm. On a certain day last week, he was advised to buy two stocks — SBI and Gujarat NRE Coke. He decided to buy only SBI. Unfortunately for him, Gujarat NRE Coke moved up Rs 17; he lost Rs 30,000 on SBI. Yet, my friend’s client only regretted his decision not to buy Gujarat NRE and not his decision to buy SBI. Why?

Justifying inaction

Psychologists argue that we console ourselves when the actions we take go wrong. For instance, the client would rationalise that many others had also bought SBI and lost money. But our psychological immune system finds it difficult to manufacture views to justify inaction.

Consider my friend’s son who was offered a choice of two MBA schools. He chose the one that had a lower ranking, much against his father’s wishes. Within a month, he quit, complaining about the lack of peer pressure. But he did not regret his decision. He looked at it as a learning experience!

But how will you justify inaction? You cannot because you do not get any experience from not doing anything!

Two researchers found this to be true even in sports. They found that goalkeepers are more likely to save shots if they stand still when the penalty kick is taken. Yet, if you watch a football match, you will notice that goalkeepers often tend to move to one side of the net. Why?

Some regrets

The goalkeeper would look foolish standing still and watching the ball get into the net. It would be easier to justify letting in a goal if he dives towards one side of the net.

Yet another study showed that older people regret things that they did not do and not the things that they did that went wrong. Some of the regrets were not going to college and not grabbing a profitable business opportunity.

So, whether it is about investment, playing football or studying, action seems to be better than inaction. Beware.

(The author is an investment strategist.)

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