We all want to have happy happenings in our life, and when something good happens we want to preserve that feeling or emotion for as long as possible to prolong our positive attitude for other things we do in life. We want to forget negative experiences and be positive in the hope that all our further decisions will be good if taken with a light, happy and positive mindset.
However, a recent new study has brought forward the “banker’s fallacy”, according to which we are naturally inclined to deliberately go for “happy endings” thus ascribing greater value to experiences than they are worth. It further means that we overvalue our last experiences in any situation with a final happy ending mental note in the hope that it will positively affect our next experience.
Decision Making
Now, our brain works like a logbook, where it keeps storing every new experience and keeps ranking them against the previous few for context. Thus, over a period of time we collect a mix of positive and negative emotions. This affects our decision-making power because last good experiences make us high-esteemed and we are more prone to take risks, and last few bad experiences make us low-esteemed and we tend to hold back.
The fallacy is named after bankers who are generally trained to close on a positive note. However, anyone who is doing it is actually thinking of the immediate next few results only. Thus, happy endings are actually trapping people into making lousy long-term decisions. People are focusing on immediate growth at the expense of longer-term stability, and our quick decisions may actually be strategically wrong affecting us adversely in the long run.
The Research Study
The study was conducted by Martin Vestergaard from the University of Cambridge, who found that most people in the test fell foul of the banker’s fallacy and made poor, short-term decisions as a result. The experiment involved participants trying to accumulate money by gambling between two sets of gold coins of varying sizes at high reaction times. The researchers found that the most immediate experiences carried much more weight in decision making than they should have, which means that a recent happy ending has a hugely disproportionate influence. The final result were thus false and delusional beliefs that in turn led to wrong decisions despite historical experience that could convince us of the contrary.
The results of the study are beneficial in all spheres of life including social, political and familial decision making as well. People in a relationship tend to make lighter decisions which may have long-term impact when they are happy with each other. However, the right decisions would be those which are taken considering the history of relationship. The same logic applies to political and social decisions too. However, the results of the study apply more to individual decisions rather than organisational or structural decisions, where a body of decision makers generally makes policy-based decisions. Though group decisions may also be affected by banker’s fallacy, the chances are less as several people are involved simultaneously and each one’s experience may differ on the last outcome.
