Behavioral Biases, Runner’s High, and Star Wars

Behavioral Biases, Runner’s High, and Star Wars

by Lauren Foster, CFA Insititute

Is it just me, or does it seem that hardly a week goes by without another study or article about diversity in the workplace making headlines?

I don’t have the answer, but it did make me wonder whether I was suffering from “frequency illusion” or “recency illusion,” also known as the Baader-Meinhof phenomenon.

“The what?” I hear you ask. “Wasn’t the Baader-Meinhof Gang an infamous radical guerrilla group?”

Yes, it was. And the Baader-Meinhof phenomenon is the term for when something you’ve just noticed, experienced, or been told about suddenly seems to pop up everywhere.

Of course, discovering that there was a term for this led me down the proverbial rabbit hole: Why would it be called the Baader-Meinhof phenomenon?

But first, some background: Back in 2006, Arnold Zwicky, a Stanford linguistics professor, minted the term “frequency illusion.” It is the result, he wrote, of two well-known psychological processes: selective attention and confirmation bias.

As explained in a 2013 article in the Pacific Standard, “Selective attention kicks in when you’re struck by a new word, thing, or idea; after that, you unconsciously keep an eye out for it, and as a result find it surprisingly often. The second process, confirmation bias, reassures you that each sighting is further proof of your impression that the thing has gained overnight omnipresence.”

Then, in 1994, a person commenting on the St. Paul Pioneer Press’ online discussion board dubbed the frequency illusion “the Baader-Meinhof phenomenon” after hearing two references to Baader-Meinhof within 24 hours.

So there you have it.  The next time you happen upon a piece of information and soon afterwards encounter the same subject again and yet again, you’ll know what to call it.

And now for some other interesting links and articles you may have missed:

Investing and Decision Making

• Far and away one of the best things I have listened to in ages is a conversation between two of the brightest sparks out there: Shane Parrish of the Farnam Street blog and Jason Zweig, author and columnist for the Wall Street Journal. Smart questions and smart answers on “writing, risk, and why historical perspectives matter.” (Farnam Street)
• “No Winner with High-Fee Funds” (CFA Investment Risk and Performance)
• An oldie, but a goodie: “If You Only Know 5 Things about Investing, Make It These” (The Motley Fool)
• If you’re curious about why people sometimes make poor choices, Michael J. Mauboussin and Dan Callahan, CFA, recently co-authored a report on some common investor biases and their causes: “What’s Going On in Your Brain?” (Credit Suisse)
• Beware silos in your organization — they can lead to poor decision making. So says Gillian Tett of the Financial Times in “Why Smart People Make Dumb Decisions.” (Wired)

Diversity in the Workplace and Elsewhere

• In this funny and engaging TED Talk, author and scholar Michael Kimmel makes the case that gender equality benefits everyone — including men. (TED)
• “The Odds That a Panel Would ‘Randomly’ Be All Men Are Astronomical“: One mathematician’s formula suggests that all-male lineups don’t “just happen,” despite what conference organizers might claim. (The Atlantic)
• “Gender Balance Initiatives Are Culture Change Initiatives” (Harvard Business Review)
• Hans Schulz, vice president for the private sector and non-sovereign guaranteed operations of the Inter-American Development Bank, on why he says no to all-male panels. (Washington Post)
• “All Firms Can Benefit from the Positive Influence of Women,” writes Wesley Gray. (Alpha Architect)

Financial Planning and Wealth Management

• In the first of a two-part series, Robin Powell of The Evidence-Based Investor interviews Barry Ritholtz of The Big Picture and Ritholtz Wealth Management about “his career, the future of wealth management, and the one piece of advice he would give to every investor.” (The Evidence-Based Investor)
• Heart disease, cancer, or dementia — which of these ailments carries the highest health care costs in the final five years of life? (The New York Times)
• Reading the article above reminded me of a related piece published earlier this year: “In Alzheimer’s Cases, Financial Ruin and Abuse Are Always Lurking” (The New York Times)
• Another interesting take on this topic: “Is It Old Age, or A.D.H.D.?” (The New York Times)

And Now for Something Completely Different

• Ah, the “runner’s high.” Researchers recently discovered that “at least part of the euphoria that comes after a strenuous workout — runner’s high — is due to endocannabinoids, the body’s self-produced counterparts to some of marijuana’s mood-enhancing chemicals.” According to the article, “Getting ‘High’ On Your Own Supply,” “the finding overturned decades of conventional wisdom claiming that natural highs come from endorphins, the chemicals that became famous in the 1980s for their euphoric effects. While endorphins seem to help numb our muscles during a workout, their molecules are too large to cross the blood-brain barrier and trigger a ‘high’ like endocannabinoids can.” (Discover)
• Speaking of running, every Saturday morning I meet up with my regular group of running buddies, and whenever I turn on the radio, the BBC program The Conversation is always on air as I drive. Last week’s episode was a conversation between two opera singers. South African soprano Pretty Yende discovered opera by chance: She was 16 years old and watching a British Airways advertisement that featured the “Flower Duet,” from Lakme. I clearly remember the ad as I grew up in South Africa. If you’re curious about the power of a 1:31 minute ad to change the course of a life, take a look. (The Conversation, YouTube)
• “How to Spark Curiosity in Children through Embracing Uncertainty” (KQED News)
• “If you want to be interesting, you have to be interested” — a great line and a great piece of advice: “‘Have You Tried Making Yourself a More Interesting Person?‘” (Austin Kleon)
• National Geographic‘s annual photo contest is under way. Give yourself a visual treat by scrolling through the images. (National Geographic)
• If you’re a Star Wars fan and are counting down to the release of Star Wars: Episode VII — The Force Awakens, you may enjoy this blog post mulling the existential question of whether Luke Skywalker turned to the Dark Side: “Luke Skywalker, Sith Lord” (Medium)
• Sticking with the silver screen, I’m both a Star Wars and a James Bond fan. Which is why this chart from the Economist made me chuckle. (Economist)

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: ©iStockphoto.com/JLGutierrez