Monday, October 18, 2010

We're All Irrational, But It's OK

My favorite speaker at last week's Financial Planning Association National Convention was Dan Ariely, Ph.D., professor at Duke University and author of two books, Predictably Irrational and The Upside of Irrationality.

Dr. Ariely was severely burned over most of his body a number of years ago, and as he endured the long months of hospitalized recovery, he began thinking about the nature of pain and how our minds handle it.

One of the first questions he considered, naturally enough, was the question of how quickly to remove bandages. The nurses who treated him thought it was best to yank off the bandage quickly: there was intense pain for the patient, but it was over quickly. It turns out, however, that when given a choice, the patient perceives less overall pain when the bandage is removed slowly: although the pain lasts longer, it is far less intense and therefore more bearable.

This was just the first of many examples Dr. Ariely gave into the nature of our thinking and how it affects everything we do and every decision we make. Just because we believe something to be true does not necessarily mean that it is true. This insight has tremendous implications in all areas of our lives, including our financial decisions.

Although I have just started Dr. Ariely's Predictably Irrational, based on his fascinating talk, I believe I can recommend both books highly. If you'd like to see video of a recent interview Dr. Ariely did for CBS, just click on the image below:

Ah, fall: my favorite time of year. Enjoy your week!

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