Tuesday, October 7, 2014

Impact bias and learning to be dispassionate

The impact bias is significant. We overestimate the length and strength of feelings we will have about an event. This effects our overall happiness. We can not effectively forecast our emotional reaction to events. We end up more often than not disappointed after some positive event and realize that we were too morose concerning negative events. The cause could be focalism whereby we place too much emphasis on a single event. It is also based on rationalization. We talk ourselves out of both good and bad states.

 For forecasting, we overestimate what our reaction will be to any large positive or negative event. The result is that we can take action too large relative to what we will feel after the fact. We mispredict our pleasure from any event. This places any forecaster on a emotional roller coaster.Take out the emotions and you will be better at forecasting. Put less emotional investment in a forecast and you will feel better, or at least you will not have the emotional highs and lows.

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