Understanding miswanting for better emotional management in finance
Like and want are two major drivers of human endeavour. Liking has to do with how a thing makes us feel. Wanting quite simply is a prediction of liking something. An event which ends in liking gives us a sense of wah-wah: happiness & contentment. A want on the other hand predicts a state of wah-wah through cognitive and psychological triggers. Hence we want what we think we will end up liking, which in-turn gives us the ‘wah-wah’ we all so deeply crave. The cycle repeats and we can’t have enough of the much coveted wah-wah. We are triggered to believe that when a want turns into a reality, there will be wah-wah. This is not always true, as is shown by a brilliant paper by Gilbert & Wilson titled ‘Miswanting’. A want which upon completion doesn’t lead to liking is a ‘miswant’. Miswanting can be frustrating due to the lack of wah-wah it eventually generates. It is worth exploring miswanting further as minimizing such instances can prove greatly useful.
Let me explain miswanting by a slightly exaggerated example. Let’s say you want NIFTY to reach 12500 by end July 2019 (It is 11800 at the time of writing this). Some would say a 5.6% rise if the NIFTY in 45 days is an unrealistic want. But not you! You are the bull with the sharpest horns. You go long on the index and wait for the markets to zoom. To everyone’s surprise, the markets do rally, and you are one of the few people who got a piece of the action. When the market does reach 12500, you realise that you are on slightly happy. Your expectation was extreme wah-wah, but what you got was meh-meh. Why!? Maybe you didn’t make most of the opportunity by employing only small amount of capital. Or may because when the NIFTY zoomed 5.6%, your most tracked scrip surged 12% in the same time! The joy your brain experienced during the want was not achieved when the event occurred. You have Miswanted!
The above example is one of event success and still an occurrence of Miswanting. The same is doubly true when you can’t realise your wants! So what’s the way out. According to Gilbert & Wilson, our general happiness sometime after an event is influenced by just 2 things a).The event and b).Everything else. If we estimate our happiness only by considering the event, then we are ignoring some of the most powerful determinants of our future wellbeing. It seems that merely considering the emotional impact of an event can lead us to underestimate that impact, simply because we do not also consider impacts of other events as well. It is not possible to consider impacts of other events as they haven’t occurred yet, and the future is unknown, even to you – the bull with the sharpest horns.
So how does an investor or a trader avoid miswanting? The answer is that she simply cannot eliminate it. If she can manage to eliminate miswanting, then she would be able to master her wants, and hence always make her wants to lead to her likes. As uncertainty is a primary driver of desire, absolute certainty would mean there would no longer be wants and likes. We have reached a ‘divide by zero’ point in our argument. But it’s important to accept this concept as the next time you achieve your goals and don’t feel wah-wah, you now have an explanation. The key here is to minimize our Miswants, not completely eliminate them.
Miswanting can be reduced be done by focusing on 2 key things:
a). Mental Conditioning: It has been proven that people overestimate the duration they will grieve the loss of a loved one. In reality we do not grieve for as long – not because we are soulless- but because we are exposed to other events after a loss. Such events help to take our minds off it, and we are able to psychologically cope with the severity of the event better. This ability to psychologically cope can be consciously honed as well. While developing such a skill can come in handy to cope with failure, it is also surprisingly effective in making wants more realistic and aligned with likes. An emotionally stronger mind will take smarter risks, as it’s more in touch with itself and understands it’s likes and dislikes better. In finance terms, this could mean learning patience, taking highly measured risks, checking your portfolio less frequently, taking very select trades, etc. The writer highly recommends taking the Inner Engineering course offer by Isha Foundation. Learning and regularly practicing the process taught by the course has helped the writer greatly to condition his mind, which has yielded dividends (pun alert) in his professional life.
b). Expectation management & Planning: Fast money is a big wah-wah but there seems to be no tried and tested way to achieve it. However, it has been tested that moderate and risk calculated decision making leads to eventual big money in many cases. This means learning discipline every step of the way and minimising chaotic decisions. Break your large want into smaller, time defined goals. Breaking down a goal into a realistically manageable task in the present will create a small want, which will end in a small like. These are better to manage as they are small and short term. A small miswant will not deter you from your large goals. A multitude of small wants can over time fulfil a bigger want, and a massive wah-wah. Spend a few hours a month to plan and re-calibrate your long term wants. And spend an hour a week to plan out your short term want. Once your dreaming is done, get executing!