It’s a Monday morning, you’ve just settled down with a cup of tea and pick up the newspaper, to be greeted with headlines of tragedy, political squabbles, and impending economic challenges. You turn on the radio, TV or look on the internet, and you’re faced by more doom and gloom. Does that sound familiar? Despite our desire for uplifting stories, bad news appears to dominate. In our personal lives, we’re much more likely to talk about Uncle Bob’s surprise early exit than Aunt Dora clocking up another year of good health.
Why does the grim news seem to grab our attention whilst there is very little space for the good stuff?
There are some good reasons why we are drawn to the bad news:
- Our Evolutionary Wiring. Paying attention to potential threats has been a matter of survival for humans. Our ancestors who quickly noticed and reacted to dangers (like predators or hostile tribes) were more likely to survive and pass on their genes. This evolutionary trait has left modern humans with a brain that’s more sensitive to negative stimuli.
- Negativity Bias. Researchers have identified what’s known as the ‘negativity bias’, which means negative events have a greater impact on our brains than positive ones. This bias means that we learn from negative experiences.
- The Drama and Uncertainty. It’s fair to say that drama and conflict can be captivating. We aren’t kept on the edge of our seats by gradual success!
- The Availability Cascade. This is a self-reinforcing process where a story or idea gets more coverage because it’s perceived as important, and it’s perceived as important because it gets more coverage. The media tends to prioritize negative news, leading to a cycle where these stories are shared and discussed more frequently.
The world of retirement planning is no different. The steady increase in life expectancy only seems to hit the headlines, if it results in financial difficulties, like the collapse of a pension scheme. And we regularly talk about stockmarket values scaling a “wall of worry” – as share prices rise, I often look in vain for stories about investors having millions of Pounds wiped on to their pensions.
However, it’s not all doom and gloom. The good news is that by understanding our innate predispositions, we can be more discerning consumers of news, and make better choices – particularly in respect of retirement plans. Knowing that we are drawn to bad news can help us to assess its real impact.
For me, one of the standout stories of the 20th Century was the way that life at home was transformed by domestic appliances. For example, at the start of the Century, laundry was an arduous, all-day affair, often involving manual scrubbing, wringing, and line drying. With the introduction of the washing machine, a task that once consumed hours was reduced to a matter of minutes, giving people (women, mostly!) more time – for leisure or work. Similarly, innovations like vacuum cleaners, dishwashers, and microwave ovens further streamlined household tasks. This led to a profound shift in the landscape of home life, as people gained greater freedom and flexibility in their daily routines. I don’t normally try to bore you with my blog, but these dull changes were much more important than the Cuban Missile Crisis!
Knowing that we are drawn to bad news can help us to stop and reassess our conclusions about what is going on. Should COVID be remembered for the obvious bad news, or for the innovations which arose from the crisis – both in medicine and logistics?
Just having a knowledge of our biases can be helpful. I often say that the most important characteristic of successful investors is patience. They know that the undramatic, gradual rise in share prices is much more relevant than the headline grabbing predictions of stockmarket oblivion.
Philip Wise | firstname.lastname@example.org
Managing Director and Chartered Financial Planner