It was the end of the appraisal season & Suresh didn’t have a good appraisal this year. He thought of catching up with his dear friend Ramesh for a cup of coffee and consolations! Ramesh arrives merrily into the coffee shop. He announces immediately on arrival that he had got a promotion, as he had worked hard and achieved his targets.
Suresh congratulates him and then turns melancholic. Ramesh worriedly asks the reason behind the same. Suresh tells him about he not getting the promotion due to non-achievement of his targets. He tells Ramesh he had worked hard but the tough market conditions and his boss’s perception were the roadblocks to his promotion!
This story is a crude illustration of the Self-serving bias. Let us understand more about the same in this edition of Money Wisdom.
The Self-serving bias turns us into playing victor or victim…conveniently! Under the influence of the Self-serving bias, we tend to attribute success to ourselves and the failures to external factors, including bad luck! All patches of failure in our lives are justified with the influence of the ‘big bad world’ in play!
This bias also plays havoc on investment decisions. The credit of successful investment decisions are taken upon ourselves while investment failures or unpleasant experiences are blamed on Governments, Central Banks, companies themselves and finally even the band of irrational investors!
So how can we avoid being a victim of this Bias, especially in Financial Markets :
Every ‘unfavourable’ result obtained in your financial and non-financial spheres of life should be observed and analysed honestly. It should not elicit a default response of blaming externalities. Do an objective assessment of yourself to find flaws in character or decision making in that moment. Be self-critical and don’t be lenient!
Admittance to mistakes done in the past can be a path to success in the future. To sum up, never think that we are only responsible for the ‘good’ while the world is responsible for the ‘bad’!
Let’s watch this video where Rolf Dobelli explains us about this bias and how not to be a victim of the same.
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