There is no looking back

Posted by By at 2 April, at 11 : 44 AM Print

Regret and disappointment are natural emotions, but how you deal with them can have serious impact on your business decisions, writes Wai-Yee Chen.

When asked to review past performances, some gloss over past negative results or decisions and launch straight into the profitable stocks picked or decisions that resulted in wins and gains. Then, there are those who first tell you their “if only” experiences and the decisions they wished they had made.

Do you look back to your investment experiences with positive emotions or regret? Even the most optimistic and extraverted of us suffer from tinges or surges of regret at times, no matter how brief.

It’s normal to regret

Regret and being disappointed are common emotions. It’s like joy versus sadness and euphoria versus regret. It’s a sense of letdown. According to psychologists, there is certain personality make-up that regrets more than others and tends to look back to past negative experiences more often.

Based on the Big Five Personality Factors (a personality assessment inventory commonly used in experiments), those who have a high dose of Neuroticism tend to look back to past experiences with regret. Neuroticism is a term used in Big Five to describe one who has a tendency for negative emotionality, are tensed, anxious and pessimistic.

Regret is counterproductive and in investing, may cause you to miss out on opportunities, act impulsively or take an action that you otherwise would not have, to avoid regret.

You may have experienced one of these situations. Keeping a stock on your watch list, but never did jump in to buy. It may have been a lack of courage, procrastination or just waiting, for something. One day, something did happen and you found this stock in your watch list jumped 20% in a day. “Why didn’t I do anything?”

Or you have been looking to buy your first home. After attending many inspections and auctions, you have yet to be successful after many occasions. Then the Reserve Bank lowered interest rates again and this time it finally gave a spur to the property market. Prices started to pick up. You missed out on buying your first home at the bottom of the cycle prices. You chastised yourself for not being more aggressive during auctions. “Why didn’t I bid higher?”

Why do we regret?

Research tells us that our brain plays a major role in how we feel. Our present experience is conditioned by the past. Some are remembered more than others. Some are more vivid than others, particularly those that have caused us emotional pain, embarrassment and loss. These episodic experiences are stored as long-term memories in our brain, specifically, in the hippocampus which is the memory bank of our emotional mid-brain. The more emotional we felt, the more we blamed ourselves for the loss, the lost opportunity or the wrong decision made, the more we will remember these bad memories and all the more they are retrieved when we are next faced with a similar decision.

Our memory bank also works closely with another colleague, the amygdala, which is our automatic response system, also in our mid brain. The amygdala is made to protect us from harm and threat. Just like how you would remove your hand without thinking from a burning stove, incited by the sensation of heat, the amygdala’s activation when a threat alerts you to retreat from a potentially harmful emotional decision. It’s automatic, even before conscious thinking was engaged. Emotional harm – like the sense of fear, sadness and embarrassment – are all threats that the amygdala instinctively tries to protect us from.

The amygdala reacts automatically in one of three ways: freeze, fight or flight. As we recall (our version which may not even be true) the amount of money we have lost buying a losing investment or lost out in not participating in a rising investment, in order to protect us from making a similar regrettable decision, the amygdala causes us to react in one of three ways. Freeze (not acting, doing nothing), fight (do it one more time and hope for the best) or flight (go the other way). Though the intention is to protect us from more harm, it can compound with more regrets.

What’s more, there is a certain personality type that is more susceptible to the works of the amygdala. Those who have a higher dose of Neuroticism are said to be more sensitive to the amygdala, which is activated more easily and gets into an overly protective mode even with small triggers.

It’s not the regret, it’s what we do with it

As this is one emotion that pervades us all, at one time or another at varying degrees, then it’s inevitable we all need to learn how to deal with it.

1. Break the circuit

Breaking the neural circuit is one key mental strategy. As this visceral emotional fear of past losses, lost opportunities and wrong decisions overtake us, stress hormones flood our brain. The protective amygdala is in overdrive and the hippocampus is working hard at retrieving and pumping out old episodes of similar stories of past regrets. Making decisions under such emotional state can only blur our judgement.

What do we do? How can we break the circuit of this emotional neural network in our mid-brain?

Stop. Pause.

That simple. Consciously stopping, stops us from inaction (freezing) due to regret and the pause prevents us from jumping to the other extreme (flight) and hence risk making an impulsive decision, just to be released from the overwhelming emotion (flight).

How do we stop? Use the other side of our brain, the cognitive one this time. This is the front of our brain which is more evolved with executive capabilities. It overwrites emotionally driven decisions with considered solutions. What it needs is time. Our cognitive brain takes the time, even if it’s a few seconds to ruminate, going back to previous precedents and analysing before deciding or making sense of how we feel.

Stop. Break the circuit to unproductive automatic emotional responses.

2. Change the story

There is a permanent remedy to regret – don’t store them as memories in the first place. Then they will not be recalled and we will not remember! (Though I can see nature’s rational in keeping some of these regrets as lessons for future references, but once they are learnt, discard.)

These old memories that are regularly retrieved by the hippocampus, if not discarded, will be strengthened by their neural synapses each time they are retrieved. The more they are recalled, the more similar experiences are linked to these memories and the quicker our brain associates them. The more their neural synapses fire together, the more they become hardwired. Stock price rallied: “I often miss out.” Stock price tank: “I often don’t sell quick enough.” These become stories you tell yourself and over time they will actually happen as you tell yourself. Your brain has hardwired these stories…

Excerpted from an article originally published in the April/May 2014 issue of Think & Grow Rich Inc. magazine. If you are a subscriber to Think & Grow Rich Inc. magazine, you will receive this article in your April/May 2014 issue of TGR. If you are not a subscriber, click here to subscribe. 


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