Are you suffering from TMI or is it just me? In modern parlance, TMI stands for “too much information.” When I’m talking with my teen-aged daughter and she suddenly moans, “TMI, mom, TMI,” I know it’s time to get to my point.
These days, many of us are feeling like we live in a general state of TMI. There is just too much information coming from too many sources— computers, our devices, radio, TV— there is even a little screen that talks to me while I’m pumping gas!
Clients are starting to tell me they’re taking intentional breaks from cable news and their computers in order to limit their exposure to what seems like an endless stream of information. When we suffer from information overload, we are typically aware of it and can take steps to manage it.
That is not the case when it comes to information avoidance.
According to a paper published by researchers at Carnegie Mellon University, “Information avoidance” is a behavioral finance concept that refers to the all-too-human tendency to ignore information that is perceived as threatening to one’s happiness or well-being, even if it can potentially improve decision-making.
“The standard account of information in economics is that people should seek out information that will aid in decision-making, should never actively avoid information, and should dispassionately update their views when they encounter new valid information,” says George Loewenstein, a professor of economics and psychology at Carnegie Mellon University, a leader in the field of behavioral economics, and one of the paper’s authors. “But people often avoid information that could help them to make better decisions if they think the information might be painful to receive.”
Some investors develop a “relationship” with certain companies in which they hold stock. Perhaps they work for the company or were early investors. They want it to do well. They want to protect their investment. They do not want to hear negative information about the company or its prospects. These investors typically don’t realize they have an unconscious aversion to negative information about a favored holding.
Like many of us, you may suffer from information avoidance and not even know it.
As a financial advisor and coach, one of my key responsibilities is to keep a clear head and be objective. Then I can help my clients avoid behavioral traps like information avoidance so they do not unknowingly get in the way of their own success.
If you think you might be harboring some unconscious biases and would like to see if they are standing in the way of your financial success, let’s chat.