P is for Priming

Priming is a psychological sleight of hand, a method of the brain preparing itself for what is about to happen. It's a bit like predictive text, very useful when it works but utterly awful when it goes wellythrowing (*). And, if you know what you're doing, you can prime people to get them to make the decision you prefer. Great for influencers, not so good for the influenced.

Example

John Bargh and colleagues carried out a study in which they got people to solve scrambled sentences in a laboratory. The actual test was not about their puzzle solving speed under different conditions, but how quickly they walked to the exit of the facility after the test. Some people were primed with words associated with being old, some people weren't. The participants primed to feel elderly were significantly slower to shuffle to the front door. Another study on financial professionals showed that if you prime them by exposing them to information that encourages risk taking they will start taking more risky investing decisions.

Priming is unconscious and therefore is very difficult to protect yourself against.

Causes

Priming is probably exactly what it says: in a world in which we're not being continuously manipulated it's very useful to have your brain set to a mode in which it's pre-prepared to make decisions about a specific situation. It's only in our modern environment, full of compliance professionals designed to exploit our every weakness, in which this becomes a problem.

Mitigation

Priming is just about impossible to defend against, because it's unconscious and because, as the earlier example of professional investors suggests, the more you understand about a certain area the easier you are to prime. After all, if you know nothing about investing you won't be much impacted by being primed to invest in risky real-estate stocks. So the more you know the more exposed you are: experience hinders, rather than helps.

About the best we can do is develop an investing framework which we follow each time we make an investing decision. This won't change the impact of the prime but it will force us to baseline our new decision against an existing process. A bit of cognitive dissonance, and a bit of temporal distance, can limit the effects. Never make investing decisions under time pressure and always look for reasons not to invest.

And also: To Boldly Go: Risk and the Prime Directive
Read more: A Liberal Arts Investor's Reading List

The A to Z of Behavioral Bias

(*) Er ... wrong.