The first of those quirks leads to denial. It’s why Sir James Crosby sacked Paul Moore rather than accept his valid critique of the bank, why Joseph Stalin ordered Peter Palchinsky to be killed for his correct analysis of the great Soviet engineering projects, and why Donald Rumsfeld forbade his senior general to use the accurate word “insurgency.” It seems to be the hardest thing in the world to admit that we have made a mistake and to try to put it right....
The second trap our minds set for us is that we chase our losses in an attempt to make them go away. [Editor's note. Anyone who has gambled in a casino knows of this pitfall.] Recall Frank, the luckless contestant on Deal or no Deal: having discarded the box containing half a million euros, he proceeded to reject ever more reasonable offers from the Banker until he ended up with next to nothing. All because, to quote the psychologists Kahneman and Tversky, he had not “made peace with his losses.”...
The final danger Tharp avoided is one we might call “hedonic editing,” borrowing a term coined by Richard Thaler, the behavioral economist behind the book Nudge. While denial is the process of refusing to acknowledge a mistake, and loss-chasing is the process of causing more damage while trying to hastily erase the mistake, hedonic editing is a subtler process of convincing ourselves that the mistake doesn’t matter.
Related posts:
Tim Harford challenges us to "make good mistakes."
Twyla Tharp on the usefulness of failure
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