Friday, 24 December 2010

Reversing Polarity

Although the research was done on losses in the more traditional financial markets, some of the findings of a study into rumination (definition: contemplation or reflection, which may become persistent and recurrent worrying or brooding) apply very well to the less traditional financial markets, i.e. betting exchanges. Something to consider when the inevitable losing run comes along.

Researchers have found that there are two kinds of rumination -- analytical and experiential. The former can actually be constructive, says Sonja Lyubomirsky, psychology professor at University of California, Riverside, and author of 'The How of Happiness'.

"Rumination can help you find out what's important", she notes. "When your goals are not being met, or not progressing as fast as you expect, that leads to self-focus -- you ask why so you can address it. You dwell on things that aren't going well in your job; maybe a colleague makes more money and it's unfair. But it might lead you to do something about it, like ask for a raise or change something you're doing at work."

The other kind, experiential rumination, can exacerbate depression, impair problem-solving, and erode social support, as friends and family grow weary of constant negativity. It's most common in people who are already depressed.

"What we've found is, if we induce people to ruminate and they're already a little distressed, it makes them feel even more overwhelmed and pessimistic," Lyubomirsky explains. "[Experiential] rumination is the opposite of problem solving -- instead of taking it step by step and going from A to B to C, it's like going in circles."

These ruminators are more self-critical, more likely to blame themselves for their current problems and express reduced self-confidence and optimism in overcoming those issues, researchers found. When presented with hypothetical negative life events, they choose gloomier and more distorted interpretations, minimizing their successes and over-generalizing from their failures.
To me, the above just seems a more academic way of saying what I said a few posts ago. My acronym is ALMO™.

Accept the loss. Learn from the loss. Move On from the loss.

While some losses are more painful than others, it's my experience that the pain isn't directly related to the size of the loss, but more to a subjective opinion of how good the the bet value was. The fact that one should never be betting with money that you can't afford to lose is a given, so the amount should always be withing our comfort level. Value bets don't always win though. We all know that, and a losing bet that was value is acceptable. What isn't so readily acceptable are the 'ill-considered' (or just plain 'bone'head') plays, where the bet was never value, but just a gamble. Those are the losses to Accept, Learn from and then Move On from.

1 comment:

Handy Andy said...

Hi Cassini,

Wishing you an very merry Christmas and a happy and healthy New Year.