One of the character traits that is shared by many high-achieving investors is self-awareness. Knowing who you are – your preferences, tendencies, biases, and beliefs – gives investors who possess this skill a noticeable advantage over those who are less self-aware.
For example, if I know that I have a tendency to sell a winning position too quickly because I want to avoid the regret that I would feel if the position later turned into a loser, I can benefit from knowing this about myself. The next time I have that feeling – fear of regret – I can slow down, take a breath, and ask myself whether selling the position is really the best option right now. More often than not the answer will be no. An investor who doesn’t have this skill will give in to emotion every time, regardless of whether the sell decision is rational.
Fear of regret is a powerful emotion for investors, but it’s far from the only one that can cause problems. A study by researchers at Ohio State University uncovered 15 fundamental desires and values that guide our behavior. See the full list below. (I highlight the ones that are the most relevant to investing.)
Here are some highlights from the study.
“Nearly everything important a human being wants can be reduced to one or more of these 15 core desires, most of which have a genetic basis.”
“These desires are what guide our actions. In a sense, we are studying the meaning of life.”
“But our results show that when it comes to values and desires, one size does not fit all. There does not seem to be any fixed hierarchy of values true of all people.”
In the study, “People were asked how much they agreed or disagreed with statements such as “I love learning new skills” “I must avoid pain” and “I would rather lose my life than lose my honor.” After testing more than 2,500 people, the researchers used a mathematical technique called factor analysis that grouped the responses into 15 fundamental desires and values.
At least 12 of the 15 fundamental desires seem to have a genetic basis, according to Steven Reiss, co-author of the study and a professor of psychology and psychiatry at Ohio State University.
“Most of these desires are similar to those seen in animals, and seem to have some survival value,” Reiss said. “This indicates they are genetic in origin.”
Based on this work, the researchers have developed a new test, called the Reiss Profiles, that can measure individual differences in these 15 desires and goals. “This is the first psychological test designed to profile what it is that a person intrinsically desires,” Reiss said. Testing has confirmed that people show a wide variety of responses to the various desires, Reiss said.
It’s the same for every desire: Some people are pursuing achievement and some people are not. Some people put a great deal of importance on family, and others don’t,” Reiss said.
“Understanding how important these fundamental desires are to individuals can explain a lot about how people act.”
15 Fundamental Human Desires and Values
- Curiosity: the desire to learn
- Food: the desire to eat
- Honor (morality): the desire to behave in accordance with code of conduct
- Rejection: the fear of social rejection
- Sex: the desire for sexual behavior and fantasies
- Physical exercise: the desire for physical activity
- Order: the desire for a certain amount of organization in daily life
- Independence: the desire to make my own decisions
- Vengeance: the desire to retaliate when offended
- Social Contact: the desire to be in the company of others
- Family: the desire to spend time with own family
- Social Prestige: the desire for prestige and positive attention
- Aversive Sensations: the aversion to pain and anxiety
- Citizenship: the desire for public service and social justice
- Power: the desire to influence people
Contact: Steven Reiss, (614) 292-2390; Reiss.7@osu.edu
Written by Jeff Grabmeier, (614) 292-8457; Grabmeier.1@osu.edu
Read the full review by Jeff Grabmeier here.