Back in the 70s an unfortunate woman was murdered in New York City in front of dozens of witnesses. The killers attacked, left the crime unfinished and returned twice over a thirty minute period before the killing ended. The witnesses observed but not one went to help or even called.
This seems amazing, but is not. The witness response was actually very human and gives us a lesson about the power of context. This lesson can help us learn how to have, keep and enjoy more wealth.
We learned in lessons one and two of this course that to truly succeed in investing and business we need to do what we love. We also learned that to know what we love we have to first know ourselves. (see https://www.garyascott.com/poorinvesting/ and https://www.garyascott.com/poorinvesting/ for lesson one and two). Understanding context and its incredible impact on the way we think and act can help us better understand ourselves as human beings.
For example the context in the New York murder was the number of witnesses that observed. One would think that the more witness's the more help, Wrong! A study found the opposite to be true. The more people there are to witness such an event the lower the percentage that will offer to help. Everyone assumes that someone else will do the heroic deed. The poor murdered woman would have been better off having been attacked in a dark alley with just one witness. The study suggests that the one witness would have been very likely to have helped or called the police!
The point is that most actions we take in our lives are very much dictated by events that are very much out of our control. For example, imagine you are successful and have just won a million dollars in the lottery. You find a wallet with ten dollars inside, You'll do the right thing and turn the wallet in. Right? Probably. The In that context the ten bucks doesn't mean a thing to you. “Who knows that ten bucks might be all that some poor person has”, you'll think..
Now change the context of the situation. Imagine that you are broke, just lost your job and your baby daughter needs an operation to save her life. The medical costs are $100. Now find the wallet, look inside and see a hundred dollar bill. What you'll do and think are likely to be different than before. Are you different? No! Just the context.
This means that events beyond our control can often put us into situations that we don't want nor like. What's worse our reactions to these events are hard to predict because of a very human feature called “Limited Channel Capacity” (LCC).
LCC means that our minds have the ability to discern only six or seven variations of any one thing. This is the limitation of our channels of discrimination. A study on this tested the human ability to discriminate sounds The study showed that if a person is given a range of low sounds they can very accurately discriminate between six or seven low tones. After six or seven choices a person's ability to discriminate is dramatically reduced and confused. The study group could not tell if more tones were higher and or lower.
Then the test was repeated with high tones. Again those tested were very accurate if the range of tones was limited to six or seven. Beyond this number they lost their ability to discriminate accurately.
NOW COMES THE INTERESTING PART.
When the study group was given a series of high and low tones mixed together you would think they could discriminate six or seven high and six or seven low. Not true! The group could still could only handle six or seven tones, even if some were high and others low, before becoming confused.
This means that our capacity to discriminate is limited to just a few factors. This forces us to paint people, events, situations etc. black or white, when reality is infinite shades of grey. For example if we see a wealthy person return a wallet they have found we judge them to be honest. What we really know is that person is honest in that context. We do not possess capacity to imagine and discriminate what that individual would do in a wide variety of situations, so we paint them honest or dishonest. We might also judge a person who needed $100 to save his baby daughter's life as dishonest if they kept a wallet found. That person may have interpreted the wallet as a gift from God to save his daughter, but we would define the answer to that person's prayer as a crime (no wonder the world often seems screwed up).
This means we, as human beings, have a short range of discrimination but live in a universe with a very broad range to discriminate.
So how does this affect our investing and business?
First this knowledge tells us that we may know ourselves, friends and family in our current context, but don't know who we will be or become or what we will do in varying situations. We can't even imagine. For example, how we feel about our investments in a rising stock market may be different than how we feel when markets collapse. Unless we have been through good markets and bad, we must beware of our own understanding of ourselves! Taking it slow in areas where we lack experience makes sense.
This also warns us that we cannot predict very well how markets (which are just collections of individuals) will react. We get a slight blur of infinite shades of possibility at best.
From a business point of view this knowledge helps us understand that business opportunity will shift as economic and social contexts change. For example the morality of U.S. business today is different today U.S. because of the context of our nation's recent leadership. I have written this lesson before the Presidential election, but for distribution after the results. I wonder how much the context of the new President will have in our business?
By understanding the power of context and the limits in our ability to measure our and others reactions to changes in context, we can know ourselves more honestly. This is the first step to Inspired Investing!
Next lesson, we'll look at how delegates gained from the insights of the Dog Whisperer.
Until then, Good investing!