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The illusion of control

filed under: /journal

As you might guess, financial planning is something that lots of people at the Google care about, which is to say that it is something that lots of people at the Google argue about. I am an Efficient Market Theory believer myself, because its guiding principle of "nobody knows anything, and anybody that claims to know anything is trying to rip you off" fits nicely with my established worldview. So I was looking in the Burton Malkiel book for the names of some index ETFs, and happened to read something that I found hilarious:

Psychologists have also identified a tendency for individuals to be fooled by an illusion that they have some control over situations where, in fact, none exists. In one study, subjects were seated in front of a computer screen divided in two by a horizontal line, with a ball fluctuating randomly between the two halves. The people were given a device to press to move the ball upward, but they were warned that random shocks would also influence the ball so that they did not have complete control. Subjects were then asked to play a game with the object of keeping the ball in the upper half of the screen as long as possible. In one set of experiments, the device was not even attached, so the players had absolutely no control over the movements of the ball. Nevertheless, when students were questioned after a period of playing the game, they were convinced that they had a good deal of control over the movement of the ball. (The only groups that were not deluded by the illusion of control were those who had been clinically diagnosed with depression.)

(The emphasis is mine.)

21 Aug 2007 00:56 PT - persistent link - trackback - 2 comments

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