Recency Bias - by Shane Borrowman
December 18, 2014
Posted By: Shaunescy
BY SHANE BORROWMAN
My eyes glaze over when certain people begin to explain complicated things to me: the guidance counselor at the local elementary school, who has a really odd and restrictive definition of “bullying”; my insurance agent, who never shows his aggravation as I ask, again and again, to have my various policies clarified; my accountant in Deer Lodge, who has handled my taxes for decades and knows I can’t be counted on to provide accurate numbers if any triple-digit subtraction is involved; my neighbor, who also handles my retirement account and has at least managed to make clear how a Roth IRA is different from a traditional IRA. Of course, that took him three years of patiently saying the same thing over and over. All I can say in my own defense in any of these instances—and there are many others—is that I’m not being deliberately obtuse. There are some concepts that just bounce right off my forehead.
When it comes to investing, though, I follow a simple, two-part strategy that keeps me focused. For one thing, I try to invest only in vice and sin. Presented with a range of investment options, I will always shoot for the bottom: alcohol, tobacco, pornography. To that tried-and-true list I’ve added other addictions, like oil-guzzling cars and gun manufacturing. The Internet took a lot of the easy money out of the porn industry…but it’s still a morally questionable yet sound investment. Just ask the manager of a hotel how much money she brings in based on pay-per-view adult fare; if she’s honest, then you’ll be shocked.
Additionally, I rarely read my quarterly statements, and I never, ever go out of my way to hear what the stock market’s closing number was on a given day. That’s information I just have no reason to possess.
By following this general approach to portfolio building, I avoid falling prey to recency bias (a term that Word assures me is misspelled, but what does Word know about investing?). “Recency bias” refers to the natural human tendency to look at current situations and then project them into the future. It’s the reason my broker spends half of every day on the phone, assuring his other clients that yesterday’s single-digit drop in the Dow isn’t cause for financial panic.
But I know I’m playing the long game with my money. That’s no guarantee of success, but it does prevent a lot of anxiety and sleepless nights. After all, while cigarette sales have steadily declined in the health-conscious US, they’ve steadily risen in Europe and Asia. As more and more of the Millenials have come of age, alcohol sales, especially micro-beer and wine, have gone through the roof. As porn has disappeared from the shelves of many bookstores and other printed-word distribution points, the privacy of online access has caused the marketplace’s size to explode.
So I worry about my money, on a month-to-month, household budget sort of level, but I never worry about my retirement. No matter what the stock exchange shows across any quarter, I do not fall prey to recency bias.
That’s not what happens to me as a parent, however.
Over the summer, for example, each of my twins went to camp alone for a week. Sam did great, just as she has in previous years. I worried—because she was going to camp with girls who were all two or three years older than her—but my worry was unfounded, and I knew it. Sam’s never had trouble making friends and fitting in, particularly because she’s such a dedicated athlete, comfortable playing soccer, basketball, and football, no matter the size of her opponents. She’s tough. Much tougher than I was at her age. When she fell—playing football at recess a year ago—and shattered one of her front teeth, she barely even cried, and she went back to school within a couple hours (straight from the dentist’s office). If that happened to me—even now—I’d likely still feel sorry for myself.
John’s tough, too, although his toughness has a different source. He plays all the same sports that his friends play, but his heart isn’t in them. Instead, he’s a gamer. He knows everything about modern video games and is good at all of them…usually from the instant he first fires up the Xbox One. What I manage to do in months, he manages in hours. He bonds with his peers because games, now more than ever before, are mainstream. When I was growing up in the 1970s and 1980s, gaming had a weird nerd-taint on it. So I really had no cause to worry about John when he went to camp.
Except John called home the first night he was there. He didn’t ask to come home, and he didn’t sound upset. He was just touching base with us (more with his mother than with me, naturally).
That phone call set me to worrying nonstop for a week. The fact that I didn’t have any other evidence of a problem only magnified my concern (rather than lessening it, which would have made more sense). I fretted. I debated calling to check on him, although thankfully I didn’t follow through on this embarrassing bit of idiocy. I fell into the trap of recency bias, convincing myself that because he might have been lonely the first night, John was going to be lonely the entire time he was at camp. He wouldn’t make any friends, and he wouldn’t have any fun. He’d hate us for making him stay there the whole time. Because he was lonely, he wouldn’t make any new friends; because he didn’t have any friends, he’d be bullied and ostracized. He’d…etc.
None of it was rational, but I didn’t let that stop me. When we did finally go pick him up, John didn’t even remember calling home until we asked about his motivations.
This sort of thing happens to me constantly, happens to me every time one of the kids has a problem:
I worry that whatever is happening in this moment is, somehow, going to be the situation forever. Both kids are moving into that odd sort of pre-teen period where their attitude grows faster than their bodies (although not by much). When I ask them to do things—fold laundry, take out the garbage, whatever—they sigh, drag their feet, roll their eyes. I shudder. I take deep breaths. I raise my voice and threaten retaliatory loss of privileges. I know on every level that I’m overreacting, but I do it anyway, and I do it again and again.
They behave the way they do because they’re kids, and they’re growing up. I don’t have that excuse, not when I know that there’s no logic guiding my thinking, which metaphorically parallels the beautiful foolishness voiced by Lieutenant General John DeWitt when, in the wake of the Japanese attack on Pearl Harbor, he justified the internment of American citizens of Japanese descent: Asked how interning these citizens could logically prevent espionage and sabotage, neither of which had occurred prior to the internment, DeWitt argued that the very lack of suspicious behavior was itself suspicious; for these American citizens, not doing things to hurt America became an ironclad reason for them to be imprisoned and thus prevented from doing things to harm America. DeWitt was a fool, but he was only one of many fools falling victim to recency bias. Projected into the future, the events of December 7, 1941, colored any and every possible situation involving Japanese immigrants, including situations that never manifested in any form.
History judges DeWitt and others like him as it should. Recency bias can be blinding, as many other historical—and modern—actions and reactions can attest.
I avoid recency bias in less emotionally charged situations, such as when I’m trusting my Edward Jones neighbor to handle my finances with only minimal oversight.
As a parent, I fail every time, and it’s an emotional killer. Rather than putting events into the proper perspective, everything is blown out of proportion. So when my son back talks in response to an order that he put his folded clothing away, my mind projects a lifetime of back talk, probably one that lands the kid in prison. When Sam throws a tantrum over being forced to wash her hair, I project a lifetime of slovenly self-care, a lifetime that never includes invites to the prom or meaningful friendships…except possibly with other people who stink.
It’s the worst kind of foolishness. And I do it even though there’s no proof of its rationality, even though I know better.
With Love, Dad
Shane Borrowman is a native of Anaconda, father of twins, and professor of English at The University of Montana Western. He has published on a wide range of topics, including the development of boxing in Renaissance England, medieval Arabic philosophy, and American zombie films. He is editor or co-editor of four writing textbooks and six collections of original scholarship. Visit http://www.shaneborrowman.com , home of Shane's blog, Kairotic Palaver.