Gamblers Mindset: Exploring the Hidden Desire for Defeat

The Gamblers Mindset: Exploring the Secret Desire to Lose Syndrome

Updated May 24, 2024

Introduction: The Investor’s Paradox: Unraveling the Hidden Desire for Defeat

Have you ever noticed how we’re often more drawn to tales of disaster than stories of success? This peculiar attraction to negativity is a hurdle that many investors must overcome to succeed in the markets. This mindset, often called the ‘secret desire to lose syndrome,’ can harm your investment strategy. Instead of focusing on uncontrollable factors, it’s crucial to concentrate on what’s within your reach. Market crashes, for instance, can be seen as opportunities or catastrophic losses, depending on your perspective.

Stock market crashes can be viewed as opportunities or monumental losses; it all comes down to the angle of observation. As a rule, individuals seem far more inclined to listen to and act on negative information rather than on positive info. Don’t believe me. Allow me to illustrate this point to you.

The Investor’s Dilemma: A Tale of Four Glasses

Imagine there are four glasses of water on a table. Someone mentions that one of the glasses contains water from a jug with a dead fly. Despite not knowing this person, most people would avoid the glasses, even if they were extremely thirsty. Few would attempt to verify the accuracy of this information.

Suppose someone else claims that one of those glasses holds water from the purest spring in the Swiss Alps. It’s unlikely that anyone would rush to drink all four glasses in hopes of finding the purest water.

This scenario extends to financial markets as well. When doom-and-gloom predictions about the financial world surface, we’re all ears. But when someone suggests everything is fine, we’re often sceptical or only half-listening.

Market Crash Myths: Decoding the Gamblers Mindset

Market crashes are a prime example of this phenomenon. When market gurus predict a crash, panic ensues, and investors start selling their quality shares. Conversely, they’re often ignored if someone suggests that the market will rise. However, this can also work the other way around, depending on the current sentiment and perception of the crowds.

Life is inherently unpredictable and unfair. It’s what you make of it that counts. Instead of worrying about things you can’t control, look for ways to leverage these situations. Identify the long-term trend and follow it. Regardless of market manipulation, there’s always a trend. If you stick with it, you have nothing to worry about.

Life was, is, and will never be fair. Life is what you make of it. So don’t fret about things you cannot control; look for ways to take advantage of these situations.

Investing and the Desire for Defeat: Unmasking the Hidden Urge

So far, we’ve explored the paradoxes of investing. We’ll delve into the ‘secret programmed desire to lose Syndrome.’ From birth, we’re bombarded with information, much of which is a mix of cultural and religious values and societal norms. Unfortunately, much of this information, particularly regarding science and logic, is biased and untested. We’re often told to believe things based on tradition or because “that’s how things have always been.”

As we move forward, we must question these ingrained beliefs and strive for a mindset that embraces positivity and opportunity. By doing so, we can overcome the ‘secret desire to lose syndrome’ and set ourselves up for success in investing.

The Gamblers Mindset in Action: Real Examples

To understand the gambler’s mindset, consider the phenomenon of “chasing losses.” This occurs when gamblers, after losing money, continue to gamble to win back their losses. For instance, a gambler might lose a significant amount of money on a slot machine but continue to play, believing that a win is just around the corner. This behaviour is driven by the same dopamine release that occurs when winning, creating a cycle of addiction and loss. Another example is the “near-miss” effect, where a gambler almost wins but falls short. This near-win can trigger the same brain areas as an actual win, increasing the desire to continue gambling.

For example, if a slot machine shows two out of three symbols needed for a jackpot, the gambler will likely keep playing, convinced that a win is imminent. In the stock market, this mindset manifests in several ways. Consider the practice of “doubling down” on a losing position. Seeing their stocks plummet, an investor might buy more shares, convinced that a rebound is on the horizon. The initial logic is that lowering the average share cost will make future gains more substantial. However, this often leads to greater losses if the stock continues to decline, mirroring the gambler’s chase of losses. Another example is “overtrading,” where investors frequently buy and sell stocks in reaction to short-term market fluctuations.

This behaviour resembles a gambler continually placing bets, hoping to hit the jackpot. Overtrading incurs higher transaction costs and increases the risk of making poorly timed investment decisions driven by emotion rather than rational analysis. The “near-miss” effect is also evident in investing.

Imagine an investor who narrowly avoids a significant market crash by selling just in time. The relief and perceived skill can encourage them to take more significant risks in the future, believing they have a unique ability to time the market. This overconfidence often leads to reckless decisions and substantial losses when their luck runs out.

A real-world example can be seen during the dot-com bubble of the late 1990s. Many investors, seeing the meteoric rise of tech stocks, invested heavily, convinced that the trend would continue indefinitely. When the bubble burst, many doubled down instead of cutting their losses, buying more now-cheap stocks, believing they would bounce back. This behaviour led to significant financial ruin for many, as the market took years to recover.

The Gambler Mindset: Succumbing to the Herd Mentality of Loss

As time goes by, we are told how we should behave, how we should eat, what we should eat, who our friends should be, what type of career to aim for, what is socially acceptable and what is not, around what age we should look to settle down and what type of woman or man would we should choose to settle down with. Individuals are also taught that working for the group or community is the right thing to do and that being selfish is very bad.

We are taught to dedicate our lives to one person and promise to do this, even though we struggle to keep our New Year’s resolutions. People are not told that instead of saying I promise, we should say I will try my very best, but being weak and human, I might fail along the line. In most cases, this promise is guaranteed to achieve the exact opposite result, and if one looks at the statistics, the evidence is overwhelmingly in favour of this. It’s this fear of trying to live up to an ideal that most of us know that we cannot live up to that ends up causing the relationship to end.

Think out of the Box

Thinking outside the box is valuable in various aspects of life, including relationships and personal growth. By taking a different perspective and exploring unconventional ideas, individuals can often discover new solutions, insights, and opportunities. Let’s delve deeper into the significance of thinking outside the box and how it can contribute to personal development and understanding.

In relationships, thinking outside the box entails approaching them with a mindset of self-fulfillment rather than seeking happiness solely through another person. When individuals are content and fulfilled within themselves, they bring a sense of completeness and authenticity to their relationships. Instead of relying on their partner for happiness, they enhance their well-being and contribute positively to the relationship dynamics.

Thinking out of the box encourages individuals to examine situations from multiple angles rather than being limited to a single perspective. This broadens their understanding and enables them to consider alternative possibilities and solutions. By challenging conventional thinking and exploring different viewpoints, individuals can overcome biases, think creatively, and find innovative approaches to problem-solving.

It is crucial to understand that thinking outside the box does not necessarily mean that one has all the answers or that one’s viewpoint is always correct. Instead, it is a humble recognition that one’s opinions and ideas are liable to evolve and change and may be faulty. Embracing this attitude encourages open-mindedness, continuous learning, and a willingness to acknowledge and rectify errors when proven wrong.

Life is a quest for knowledge, and thinking out of the box allows individuals to expand their horizons, challenge assumptions, and gain fresh insights. By approaching old data with new eyes, individuals can uncover hidden patterns, discover more profound meanings, and make better-informed decisions.