You may have seen someone react abruptly to situations where you thought they would react in an entirely different way. But you may be suffering from the cognitive bias of the hot-cold empathy gap
What is the Hot-Cold Empathy Gap?
It is difficult for humans to predict how they will behave in the future, in a different emotional state than they are currently.
A hot-cold empathy gap is a cognitive bias in which people underestimate the influences of visceral impulses on their own attitudes, preferences, and behaviors.
The bottom line is that when we are in a calm and comfortable state, it is difficult to predict how we will be in a stressful situation and therefore difficult to predict how we will behave.
Hot-cold empathy gaps can be analyzed according to their direction:
Hot-to-cold
People under the influence of visceral factors (warm state) do not fully understand how much their behavior and preferences are being driven by their current state; rather, they think that these short-term goals reflect their general, long-term preferences.
Cold-to-hot
People in a cold state have difficulty imagining themselves in hot states, thus minimizing the motivational force of visceral impulses. This leads to unpreparedness when visceral forces inevitably arise.
What is the importance of investments?
As you can see, it is difficult to predict our behavior when we are in another state.
We think that when we see a crisis with big drops, we will behave calmly and we will “just buy”.
But unfortunately, it will not be so for most of us. Many will sell, due to being in a state of high emotion.
Being aware of the existence of this behavioral bias will help you to know that emotions can impair your logical and rational judgment.
In times of heat, the best choice is often to do nothing. Waiting for you to get cold to endorse decisions in a more rational way.
So stay calm and wait for your hot side to cool down before making any long-term decisions.
Happy investing!
Photo by Gilberte Dimicolis on Flicker