To Dump Bad Investments, First Focus On Your Goals
Getting up the nerve to cut your losses can be hard to do, researchers note
WEDNESDAY, Feb. 9, 2011 (HealthDay News) -- People who focus on their hopes and aspirations may be less likely to cling to bad investments, a new study suggests.
Volunteers were first given the choice to write about either their personal duties and obligations or their personal hopes and aspirations.
The participants were then told to imagine they were an aviation company president who had committed $10 million to developing a special kind of aircraft. But after spending $9 million and with the project nearly completed, another company announced it had made a better, cheaper plane. Study participants were asked if they would spend the last $1 million or cancel the project.
People who wrote about their hopes and aspirations were more likely to abandon the project. Those who wrote about their duties and obligations felt it was their responsibility to finish the project, thus throwing good money after bad.
The Northwestern University researchers said people who focus on their own hopes think positively about opportunities for growth and were therefore more likely to contemplate what else might be accomplished with the remaining $1 million.
People who focus on duties and obligations feel more anxious and therefore thought about how abandoning the project would amount to accepting complete failure.
The study was published in the January issue of Psychological Science.
"At the very least, when things start to go wrong, people should stop and evaluate the costs and benefits of going forward," study author Daniel C. Molden, an assistant professor of social psychology at Northwestern University, said in a journal news release. "Instead, many people think, 'I've already committed so much to this, I can't quit now.'"
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