Something or nothing – The human dislike of simply doing nothing can work against investors


Kevin Murphy

Kevin Murphy

Fund Manager, Equity Value

“All man’s miseries derive from being unable to sit quietly in a room alone.” So observed the 17th Century philosopher and mathematician Blaise Pascal but even he might have been surprised by the results of an experiment undertaken by a team of psychologists led by Professor Timothy Wilson of the University of Virginia.

The scientists concluded that “most people are just not comfortable in their own heads” and “would rather be doing something – possibly even hurting themselves – than doing nothing or sitting alone with their thoughts”. They first demonstrated this by asking people to sit in an empty room for between six and 15 minutes and just think – an experience the majority confessed to finding unpleasant.

Wilson and his team then upped the ante by asking their guinea-pigs if they would prefer to avoid an electric shock. Understandably enough, everybody said they would and then, after receiving a sample of the shock, a number said they would even pay money – on average about $5 (£3.30) – to avoid repeating the experience. So can you guess what the scientists did next?

That’s right. They put these people alone in an empty room – empty that is, apart from a buzzer that would administer the aforementioned electric shock – and again asked them to sit there for 15 minutes and just think. It turns out one-quarter of the women in the experiment found that so hard to do, they pressed the buzzer and received a shock at least once.

But that proportion palls in comparison with the two-thirds of men who chose to shock themselves at least once rather than do nothing – including someone who apparently pressed the buzzer no fewer than 190 times in his 15 minutes. (In this context, the scientific term for such a person is an ‘outlier’ although, like us, you may be able to come up with a few non-scientific terms as well.)

So does this have any relevance to investing? How could you ever doubt it? Most investors will be aware that, whenever they do something in the stockmarket, they will incur fees – stamp duty, trading commissions, bid/offer spreads, perhaps capital gains tax and so on. In other words, arguably the only certainty in investment is that, every time you make a trade, it involves a small step backwards.

Yet often, like the people in the buzzer experiment, investors “would rather be doing something – possibly even hurting themselves – than doing nothing or sitting alone with their thoughts” – and never more so than at this time of year, when the thoughts people do have can naturally turn to worthy resolutions, clean slates, brave new worlds and so forth.

But why would any investment strategy that was appropriate at 11:59pm on 31 December suddenly stop being so a minute or two later? If you have yet to make a New Year’s resolution, The Value Perspective would urge you to reconsider the potential upside of doing nothing – or at the very least to read one of our articles, such as Active service, on the benefits of pursuing a value investing strategy in combination with a patient, long-term outlook of at least three or five years.


Kevin Murphy

Kevin Murphy

Fund Manager, Equity Value

I joined Schroders in 2000 as an equity analyst with a focus on construction and building materials.  In 2006, Nick Kirrage and I took over management of a fund that seeks to identify and exploit deeply out of favour investment opportunities. In 2010, Nick and I also took over management of the team's flagship UK value fund seeking to offer income and capital growth.

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