Just as much as we get a dopamine hit when we eat food, have sex, embark on a new adventure and find acceptance. We experience this same natural drug and feeling when we move from certainty from our initial feeling of uncertainty.
In situations of uncertainty we experience a rush of adrenaline, anxiety, an increase of heart rate, confusion and a racing mind for answers. This too is our bodies physical and an emotional response to a threat i.e. getting us into a state of preparedness and fight or flight for our own survival.
We are all naturally addicted to dopamine. Its function is to both reward us and too keep us alive.
Did you know neuroscientists and researchers have discovered and know can evidence that our brains are determinists?
This means that while sometimes we make decisions consciously more often we make them unconsciously due to our habits, environment, ego and sense of self i.e. we make our choices reactively rather than proactively.
One of my many ongoing activities is to help clients proactively match their comfort and certainty with their investments and expectations, while balancing this with their ever-changing personal circumstances.
I regularly remind them “money flows to where it is most valued” because being humans we value certainty. In money markets certainty has a price. The more certain the return, the lower the expected return.
When it comes to investing this is what bankers, market commentators and economists call “the risk premium” of an investment. i.e. How much more risk are you prepared to expose your investment in order to achieve a higher return?
As investors we experience an adrenaline hit as we buy something and a dopamine hit after we have bought something and we see the value increase i.e. we see our financial position being more certain. A secondary dopamine hit comes from our ability to have predicted something and then have it evidenced back to us that our predictions were correct, resulting in a positive feeling.
Beyond investing, this is also why we feel good after completing a task, passing an exam etc. and provide us an explanation as to why we feel anxious and uncomfortable if we have had poor previous experiences making choices, doing specific tasks or sitting exams.
The paradox of our desire for certainty is its almost simultaneous tension that it creates within us. Meaning that certainty can be both productive and counterproductive to our evolution.
How can more certainty be counterproductive? Because we risk over engineering and creating a life of total certainty for ourselves only to experience boredom, stagnation and decay.
Yes. I like eating peanut butter sandwiches however after about a week of eating peanut butter sandwiches my body and mind is telling me it wants to break out and eat some fish and chips.
Economists also call this “the diminishing rate of return” i.e. the more you have the less you desire to have more.
On the flip side when we have too many choices (e.g. choosing a coffee at Starbucks) we have difficulty deciding and we naturally become more cautious and conservative. The greater number of choices the greater our uncertainty and the less reward we see to be of benefit to us. This is also called analysis paralysis.
Back to certainty. Since the dawn of time we humans have continued to evolve, discover, grow, contribute and increase our value amongst our peers by solving problems and addressing uncertainties.
The by-product of this is that we crave more information. We then internalise and process this information and so doing increase our confidence and courage to move forward in the face of uncertainty.
Certainty moves us from good intention into action and doing so brings into reality our desires and aspirations.
For example. We can evidence through the lens of historical returns investors evidence markets have always recovered and that it is during times of great uncertainty that often the best opportunities (in hindsight) are on offer.
With this information and awareness we often override our present emotional craving for certainty. This action underpins our confidence to participate in these opportunities, rather than remaining a spectator. Our decision to invest also feeds into the good feeling we get when our predictions turn out to be correct.
Certainty, certainly deeply shapes our behaviour. The more certain we are, the greater our confidence and pride becomes. The quicker we make decisions, the longer and more effort we put into completing our task even in the face of adversity and the more confidence we place in others.
Certainty gives me the confidence to buy a plane ticket; turn up to the airport and put my life in the hands of the pilots, engineers and crew 36,000 feet in the air, in a metal tube that weighs four hundred and eight seven tons and having the confidence that everything’s is going to be alright.
However in an attempt to free ourselves from the purgatory of boredom and challenge ourselves to create and fulfil our innate need to discover learn, create and contribute. We may also unconsciously create chaos in our lives to stir the pot of an overabundance of certainty. Reaffirming the proverb “pride goes before destruction and the haughty spirit before a fall”.
The challenge we all have “should we choose to accept” is to move forward in the face of our innate desire for security and certainty. Too walk the tightrope of risk in life and so doing experience greater knowledge, self-confidence, and personal satisfaction contribution and be of greater value to ourselves and others.
This post was written by Peter Horsfield, as such they are his personal views. Peter helps you to focus on what’s most important, the right strategies at the right time. To learn more about How to become Financially Independent visit Peter Horsfield Smart Advice
About Peter Horsfield
Peter Horsfield in an Authorised Representative and Investsure Holdings Pty Ltd ABN 16 050 286 630 as trustee for Horsfield Family Trust ABN 55 609 068 513 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523.