Cognitive Dissonance

A child of social psychology, you’ll see cognitive dissonance’s head popping up in many fields. Because we’re humans with silly human brains.

So...what is it? Cognitive dissonance is when someone carries two conflicting beliefs. Most of the time, the person doesn’t realize it. When they do realize they believe in two conflicting things, the brain starts sparking, like a malfunctioning robot.

Cognitive dissonance can lead to irrational decisions, or at the very least make you look contradictory or stupid. When you realize you’re suffering from cognitive dissonance, you’ll either change your behavior, or come up with a way to rationalize it. We suggest you do the former and resolve these conflicting beliefs, or they're likely to just...pop up again. And you can’t really rationalize cognitive dissonance away, or it wouldn’t be such a problem in the first place.

In investing, you may suffer from cognitive dissonance with conflicting beliefs like “I’m a smart investor, and smart investors are safe investors” with “Wow, look at all those people who made a ton of money off of cryptocurrencies. They are smart investors. Maybe I should invest in cryptocurrency…”

See how this can have your brain start hoola-hooping? “But cryptocurrency is risky...but they’re smart, just look at them...but smart investors are long-term investors, not ones that jump on the new investing trend…” One of the beliefs has gotta give.