Brain Food #417
Deprival super-reaction syndrome
Daily Brain Food.
Thoughts of the day
Another Monday, another week that will require much patience and calm.
I recently came across the concept of Deprival Super-Reaction Syndrome, a term coined by investor Charlie Munger. The premise will sound familiar.
In his speech The Psychology of Human Misjudgment, Munger described it as:
“When something we like is taken away or threatened to be taken away, we get upset. Taking away people’s freedom, status, money or anything they value will result in Deprival Super Reaction Syndrome (DSRS).”
In short, in the face of losing not just something we have, but something we feel entitled to, we overreact (or, according to Munger, we super-react). Any form of scarcity, including the mere threat of scarcity, can lead to asymmetrical reactions. We dislike losing something we never even had, perhaps because the pure possibility of being able to have it sufficed. We dislike being limited against our own will. We dislike losing more than we like winning.
This is important in investing, because a small loss is likely to lead to a bigger one, with the mindframe of “getting back to even”. But it is also important in life, when things go astray. It is time for all of us to evaluate and consider even our seemingly most harmless actions, what is subconsciously driving them, and what repercussions they might have.