Yesterday my son competed in his school biathlon (swim+run); before the event he told me that he was going for a top 10 place.
I said to him don’t be silly you haven’t done any training, you have an injury which has required weeks of physio; rather focus on completing the event with no additional expectations. Like all teenagers, who know everything he said, “dad I can do it”. My wife called in the afternoon to say David placed 11th and was so disappointed.
There is a lot of psychology research supporting the idea that setting goals improves task performance (Locke & Latham,2002) I think we all agree this makes logical sense. However there is an increasing body of research that setting unrealistic goals can have a determinental effect on one’s psychological well being. Lets think about it simplistically.
- If I set goals that are unrealistic I am likely to increase the amount of stress I feel trying to achieve the goal.
- If I set goals that are unrealistic I am likely to fail to achieve the goal, making me feel like a failure.
If we bring this idea closer to home, Behavioural Finance, founding fathers’ Kahneman & Tversky found in their seminal work Prospect Theory that decision makers take on more risk when they are in a loss making domain. I would like to suggest that loss making has a broader definition than simply losing $, it extends IMHO to losing on the goal front as well.
Miranda Morris, Ph.D. (psychologist) says, “The biggest unrealistic expectation is that people shouldn’t have unrealistic expectations. Its part of the human experience.”
There are only 2 inputs required to put the PsyQuation wheels in motion – that simple ?.
- You need to input your annual profit target.
- You need to input your maximum acceptable loss (drawdown).
There are a few “Nudges” we use in an attempt to bring down your expectations.
- You will notice that we have a “Suggested Goal” on the screen which plays on the psychological affect of “anchoring”.
- We show your relative standing (statistic) on our trading league, providing a further sanity reference check.
- Finally, we place a checklist screen (see below) as a pause for reflection before allowing the software to activate.
As you can see the PsyQuation team takes goal setting very seriously and we look forward to sharing further research on how important realistic goal setting is.