The clash of control and randomness

People like to exercise control over their environment, which is why many of the same people who drive a car after consuming half a bottle of scotch will freak out if the airplane they are on experiences minor turbulence. Our desire to control events is not without purpose, for a sense of personal control is integral to our self-concept and sense of self-esteem. In fact, one of the most beneficial things we can do for ourselves is to look for ways to exercise control over our lives – or at least to look for ways that help us feel that we do. 

The psychologist Bruno Bettelheim observed, for instance, that survival in Nazi concentration camps “depended on one’s ability to arrange to preserve some areas of independent action, to keep control of some important aspects of one’s life despite an environment that seemed overwhelming.” Later studies showed that a prior sense of helplessness and lack of control is linked to both stress and the onset of disease. In one study wild rats were suddenly deprived of all control over their environment. They soon stopped struggling to survive and died. 

Why is the human need to be in control relevant to randomness? Because if events are random, we are not in control, and if we are in control of events, they are not random. There is therefore a fundamental clash between our need to feel we are in control and our ability to recognize randomness. That clash is one of the principal reasons we misinterpret random events.

The need to feel in control interferes with the accurate perception of random events.

In real life the role of randomness is far less obvious, and we are much more invested in the outcomes and our ability to influence them. And so in real life it is even more difficult to resist the illusion control.

One manifestation of that illusion occurs when an organization experiences a period of improvement or failure and then readily attributes it not to the myriad of circumstances constituting the state of the organization as a whole and to luck but to the person at the top. In major corporations, in which operations are large and complex and to a great extent affected by unpredictable market forces, the causal connection between brilliance at the top and company performance is even less direct. 

Research has shown that the illusion of control over chance events is enhanced in financial, sports, and especially, business situations when the outcome of a chance task is preceded by a period of strategizing (those endless meetings), when performance of the task requires active involvement (those long hours at the office), or when competition is present (this never happens, right?). 

The first step in battling the illusion of control is to be aware of it. 

Full Disclaimer: I am not a financial planner. The views expressed in this post are all mine and they may or may not suit your needs. Please do you own due diligence. I do not make money on any of the products suggested in this post.
References:
The Drunkard's Walk: How Randomness Rules Our Lives

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