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Tuesday 28 August 2012

Repellent; The Magical Law of Attraction

Smile or Die: How Positive Thinking Fooled America and the World by Barbara Ehrenreich

As most long-time readers would guess, I don’t have much truck with the concepts of positivity.  The appropriate and mindful attitude of most investors should be a constant expectation of something going wrong, because our mindless reptilian brains will automatically gravitate to the sunny upsides of over-optimism given the slightest reason.

Generally the advocates of positive thinking are in the ascendency – they tell people something they want to hear, namely that you can have what you want merely by wishing for it.  This is the magical law of attraction and not only can it impoverish investors directly it also does so indirectly, through its effects on managers and employees.  Exercised as mind-control it’s repellent, unnatural and destructive.  Get real, folks.

Prognosis: Poor

Reading Barbara Ehrenreich’s book is a mind-numbing experience.  Not because it’s bad; quite the opposite, it’s extraordinarily good.  It’s just profoundly depressing that so many people are caught in the embrace of an idea with about the same scientific justification as astrology.  Worse, many of these people are the leaders of our corporations.

Frankly it’s hard to find anything positive to say about positivity.  There are, perhaps, some health benefits in terms of less stress and worry, but it's virtually impossible to pull out the genuine positives from the mass of confusing and subjective research in the area of positive psychology.  As Smile or Die outlines, many nuanced studies are spun into celebrations of positivity in the hands of mainstream press: happiness sells, it seems.

Mind Control

Worse still, in the corporate world the lore of positivity has been adopted primarily as a means of mind-control – how many people have been forced into some infantile and fatuous role-playing and team-building sessions in lieu of job security and proper benefits?  The demand that people stop whinging about their misfortunes and exhibit the correct attitude is as much about organizations maintaining control of their increasingly right-sized and temporary staff as it is about any genuine improvements in performance.

Despite decreasing job security and falling average incomes (as emphasised in the Federal Reserve's recent consumer finance study), and just about the lowest level of government spending on healthcare and social security in the developed world, social unrest is relatively rare in America – which is perhaps unsurprising when people are furiously indoctrinated with a spiel of positivity that tells them that their problems are of their own making and the solutions are in their own head, if they only want them hard enough.  As Ehrenreich states:
“The strong belief in opportunity and upward mobility is the explanation that is often given for Americans’ high tolerance for inequality: the majority of Americans surveyed believe that they will be above mean income in the future (even though that is a mathematical impossibility)”
Born Poor, Die Poor

Unfortunately America has one of the worst records for social mobility: if you’re born poor you’ll likely stay poor, if you’re born into wealth you’ll probably keep it.  There are copious amounts of research on this subject but, for example, American Exceptionalism In a New Light, gives a flavour (and remember that the UK, famously, has one of the most ossified class systems in the world):
“Mobility is lower in the U.S. than in the U.K., where it is lower again compared to the Nordic countries. Persistence is greatest in the tails of the distributions and tends to be particularly high in the upper tails: though in the U.S. this is reversed with a particularly high likelihood that sons of the poorest fathers will remain in the lowest earnings quintile... The U.S. also differs from the Nordic countries in its very low likelihood that sons of the highest earners will show downward ’longdistance’ mobility into the lowest earnings quintile.”
And no amount of positive thinking is likely to do much about this.  Yet the whole, monstrous philosophy, is based a bizarre, pseudo-scientific idea known as the law of attraction which, to lay it bare, says that if you really, really wish for something you can have it.  Want a new house?  Then that low starter interest rate mortgage is just the ticket – after all, you’ll definitely be making more money by the time interest rates go up. Just believe in yourself.

Magical Thinking

This is magical thinking, not the behavior of rational individuals making coherent decisions on a long-term basis.  It even has a really ugly downside, since it holds that if something bad happens to you, it’s your fault.  Even getting fired.  Or, unbelievably, as Ehrenreich describes from personal experience, getting cancer.

Yet the gurus of positivity have a hold on the leaders of our major corporations, offering personalised coaching services to help ensure that these cosseted, highly remunerated and increasingly remote managers have the reassurance that their wishes will translate into the actions they believe.  Of course, for CEOs magical thinking often works anyway – they only have to wish for something for some minion to go scurrying off to make it happen. 

The problem with this is that the more managers believe that they can control the world around them the less in control they really are.  Advocates of positivity demand that those around them exhibit the correct attitude – not for no reason were the quizzical jeremiahs of the risk departments of various large financial institutions fired when they started questioning whether their leaders actually understood what they were doing.  The self-same leaders are still struggling to understand why the world isn’t continuing to obey their wishes – ‘cos they’re still thinking right, aren’t they?

Short-term Rewards

Positivity isn’t a neutral thing; it leads to negative outcomes for firms, employees and shareholders. It also leads to intense short-termism.  A consumer believing in the law of attraction may well “reward” themselves with the latest designer goods, ignoring the fact that the credit card has to be paid later.  A manager adopting the same attitude will fire people with scarce skills and cut R&D in order to boost short-term earnings, share prices and, not inconsequentially, their bonuses.  Positivity is about the here, and the now; the future is another country.

Of course, positivity is actually a parasitic attachment to several of our most dangerous and cherished behavioral biases; in particular over-optimism and hindsight bias. It’s unsurprising that people cleave to a philosophy that exploits these biases, and the law of attraction is simply feeding a desire that already exists.

Be Watchful

Quite clearly an adherence to positivity is likely to be exceedingly damaging for any investor; mostly we don’t need external justification in order to demonstrate an over-enthusiastic belief in our magical abilities to predict the future.  By and large, over long periods of time, stockmarkets tend to go up.  In general the positive years outnumber the negative by a factor of about two to one, although the volatility that can be exhibited in the meantime can be excessive: markets have a normal, inflation adjusted return of around 8% over long periods, but each individual year will be more than 10% greater or less than that two thirds of the time.

Broadly speaking the proper attitude of mind to deal with this is watchful pessimism.  If we can avoid the worst mistakes of the behaviorally compromised investor – investing in small caps with no business models but dementedly positive management or buying wildly overpriced glamour stocks because everyone else is –  keep a watchful eye on the debt levels and cashflow status of our investments and avoid being shaken out of the investment tree by volatility when some short-term calamity strikes or overtrading then the upward bias in markets will generate decent returns over long periods.

Behave, Don't Believe

If, on the other hand, we believe we’re brilliant investors based on the magical thinking of the law of attraction then we will lose, and do so quite badly, as we outlined in Happy People Make Terrible Traders.  We may also fail to notice that we’ve lost, because that’s what hindsight bias does to us. Positivity is positively bad for investors.  Suspicion and a permanent expectation of stuff going wrong would be a better attitude of mind.  Just don’t expect to find a positivity expert telling you that.  It’s far easier to believe we can have what we want because we want it.

Smile or Die is a profoundly sobering book.  Next time you feel confident you should read it.


  1. I'm positive you'll find the following article of interest:
    If not - then I guess it was just my luck;-)

  2. "... namely that you can have what you want merely by wishing for it."

    I'm afraid that's a straw dog, and is in fact the opposite of the approach you're criticizing. That approach in fact argues that merely wishing for something to happen gets you nowhere. It simply argues that one's state of mind is critical to achievement. And that there are particular states of mind that seem to be more likely to result in positive outcomes, and those states of mind can be learned and tested.

    I don't know that that is so controversial a notion. And I'd also argue that you don't have to lose a healthy skepticism to test that hypothesis.

  3. Definitely a lot of straw men here. The inequality and persistence of poverty across generations in America has less to do with magical thinking that with old-fashioned racism. Get rid of the blacks, get rid of the hispanics, get rid of the inbred white trash and you'll find
    America is quite the land of social mobility. Those stories about Vietnamese boat people whose children became doctors and successful businesspeople are NOT just myths. And those stories about black women with 10 children all of whose fathers (different fathers) are in prison and most of whom end up in prison themselves are also not a myth. This is reality. Scandinavian countries were, up until recently, among the most culurally and racially homogeneous in the world. Every Dane looks like every other Dane and if you go back a few generations, their all blood kin. No wonder they insist on equality. Things are different in the United States and Britain. Also, note that there is/was quite a bit of magical thinking going on in Europe, though it may not be called as such. Case in point: Greece inter alia.

  4. As in politics, religion and LOA. I agree to respect someone opinion regarding issues and will not try to judge or change their minds. It is their beliefs whether I agree with them or not. As I would expect you in respect my opinions whether you believe them or not. So lets agree to disagree. But what this world needs is some positive thought, this continued negative thinking will get us nowhere.

  5. How depressing.

    Not the article, the comments.

    Naively, I assumed this would attract a sensible sort of commenter.

    I think the mentality difference is fairly obvious from a lot of USAcentric behaviour. The meaningless "have a nice day". The passive-aggressive "sir" and "madam"ing. The popularity of cult religions and other woo like affirmations. It's all part of the "believe in yourself" mentality.

    It is rather clever though. It so easy to start off by telling people that they're all born equal (which sounds good although it's demonstrably bollocks) and explain those that are somehow better (usually meaning "richer" in USA) have got there through their own efforts. You can push this out to those to stupid to realise that they have to work for a leaving by talking about positive thinking, entrepreneurialism and other USA favourites. "Don't be afraid to fail", the rich say as they hand out loans and insurance.

    Just to be clear, I am NOT the anonymous user wittering on about belief and respect as though sharing ones subjective experience is somehow useful or important. Go back to Facebook.

  6. LOA/Positivity is not the problem. What you are describing is how people may be mis-applying/misconstruing the concept. It's true that there are some law of attraction gurus out there that don't get that underlying limiting beliefs can trip up one's ability to positively attract what they want, and they are coaching on LOA totally wrong, as a result. Or, perhaps they don't use the tools necessary to shift those beliefs once spotted. It's also true that some people refer to it out of context or through manipulation-that is what I believe you are describing.

    However, this doesn't mean that LOA doesn't exist and that knowing about it isn't super valuable.

    Problems arise when people ignore/suppress their negative feelings and the limiting beliefs that lurk beneath them in the name of positive thinking. The point you are making in terms of being on the look out for possibilities/obstacles is valid, but I would not go so far as to always expect things to go wrong or worry about things that will go wrong. There's a difference between awareness and planning and worrying/obsessing.

    Facing the negative emotion and any limiting thoughts or even obstacles that are in the path is key. When there is awareness, a shift can be made so that one can attract something different. And, tools, including hypnosis, are usually needed to replace the limiting belief because they are held in the subconscious.

    And, using an intentional LOA process includes inspired action, so it's not as though, you think something and it always magically appears. Sometimes connections and doors open that we don't expect without much work. And, sometimes we are inspired to do something that leads to a particular success. Behavior does matter.

    It's, important, however, to know what thoughts are driving your behavior so that there's an alignment between what you want, what you think, what you do, and what you attract.

    Nearly everyone has underlying limiting beliefs for which they are totally unaware, and this is attracting/creating all kinds of situations that are undesirable, including chronic medical conditions. If you ignore or naturally/automatically suppress your negative emotions (many of us do), which signal the existence of such limiting beliefs, then you will continue to create from those negative thoughts. It's not usually enough to just say, I want X, because there's an internal conflict holding you back-part of the mind believes in X-goal/desire and the other part is playing an old record that conflicts with it. Click here for more explanation:

    This is the problem. In my work, I help people to spot limiting beliefs and then use/teach tools to shift them, and I have seen tremendous success with this process-so I know that it's real. As a former lawyer/skeptic who completely values the logical mind, I have been amazed to see what can happen when this process takes place. For example, I have seen clients make medical improvements that many didn't think were possible.

    Thanks for letting me comment.

  7. This is the first PFB posting I find myself disagreeing with.

    The Law of Attraction is an easy target to debunk logically, but I think your postings show that people themselves neither think nor act logically.

    I see positivity as >finding the positive within something that you would otherwise see as negative< and this is different for each individual.

    A good example of this would be seeing the price of an asset - or class - go down as an opportunity to buy, rather than a trigger to worry about falling prices.

    In many cases it is people's innate fears (as Laura states) that prevent them from investing in the first place and positivity combined with rational thinking can overcome this.

    A positive investor may also lose a lot of money, but would see this as a learning process and a way of becoming a better investor - to 'fail better' next time.

    Many successful businessmen have been bankrupt and many successful investors have lost fortunes - positivity is what allows them to try again.