July 14, 2013 – Perception Can Be Stronger and Lead to Reality

You must have heard about these cliches ” Fake it, until you make it.”  “Perception is stronger than reality.” As a trader for most of my life, perception is powerful and sometimes even stronger than reality.   You can often hear and read from experienced traders these simple lines “when in doubt, get out” as well as  “when there’s smoke, there’s fire”.  In fact, Larry Williams used to narrate about a bunch of Chicago pit traders who seeing strong typhoons in their midst (without setting foot in Orange County or Texas was it?) bought up hundreds and thousands of futures of commodities thinking that the rains will destroy all harvest inducing a short squeeze in lifting prices higher.  Whether or not there was indeed a scarcity was not the point, a bunch of traders believed it so, and thus prices moved wild.

Just as Bernanke’s hint of “accomodative monetary policy” shook the dollar and all assets correlated to it, the entire market seemed to obey only one word (at least for the time being) and it is the almight powerful Bernanke’s words.  Such power accorded to one must have been similar to how Alan Greenspan called traders’ actions “irrational exuberance” during his time when he mercilessly cut rates all the way inducing asset bubbles, but for the time being, traders didn’t care on being right, all they cared about was making money.

In one sense, what I write here is not about how these economists, traders and so forth meddle with each person’s life (knowingly or unknowingly) but more on the behavioral aspect of perception.

Too often, we think that perception is just an illusion.  However, consider so many studies proving the validity of panacea and laughter as the best medicine to patients.  The belief of getting well makes people well.  Beliefs are stronger than what we attribute them to be.  That’s why behavioral analysts are better than traditional accountants and conventional economists when it comes to getting as close to reality as possible.

Time and time again, perception has shown itself to be stronger than reality.

My Questions are:

1.) Does perception of a less corrupt Philippines lead us to be less-corrupt?

2.) Does effects of a better administration lead to a better administration, thereby a virtuous cycle?

http://www.economist.com/blogs/graphicdetail/2013/07/daily-chart-8?Fsrc=scn%2Ftw%2Fte%2Fdc%2Fbribery

Countless studies seem to show that

we humans do tend to make our dreams and beliefs a reality.  Even rats respond to Pavlovian dogs.  Art of Manliness writes that studies have shown that rats can be taught to like having sex with death-scented rats. Read more  here “How delaying intimacy can benefit relationships)  

In one study, Pfaus painted female rats with “cadaverine” – a synthetic form of the scent of death. Cadaverine smells so bad that rats will scramble across electrified gates to get away from it. Thus when virginal male rats were put in a cage with these death-scented females, they at first predictably refused to mate with them at all. But after much coaxing from the researchers and flirting from the female rats (who were blissfully unaware of their repulsiveness), the male rats gave in and got down to business. Later on, when these male rats were given a choice between mating with the death-scented rats and ones that smelled naturally good (to a rat), they preferred to mate with those wearing eau de cadaver. Pfaus even tried perfuming some female rats with the delightful smell of lemon, but the male rats couldn’t be swayed from the preference they had formed during their first sexual experiences.

In another experiment, Pfaus put different virginal male rats in little Marlon Brando-esque leather jackets, which they wore during their first times mating. When the leather jackets were later removed and the rats given a chance to mate again, a third of them refused to even make an attempt, many that tried to give it a go couldn’t get an erection, and sex for all the rats took longer and required a lot of help from the females.

In both groups of rats, the male rats had come to associate certain elements (scent, jacket) that were present during their first sexual experiences with arousal, and had formed a preference and even a need for those same elements to be present for successful sex later on. This result has been shown in numerous other studies – when rats are sexually stimulated in certain locations or in various degrees of light, they will come to associate those conditions with arousal. It’s basic Pavlovian conditioning, applied to sex.

If we think we’re less corrupt, we act in less corrupt manners.

If we think we’re beautiful, we tend to become beautiful.

If guys think viagra helps their sexual performance, it makes them perform better mainly due to their confidence than the drug itself.

So just believe and you might lead yourself with your actions for that belief to be real.

Watch these TED videos:

Perspective is everything.

This is what every Axe commercial tries to use, and maybe it does work.

Note though that false perception can harm you.

– FT