Gratitude Increases Financial Patience, Investment Earnings

Jennifer Lerner

Jennifer Lerner

Emotions affect personal financial decision-making, and negative emotions like anger and fear can lead people to make either risky or conservative financial choices, according to Harvard’s Jennifer Lerner.

David DeSteno

David DeSteno

With Northeastern University’s David DeSteno, Leah Dickens, University of California Riverside’s Ye Li, Lerner and Columbia University colleague Elke Weber noted that sadness increases impatience and leads to “myopic misery” – focus on immediate gain instead of more profitable longer-term options.

Leah Dickens

Leah Dickens

Lerner and team analyzed participants’ payoff choices when they were in an induced sad state or a neutral emotional condition compared with disgust as a control state.

Ye Li

Ye Li

On average, sad-state participants accepted between 13% and 34% less money to receive a payoff immediately (“present bias”) instead of waiting 90 days for a larger payment, confirming that induced sad feeling led to preference for immediate reward and less patience for a better but more distant payoff.

Elke Weber

Elke Weber

However, these sad volunteers were not more impatient in other generalized areas, suggesting that this effect focuses on impatience for rewards.
In contrast, the negative emotion of disgust did not result in greater impatience, pointing to the specific impact of sad feelings on payoff choices.

Cynthia Cryder

Cynthia Cryder

In a related study, Lerner and team evaluated the impact of induced positive emotions: Happiness and gratitude.
Again, participants could select a smaller, immediate payoff or larger payout later.

Induced gratitude enabled most volunteers to negotiate larger immediate rewards in exchange for giving up a larger, but more distant payment: “…the mean grateful participant required $63 immediately to forgo receiving $85 in three months, whereas the mean neutral or happy participant required only $55 immediately.

James Gross

James Gross

This trend was replicated in other studies by Lerner, Li, and Weber, who reported that average sad-mood participant was willing to accept $4 today instead of $100 in a year, whereas the average neutral-mood volunteer required more than four times as much$19 today to forego $100 in a year.
Another study estimated that sad volunteers accepted between 35% and 79% less money immediately instead of waiting for a future payoff.

Ronald Dahl

Ronald Dahl

This ”misery is not miserly” effect is influenced by the degree of “self-focus” or attention to personal impact in  an observed situation.
When volunteers were primed to focus on their personal reactions while experiencing induced sadness, they gave up more money to acquire a commodity compared with people who had neutral emotions or neutral self-focus, according to Lerner with Washington University’s Cynthia E. Cryder, James J. Gross of Stanford, and University of Pittsburgh’s Ronald E. Dahl.

Gratitude moderates “economic impatience” and suggests that affect-based interventions can help investors enhance financial decision making.

-*How do you manager the impact of transient emotional states on financial decision-making and risk-taking?

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