The Ostrich Effect: Ignoring Bad News Doesn’t Make Them Go Away

A friend of mine — let’s call him Rajesh  — is slightly overweight. Rajesh has been exercising daily for the past 5 years. He hits the gym regularly. He goes for his morning run daily. He believes he eats healthy as well.

According to Rajesh, he’s getting healthy slowly. It’ll take time —can’t be done in a day after all. One doesn’t get abs just like that, he says. He deliberately avoids any sort of feedback that doesn’t appreciate his efforts. Maybe he doesn’t do any proper exercise at the gym. Maybe he doesn’t eat right. Maybe he doesn’t really run more than a minute. But he isn’t ready to listen to any of that.

In his little bubble he has convinced himself that all is well and he is in the right path. After all, the dietician or his trainer can’t know about his body more than him — why hire them! All negative feedback is noise to him.

When I had left my job to start my own venture with a friend a couple of years back, it was exciting in the beginning, but all wasn’t so well later. I didn’t have an engaging product, and business wasn’t growing. I didn’t have any money to sustain the next 6 months. Things were actually bad.

Everybody except I knew that. If somebody tried to tell me, I always had some kind of explanation. This market is tough to crack. It’s a new thing we are doing — things are bound to get bad. All startups go through the valley —the night is the darkest before the dawn, etc.

All were plausible explanations, and none of them were wrong — at least to me. I most likely believed all of them. But it didn’t change the fact that things were getting out of my hand, and I just wasn’t ready to acknowledge them. I was just fooling myself.

Both the above are examples of The Ostrich Effect.

People who are worried they have fallen off track don’t want to know how they’re doing.

When fallen off track, you sometimes actively (yet unknowingly) avoid dealing with unpleasant news, even if it contains important information.

Behavioural economist George Loewenstein of Carnegie Mellon University coined the term “the ostrich effect” to describe the way investors stick their heads in the sand during lousy markets.

This mostly happens in situations where you are emotionally invested in information. This behaviour typically follows the same pattern: you are exposed to discomforting information, and instead of suffering through the resulting anxiety you choose instead to outright ignore the information. Ignorance is bliss, but feigned ignorance isn’t.

This tendency of selective avoidance of negative information can occur in a variety of scenarios, such as: to your decision about when to seek formal medical diagnoses for worrisome health symptoms, to a mother’s decision about seeing a psychologist for her child who is having trouble at school, to a business executive’s decision to perform due diligence when there are red flags relating to the company’s growth prospects.

In particular, the ostrich effect predicts that people may delay acquiring information —even when doing so degrades the quality of decision making.

Loewenstein used this principle to describe irrational investors who actively avoided receiving information on potential losses to their funds. If the markets were good, investors would diligently look for information on their investments. If they suspected poor performance, investors preferred to ignore the news and checked in on the performance of their holdings less often.

You avoid getting an important medical test done, fearing bad results. You turn off the news when the headlines make us upset, even though the information is pertinent.

In finance and investment, this behaviour can partly be explained by the disposition effect — the tendency to minimise the feeling of financial loss even when it doesn’t make any logical sense to do so.

In an experiment, researchers wired people up to discover how they might really respond to financially stressful situations. They found people who are highly anxious about their finances tend to ignore potential money problems and may be less likely to ask for help or look for a solution. You can’t run away from trouble. There ain’t no place that far.

This is applicable to situations outside finance as well, such as in health — trying to get in shape, in learning—picking up a new language, and also in personal growth—trying to build a new habit.

The ostrich effect can also be increased by the Present Bias — thereby making it even more tempting to avoid tough decisions for weeks, months or even years.

Ostrich Effect isn’t that easy to master because half the time you are not even consciously aware that you are under it’s spell. But even unknowingly turning yourself into the proverbial ostrich would simply make your problems grow bigger over time.

When you can’t solve the problem, manage it. A good way to stay on track and avoid running off course. Build guardrails. Call for external help. Appoint a devil’s advocate who can bring you back whenever you stray off track. Appoint a messenger of bad news — one who can tell it to your face that you need stop acting stupid and get that blister checked before it’s too late. You must make it a habit to listen to the bearer of bad news.

“The first messenger, that gave notice of Lucullus’ coming was so far from pleasing Tigranes that, he had his head cut off for his pains; and no man dared to bring further information. Without any intelligence at all, Tigranes sat while war was already blazing around him, giving ear only to those who flattered him.” — Plutarch’s Lives

If you are planning to get fit, appoint a trainer. If you are building a new habit, use a habit tracker. If you want to put money in stocks, but don’t have the nerves for it, hire a wealth manager.

Similarly, if you think someone is ignoring a bad situation in the hopes that it will go away eventually, tell her she is embracing the Ostrich Effect. If your friend is in a bad relationship, but is in denial of it, be a good friend and get her out of it. If your friend is believes he is learning tennis but sucks at it, and isn’t really progressing, convince him of that.

It’s easier said than done. Denial ain’t just a river in Egypt. It takes a lot of effort to break through people’s guards, get their heads out of the sand, and make them look at reality.

The Afghan government had been telling the US for years that Pakistan was backing the Afghan Taliban and was housing its leaders including those of the Al Qaida.

As this was the same Pakistan that the US was funding with billions of dollars to ensure Pakistan’s nuclear weapons don’t fall into the hands of extremists, the US didn’t want to believe the masses of evidence being gathered by its intelligence about Pakistan’s duplicity.

For years, America’s “denial” of Pakistan’s dual strategy was the world’s best (read worst) example of the Ostrich Effect. Lesson: don’t be like America. Train your System 2 to keep your biases in check, and study the facts independently.

The truth does not change according to our ability to stomach it.

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