Pod Insights Choiceology with Katy Milkman Death by Dashboard About this episode When progress falters, our confidence often goes with it. This episode explores why short-term performance can carry more psychological weight than it deserves.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:09 Speaker 00 I would keep my stat tracker page open on my second monitor. And between games, I would refresh it to see if I made the number change that I wanted to change.
0:20 Katy Milkman? When you're competing at the highest levels of esports, you're surrounded by data. There are the stats you see while you're playing, like your score or your health. But there are also external websites that track your global rank, basically a public report card that updates in real time. These sites can be informative, to be sure, but checking them constantly can create a counterproductive distraction.
0:43 Speaker 00 It felt like either I was the best in the world or I wasn't worthy of anyone's time. Because it was just such a black and white thing of the number goes up, the number goes down. What it led to is this really heavy comparison of myself to the people that were in that game, random opponents, random teammates, whatever, and saying, "Well, I think I'm going to lose this one because their numbers are better than mine." And I psyched myself out right away.
1:09 Katy Milkman? Players can get so fixated on the immediate sting of seeing their ranking drop that they lose their nerve. Instead of playing to win the match, they start playing a safe game just to keep that one number from budging.
1:23 Speaker 00 I would focus on one particular number, and I would focus on only that much to the degradation of my performance elsewhere.
1:34 Katy Milkman? Cora Kennedy used to play esports competitively. Now she directs collegiate esports at Illinois Wesleyan University. And these days, she sees her students falling into the same trap that used to haunt her, obsessing over minor fluctuations in their rankings instead of focusing on the big picture.
1:52 Speaker 00 What really gave me pause and helped me reflect on it was shepherding my students to the same struggles I've gone through and trying to steer them away from the challenges that I've dealt with by being so statistically oriented, by being someone who focuses so intently on a stat. And it can hurt your teammates, hurt your team performance if you... Just focus on one little number.
2:17 Katy Milkman? That's why Cora now tells her players to close the stat trackers during a game. She knows that when you're hyper focused on numbers going up or down, you lose the courage needed to take the kind of smart risks that are required for long-term success. In this episode of Choiceology, we look at why the best strategy for achieving your goals, boosting your creativity, or securing your peace of mind can sometimes be to ignore the data you're tempted to check the most.
2:58 Katy Milkman? I'm Dr. Katie Milkman, and this is Choiceology, an original podcast from Charles Schwab. It's a show about the psychology and economics behind our decisions. We bring you true and surprising stories about high-stakes choices, and then we examine how these stories connect to the latest research in behavioral science. We do it all to help you make better judgments and avoid costly mistakes.
3:33 Katy Milkman? In 2022, Dan Jin was living in a small town in Colombia while building his online photography magazine.
3:40 Speaker 02 They call it a pueblo magico, a magic town.
3:44 Katy Milkman? Dan loved traveling, and he'd spend hours hiking and exploring cities on foot, sometimes covering up to 20 miles a day. And faithfully tracking his steps was his Apple Watch.
3:57 Speaker 02 It made me feel better about the output and activity I was doing when I had something that I could visually see. You know, you've walked 10,000 steps today, for example. The feeling I would get, maybe it's like a dopamine hit, and I'm like, yes, I've accomplished something. Let's do that again tomorrow and the day after that.
4:15 Katy Milkman? Like many people, Dan found the data from his smartwatch informative. It quantified his tracks. But Dan grew increasingly reliant on its feedback. Checking his watch every so often turned into something of a tic.
4:28 Speaker 02 I had my heart rate metrics, my step count metrics, my VO2 max, like I even knew what it meant, on my face of the smartwatch. So all I had to do was just flick the wrist and have a glance. I mean, only God could count how many times, you know, I did that because it was habitually.
4:48 Katy Milkman? Dan's goal of staying active and enjoying his South American travels was slowly being overshadowed by an infatuation with his ever-present health and fitness data. He started to dwell on tiny daily fluctuations. Then, at the end of 2022, by necessity, Dan's activity levels plummeted.
5:09 Speaker 02 I remember waking up one day and being like, I can't get out of bed and I have no idea what's going on. So I'm freaking out. And that's when I came down with a bout of severe post-viral fatigue after a viral infection, the COVID infection, actually, which ended up being chronic fatigue and other dysautonomia-related symptoms such as heartbeat flutters, dizziness, migraines, just everything.
5:39 Katy Milkman? Doctors were still very unsure about all the long-term effects of COVID right after the peak of the pandemic. The medical mystery made it hard for Dan to achieve his new health goal, recovering from this illness. And his watch wasn't helping.
5:54 Speaker 02 What was kind of a harmless intrigue about the metrics became an overnight obsession. I'd constantly be checking my heart rate all the time. And if I saw it spike, I'd just stop what I was doing. I'd be like, okay, I'm not able to move forward with this task. I need to rest, otherwise I'm going to have a crash where symptoms are so strong, you can't be mobile and you end up recovering in bed.
6:17 Katy Milkman? Dan initially felt like the data gave him control. In reality, his fixation was fueling a cycle of anxiety. By reacting to every tiny dip or spike, he was losing his sense of agency. His health got so bad at one point that he had to move back to England to live with his family.
6:35 Speaker 02 They would see that I would be constantly tracking my data. So they'd be like, hey, take the watch off. You know, it's going to be better for you. Because yeah, they'd be like, hey, shall we go out for a walk? And I'd be like, let me just check my health data and see if I've done too many steps and had too many fluctuations with my heart rate. I was fearful. I was scared because I didn't want the data to show me something that I'm then going to say, oh, I've done too many steps this day. I've gone outside of my energy envelope. Therefore, I'm going to pay for it in two or three days' time when an inevitable crash comes. So yeah, it was just intense, just so intense.
7:16 Katy Milkman? This went on for a year and a half, until finally, Dan felt well enough to go on holiday in Istanbul. He brought his watch.
7:24 Speaker 02 I just kept looking at the heart rate and the HRV and stuff like that. And I was like, I'm meant to be away here, getting away from all this. I clearly can't have this device and use it in a sparing manner. I just took the Apple Watch off and that was that. And I've not worn one since.
7:48 Katy Milkman? Dan broke up with his smartwatch permanently. Today, he listens to signals from his body and healthcare professionals and steers away from continuous health trackers.
8:00 Speaker 02 My health anxiety started to gradually reduce. And having the brain space that was freed up from not being absorbed by these metrics and this data allowed me the opportunity for my body and mind to just relax.
8:17 Katy Milkman? Dan's also grown his online photography magazine called Them Frames. He manages a team of two writers and is busy monetizing the business, paying attention to key metrics like web traffic and affiliate earnings, which show granular data. Initially, Dan checked Google Analytics compulsively and felt the urge to make rash decisions in response to even tiny dips in traffic. It was déjà vu, but with a different tracker. And then, he paused.
8:47 Speaker 02 I know through experience that being impulsively reactionary isn't always the best thing to do.
8:55 Katy Milkman? Dan realized that zooming in on realtime data made every small loss feel like a catastrophe. So he decided to zoom out. He stopped checking the dashboard daily and moved to a single weekly review.
9:10 Speaker 02 I've noticed such a difference. I feel lighter. I feel more focused on the overreaching goal of the business, which isn't necessarily just about making as much money as possible. It's not. It's about providing quality, research-led content to people in the photo industry that love it just as much as I do. And I've been able to focus so much more on creating well and not in a rush and not being flustered because I'm pushing the data and I'm not aligning every creativity action with a traffic or monetary outcome. I'm just creating because I feel that for longevity, this will be the right thing to do.
9:52 Katy Milkman? Dan Jin was a photojournalist and is now the founding editor of Them Frames, an online photography magazine. You can find more details about Dan in the show notes and at schwab.com/choicology.
10:12 Katy Milkman? Checking your progress, rank, or other performance statistics too often can be a slippery slope. While positive feedback of the type Dan experienced when he first wore his Apple Watch can be a great motivator, we've also seen how quickly a helpful tracker can devolve into a source of misery when it shares bad news. It's tough to keep the long view when a single bad data point stings more than a dozen good ones. Why is it that frequently checking our performance can sabotage our long-term success? My next guest has studied the extended effects of keeping your eye on a noisy metric. He'll tell us how people's reactions to such metric checks can explain a longstanding
10:55 Katy Milkman? mystery in economics about the stock market called the equity premium puzzle. Shlomo Benartzi is a professor emeritus of behavioral decision-making at UCLA Anderson School of Management. Hi, Shlomo. Thanks so much for joining me today.
11:11 Speaker 03 Thanks for the invite.
11:12 Katy Milkman? I was hoping you could start by explaining the equity premium puzzle. What is it exactly?
11:18 Speaker 03 So, the equity premium referred to the fact that if you invest in what traditionally has been thought as risky assets, like stocks, like equities, then you would earn higher returns. You will get a premium relative to investing it in a safe asset, for example, like cash or in government T-bills. And the puzzle is that not that you get a premium for taking risk, but how large that equity premium has been historically. One way to think about it is that if the stock market goes down, if we keep sending
12:00 Speaker 03 our kids to private schools, if we keep buying lunches, if we keep paying the mortgage, then the question is, is it so risky, the stock market, that we deserve to earn such a high premium?
12:17 Speaker 03 If our consumption is not affected by it so much from day to day, even from a year to year. So in a sense, we're being rewarded a lot for what seems to be not proportional risk at the end of the day. And the question is, why has it been so large for decades and decades since we have data on stocks, bonds, cash, and so on?
12:47 Katy Milkman? Thank you for summarizing. For listeners who haven't heard every episode in our back catalog, since it's going to be really important to understanding your work in this area, could you also define loss aversion?
12:58 Speaker 03 Sure, absolutely. I love one of the lines Kahneman and Tversky have used, which losses loom larger than gains. Or the psychological pain of a loss is much greater than the psychological joy or pleasure of an equivalent size gain.
13:20 Katy Milkman? So now we know what the equity premium puzzle is, and we know what loss aversion is. And I want to talk about how you and Richard Thaler helped offer an explanation. Could you describe the idea you had for how loss aversion could potentially help explain the equity premium puzzle?
13:37 Speaker 03 Yeah, you need two components to explain in our framework, the equity premium puzzle. You need loss aversion, and you need myopic investors. And by myopic, I mean investors who actually are focused on short-term performance, even if it's their 401K plan and they have 30 years, 40 years until they're going to need the money. If you only have loss aversion, if people are very sensitive to losses. But they're kind of thinking forty, fifty years ahead. Then they're not gonna feel investing in the stock market.
14:19 Speaker 03 Because over such a long horizon, most likely, the market is gonna go up. So people are very sensitive to losses. It's not enough to explain why stocks have such high returns. Because they're practically no losses. If you wait thirty years and you look, you're gonna see that it went up. Maybe a bit, maybe a lot. It's not gonna go down. It's not a guarantee. But but to date, we haven't seen periods of thirty, forty years when things just go down. Now, the critical component is that if people are loss averse, where would it kick in?
15:03 Speaker 03 It would only kick in if they're looking at short term losses. Because on a given day, markets have practically a fifty fifty chance to go up or down. So if you're actually looking at the stock market on a daily basis, half the days, you're gonna have that painful experience of losses. And if memory serves me right, on an annual basis, you now have a two third chance of stocks going up and only one third down. And as you move to a ten year period, don't remember the exact numbers, but it's like north of eighty percent, you're gonna go up. And when you go to thirty years, it's very, very, very slim chance you're gonna have losses.
15:48 Speaker 03 So what happens? It's the combination. We're sensitive to losses and we keep looking for them. We open the newspaper. That was the version maybe thirty years ago, when Richard Taylor and I did the research and wrote the paper. Or nowadays, you know, we just open our little devices and we check in the stock app. And before you notice, we see losses and we think that the stock market is very, very risky. Because we feel the pain of losses very often. And as a result, we virtually say, we're not gonna invest in the stock market unless we're gonna get very high returns.
16:31 Speaker 03 And that's one reason we believe historically the stock market provided returns that economists couldn't explain. They were just too high, given what traditionally we viewed as risk. But if you view risk as more the emotional pain of noticing daily or annual losses, then people would comment very high returns.
16:59 Katy Milkman? Could you describe the simulations you actually did to figure out that this seemed like a plausible explanation?
17:07 Speaker 03 Yeah, so our simulations were slightly different. Because if people are very sensitive to losses and they're going to look at the stock market every day, they're very unlikely to invest in the stock market because half the year, they're going to feel that pain. So the question we asked is, what would have to be the break even point? How often would people have to look at the stock market to make it risky enough that we can replicate the equity risk premium? We found out that the answer was roughly one year. So they might still kind of briefly look at things in between.
17:52 Speaker 03 But if you think about it, people file their tax returns annually. And if they have capital gains, or if they have capital losses, or dividends, or interest income, that's when they actually have to go find the numbers and put them on their tax returns. So it seemed very plausible that that is a reason for the equity risk premium.
18:18 Katy Milkman? And you came up with this ingenious, I think, explanation that's really clear and simple and based on bedrock. Robust behavioral biases that, well, if people think once a year, how are my investments doing roughly? And if people don't like it when their investments are down, and in fact, we know about how much less pleasant it is to lose a dollar than to gain a dollar is pleasant. It's about two to one. You get exactly what we see. It's such an interesting and important finding to recognize how loss aversion and this yearly horizon can combine to create a pattern we see in the world that really matters in terms of people's long-term financial security.
19:00 Katy Milkman? What takeaways did you and Richard Thaler offer in your original paper?
19:05 Speaker 03 In the paper, we virtually had a soft piece of advice for people who have a 30-year horizon. Thaler used to put it in a really nice way, which was, young people should just put it all in equities and on the weekend, just read the sports section and nothing else in the newspaper. And that's obviously going back to days where the newspaper had a different informational role in our lives.
19:32 Katy Milkman? I'm curious if there are realms beyond the stock market where you think the insights at the heart of this research on the equity premium puzzle and myopic loss aversion can also be applied. And if so, where are those places and how would you apply these insights?
19:51 Speaker 03 So I've always had a bad back. Wasn't built well. It is what it is since I've been 15. The last two months have been pretty bad. Like, I can see it, I'm here at the show, but walking and standing have been very painful. So I go to this physical therapist. Everyone says she's walking on water. And I go for a session and it gets much worse. So what do you do, right? Do you take that pain, literally, that lost that pain? And do you say, okay, markets go up and down, experiences with medical treatments up and down, you should try again. Do you write off that physical therapist?
20:36 Speaker 03 Do you write off physical therapy period? Do you decide that you're gonna actually be so conservative that you're not gonna even try to treat your back? You're just gonna hope that it's gonna slowly get back on his own? So how much to react to one bad experience is very tricky. There are other domains that have nothing to do with money and the stock market where short term disappointments, painful experiences might make us a bit too conservative tackling the problem or going for a moonshot.
21:18 Katy Milkman? I'm hoping our listeners will see that this is advice not only about thinking about their stock portfolios versus what they put in their pillow and what they put in T bills and so on, but also the way they think about a broad set of investments and all of the important parts of life. I so appreciate you taking the time to talk with me today. Shlomo, this has been really fun, as it always is when we have a chance to connect. And I just want to say thank you.
21:44 Speaker 03 Thank you.
21:47 Katy Milkman? Shlomo Benarzti is a professor emeritus of accounting and behavioral decision making at UCLA Anderson School of Management. He's also the author of multiple great books, including Save More Tomorrow and The Smarter Screen. You can find the paper he co-authored with Richard Thaler, offering an explanation for the equity premium puzzle, and a link to his books in the show notes and at schwab.com/choysology.
22:14 Katy Milkman? If you want to go deeper on how losses and gains are experienced relative to expectations, there's a great episode of Financial Decoder on reference points and prospect theory titled, Does Your Inner Scorekeeper Skew Your Judgment? Host Mark Reapie talks with Dan Stone, Associate Professor of Economics at Bowdoin College, about how the way we frame outcomes can change how losses and gains feel in everyday decisions. We'll include a link to that episode in the show notes.
22:45 Katy Milkman? When we check our performance too frequently in settings where there's unpredictable variability in outcomes, or what researchers call "noise," we'll inevitably witness dips or losses over and over again. And because losses sting more than gains feel good, all that checking makes even a broadly positive trend feel bad. In other words, when we're obsessively checking our stock market portfolio, our heart rate, or our ranking, we may lose track of how well things are going. And we can end up unhappy, or making reactive decisions that undermine our long-term goals.
23:25 Katy Milkman? The anecdote is surprisingly simple. Stop watching your metrics so closely in these kinds of environments. Consider the time horizon that actually matters for your goal, and aim to better match your frequency of scrutiny to that timeframe.
23:40 Katy Milkman? This is why Cora tells her players to close those stats tabs mid-match. It's also why Dan switched to a single-weekly analytics review for his startup, and stopped monitoring his minute-by-minute step count and heart rate entirely. And it's why Shlomo Ben-Artzi and Nobel laureate Richard Thaler have encouraged long-horizon investors to read the sports section and ignore the daily, weekly, and even yearly stock market fluctuations. This doesn't mean you should stop monitoring all metrics. Many metrics, like those tracking safety or compliance, require close attention all the time. But when tracking performance serves no real purpose and could cloud your judgment due
24:21 Katy Milkman? to myopic loss aversion, sometimes the smartest move is to stop checking the numbers, so you can zoom out and focus your effort more productively.
24:46 Katy Milkman? You've been listening to Choiceology, an original podcast from Charles Schwab. If you've enjoyed the show, we'd be really grateful if you'd leave us a review on Apple Podcasts, a rating on Spotify, or feedback wherever you listen. You can also follow us for free in your favorite podcasting app. And if you want more of the kinds of insights we bring you on Choiceology about how to improve your decisions, you can order my book, How to Change, or sign up for my monthly newsletter, Milkman Delivers, on Substack. Next time in the season finale of Choiceology, I'll speak with Harvard Business School professor Amy Edmondson about the importance of creating work environments where people feel comfortable speaking candidly with one another, and how it can make all the difference in business,
25:31 Katy Milkman? as well as in moments of life and death. You won't want to miss it. I'm Dr. Katie Milkman. Talk to you soon.
25:45 Speaker 04 For important disclosures, see the show notes or visit schwab.com/choiceology.
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