Like many no doubt, I felt a tinge of emptiness when the Paris Olympic Games ended. Particularly after Australia’s greatest gold medal haul ever totalling 18, and a couple of weeks laden with memorable performances, and not necessarily just Australian.
The exhilaration of securing gold and becoming an Olympic champion must be indescribable, and not even Hollywood could dream up some of the drama or results that unfolded in Paris. Which I guess is what many of us love about sport.
But gold medallists aside, I found the reactions to winning silver and bronze medals equally as intriguing, as they were often mixed. I couldn’t help but notice that strikingly, many bronze medallists seemed to be happier with their prize than silver medallists. And it turns out that various studies over time have confirmed this counter-intuitive response.
The science behind medallists and happiness
Studies of facial expressions at medal ceremonies, and first reactions on crossing the line or touching the wall across multiple Olympic Games and World Championships, reveal greater overall levels of happiness for those winning a bronze medal compared to those taking out the silver. That silver to many athletes feels like they have lost, especially if they had been favoured to win gold. While bronze medallists often think they have won by making it onto the podium ahead of the rest of the field.
Like everything, there is a technical term for this phenomenon. It is known as “counterfactual thinking”, which is a psychological term for imagining alternative outcomes that could arise but don’t.
Many silver medallists experience “upward counterfactual thinking”, where they focus on what could have been had they not fallen short, and hence a feeling of being unsatisfied with their result. Bronze medallists, on the other hand, engage in “downward counterfactual thinking”, whereby they think of all those behind them who didn’t win a medal, and therefore think of themselves as winners, and are more satisfied with their outcome.
Where the silver medallist feels an opportunity has been missed, the bronze medallist has seized theirs.
Now there’s always an exception to every rule, or observation in this case, and there was no better example of that than the sheer emotion and excitement displayed by Australian Jessica Hull, who took out the silver medal in the women’s 1500 metres track event. And no wonder, given it took the current world and Olympic champion, and world record holder in Faith Kipyegon to beat her. Jessica knew she was a winner.
Counterfactual thinking and investing
All this got me thinking about other areas of life where people compare outcomes to what might have been, where the phenomenon of counterfactual thinking can take hold. It is not just limited to sport. Take investing.
Silver medallist type thinking might occur with those investors who show dissatisfaction with the performance of their portfolio compared to better performing possibilities they had considered but didn’t take. Rather than being satisfied with solid returns achieved, they show regret for not having gone down a different path and achieved better. This may lead to regret aversion and more passive investing in the future, to avoid the fear of not making optimal decisions.
The bronze medallist aligned investor however, is generally happy with modest portfolio gains, knowing that the alternative could have been losses. This downward counterfactual thinking can spur confidence and satisfaction with their investment strategies.
Identifying where one sits on the silver-bronze-medal spectrum of thinking, can assist investors in improving their approach to investing.
By focussing less on missed opportunities, investors can minimise biases and tone down the emotion in investing, which leads to more rational decision making. Equally, more realistic goal setting instead of striving for super returns, should reduce stress levels. And taking a leaf out of the bronze medallist mindset would place a priority on risk management strategies to avoid loss making situations.
Ultimately, the goal for any investor should be to adopt a healthy and balanced investment approach, to achieve a level of comfort and satisfaction that they can be happy with. And that would be a gold medal performance.
Footnote: Looking at the final medal tally in Paris. Among the top ten nations, the Netherlands had the highest bronze to silver ratio of 171% (7 silver, 12 bronze), while Germany had the lowest at 62% (13 silver, 8 bronze). So I guess it’s party time for the Dutch, while it’s chin-up for the Germans. The ratio for Australia was 84% (19 silver and 16 bronze, to go with our 18 gold).
Tony Dillon is a freelance writer and former actuary. This article is general information and does not consider the circumstances of any investor.