It is a fundamental characteristic of human beings that we are able to hold two conflicting ideas in our mind at the same time. For example, we can both like and dislike a particular person; we can both support and not support a specific social cause. The ability to maintain contradictions in our thinking creates a valuable mental richness that would not be possible if we were able to see the world only in discrete, black and white terms.
However, when we find ourselves under the influence of contradictory ideas that relate to our beliefs or our desires, we experience significant mental discomfort. The psychological term for this discomfort is COGNITIVE DISSONANCE.
Cognitive dissonance is most pronounced when our actions do not match our beliefs. For instance, consider an overweight person who wants to lose weight, and who believes it is unhealthy to indulge in refined carbohydrates and sugar. From time to time, he may, nevertheless, find himself chowing down on pizza and chocolate cake. In such cases, something inside him will need to change in order to relieve the unpleasant feeling produced by the harsh inconsistency (the dissonance) between his actions and his beliefs.
In this case, the person will most likely modify his thinking, at least temporarily, to make himself feel better. He might, for example, justify his indulgence by telling himself that eating pizza and cake is a treat, and everyone deserves a treat once in a while.
Rationalizations like this usually serve their purpose, in that they reduce the internal discomfort created by the cognitive dissonance. However, in the long run, such strategies are merely temporary solutions to a permanent problem. As such, they cause more harm than good.
When we invest, it is common to encounter significant cognitive dissonance in the form of misgivings. Most often this happens after we have made an important decision and, later, we encounter information that leads us to think that our decision may not work out as well as we have hoped.
In such cases, we must resist the temptation to reduce our discomfort by ignoring or discrediting the new information. Instead, we are better served by asking ourselves if we ought to reevaluate our decision. If so, we must do so dispassionately, without bias.
— Harley's Rule of Investing #9 —
It is a lot easier to be honest with other people
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