Self Deception and Denial

In his famous 1974 commencement address at Caltech, American physicist Richard Feynman warned against self deception.

The first principle is that you must not fool yourself – and you are the easiest person to fool.

Self Deception

My first stock purchase was Starbucks. I paid around $38 in 2006. Sales and Profits were growing at 20% and the p/e ratio was well over 40. The stock was overvalued because of its potential to expand internationally. I did the math and the calculations were clear that I should not purchase the stock. But my emotions did not leave me. I loved their coffee and I started creating stories favorable to why I should do the purchase. In fact I searched for news conforming my stories. I purchased it at $38 and sold it at $25. This is Self Deception. Reminds me of Bertrand Russell statement

What is wanted is not the will to believe, but the will to find out, which is the exact opposite


In my 9th grade I flunked in Hindi exams. I was extremely sad and upset. Not on myself but on the teacher who corrected the exam paper. Putting the blame  on the teacher was easier than accepting that I did not do well in the exams. I distorted my cognition to make the pain less severe. This is Psychological Denial. If I had accepted the blame then there was an opportunity to correct it.

What should I do

Refusing to look at unpleasant facts doen’t make them disappear. Bad news that is true is better than good news that is wrong. When the cost of denial is worse than facing reality, we must face reality.

2 thoughts on “Self Deception and Denial

  1. Jana,

    Thanks for sharing your thoughts. It would be helpful if you can outline what went wrong in your assumption about Starbucks , is it the case of great company but bad price. It will be a valuable lesson to your readers.

    • The stock was extremely overvalued because of the high expectations on international growth. Things did not work out as expected as they got delayed to enter into the Indian Market. The stories turned sour and the stock price plummeted. If it had been any other stock I would have touched it. Just because I loved the company and their coffee I was biased and bought into the story.

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