Yup. I had termed it status quo bias, but endowment effect would also explain it.
I was talking it over with a friend, who suggested that what’s really going on is that humans are more willing to gamble with fortuitous winnings than they are with purposeful investments (as in, you’ll be more likely to gamble a dollar you found on the ground than one you earned)… and I actually think that this is the biggest contributor to the explanation.
Of course, holding liquid assets in dollars wasn’t a deliberate decision either—it was just used by default. Even if I was completely risk averse, It’s not like I’ve got evidence that dollars are the most safe asset.
If I was planning this deliberately—I’m still a dependent and don’t really earn yet, so I haven’t really researched this—I’d probably store liquid assets in an index fund or something.
The thing is, when I look at the big picture everything is so riddled with bias already. For example, when Bitcoin began I put a high certainty on the value increasing, but I didn’t deliberately buy any. Before the recession, I put a high certainty on there being a recession before they put the temporary prohibition on shorting, but I didn’t short anything. Yes, it’s a good heuristic to not do anything (or more accurately, follow the majority) in scenarios when you are uncertain of your own competence...but my reason for not doing anything wasn’t explicitly negotiated via that reasoning, it was simply an instinctive tendency to not activity do things. (Interestingly, in this scenario uncertainty about my competence doesn’t imply inaction but action, since I’d have to deliberately buy USD.)
Edit: I’m reminded of this post… I think investing money in small amounts qualifies for “aliveness in training”, although as the amounts get larger it’s not training anymore. Perhaps we should encourage users who wish to practice in rationality to invest some liquid assets in something other than their native currency (unless they’ve deliberately chosen the native currency as the best place to store assets) to practice decision making?
Yup. I had termed it status quo bias, but endowment effect would also explain it.
I was talking it over with a friend, who suggested that what’s really going on is that humans are more willing to gamble with fortuitous winnings than they are with purposeful investments (as in, you’ll be more likely to gamble a dollar you found on the ground than one you earned)… and I actually think that this is the biggest contributor to the explanation.
Of course, holding liquid assets in dollars wasn’t a deliberate decision either—it was just used by default. Even if I was completely risk averse, It’s not like I’ve got evidence that dollars are the most safe asset.
If I was planning this deliberately—I’m still a dependent and don’t really earn yet, so I haven’t really researched this—I’d probably store liquid assets in an index fund or something.
The thing is, when I look at the big picture everything is so riddled with bias already. For example, when Bitcoin began I put a high certainty on the value increasing, but I didn’t deliberately buy any. Before the recession, I put a high certainty on there being a recession before they put the temporary prohibition on shorting, but I didn’t short anything. Yes, it’s a good heuristic to not do anything (or more accurately, follow the majority) in scenarios when you are uncertain of your own competence...but my reason for not doing anything wasn’t explicitly negotiated via that reasoning, it was simply an instinctive tendency to not activity do things. (Interestingly, in this scenario uncertainty about my competence doesn’t imply inaction but action, since I’d have to deliberately buy USD.)
Edit: I’m reminded of this post… I think investing money in small amounts qualifies for “aliveness in training”, although as the amounts get larger it’s not training anymore. Perhaps we should encourage users who wish to practice in rationality to invest some liquid assets in something other than their native currency (unless they’ve deliberately chosen the native currency as the best place to store assets) to practice decision making?