What is... | December 19, 2016

What is the focusing illusion?

How shifting your attention can help prevent mistakes in life – or even with money.


When you see a multi-millionaire holidaying on a yacht, chances are you feel envious. But maybe overall you are both just as happy. At first, that might be hard to believe especially when you see that they have all the luxuries when you’re struggling to get by each month. However, research suggests that you might feel this way because you’re only focusing on the visible wealth aspect of their life. 

Whenever you focus too much on any one aspect of life, whether that’s earning more money, living in a better neighbourhood, shedding a few more kilos or going on that dream holiday and believe it could be the solution to all your problems, you’re usually exaggerating its importance and it’s an illusion.

People think they’ll be happy forever if they win the lottery because it’ll solve all their money problems. But of course that’s not the case because the novelty wears off; you adapt to the new realities of your life and the focus shifts to the next thing

It’s all in your head
Behavioural economics founder Daniel Kahneman and his colleague David Schkade described this mismatch between thinking about a life condition and actually living it as focusing illusion: nothing in life is as important as you think it is, while you are thinking about it.

They tested this idea by comparing life satisfaction of people living in California on the West Coast with those living in the Midwest United States. The Midwesterners believed those living in California would be happier (perhaps because of the media representation of California as a sunny place with a diverse culture) without considering the urban downsides of traffic and pollution.

It turned out that self-reported overall life satisfaction was the same in both regions. This shows that when we focus on one aspect of our lives, we tend to undervalue the others, which also play a large role in making us happy. Often, people don’t know how happy or satisfied they are with their life in the way they know their height or telephone number.

Novelty distorts our focus
Recent life changes – perhaps a marriage, divorce, new job or home – come easily and quickly to mind and you tend to focus on them. You’ll tend to think about these novel events, which increase their apparent importance and influence. If you’ve just got a new job and you’re happy, you’re likely to say life is good but if you regret the move, you might tend to be dissatisfied in general.

However, 15 years on, this life change will seem insignificant. The classic examples of this are lottery winners and people who have become disabled due to an accident, as Kahneman writes in his book Thinking Fast and Slow. People generally think they’ll be happy forever if they win the lottery because it’ll solve all their money problems. But of course that’s not the case because the novelty wears off; you adjust and adapt to the new realities of your life and the focus shifts to the next big thing.

Similarly, people who have become disabled because of an accident aren’t unhappy all the time despite their loss. And one reason is they can still do many things that make them happy such as watch television or spend time with friends. Incredibly, neither of these groups are nearly as miserable or happy as many people think. In fact their day-to-day happiness is about the same.

Take a broader view
When you see a new gadget or an appliance that you really want or even a new fancy restaurant, you tend to focus on it and greatly exaggerate and overestimate the difference it could make to your quality life.

In the same way, Kahneman writes that education is one of the most important determinants of your income, which is why so many people are willing to spend so much money on it. Nevertheless, education is still less important than most people think. Even if everybody had the same education, the difference in earnings would remain huge, as this NYT article explains.

Obviously, the focusing illusion has a bigger effect when it comes to some goods and experiences than others, particularly those that continue to attract more of our attention over time.

When taking your next big decision, whether that be accepting a new job or moving house, don’t just focus on one thing. Try and consider all the factors that go into that change. Remembering that other aspects of your life are also very important may help you take a broader view of the situation – and make better decisions about personal finance.

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eZonomics team
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