The Peril of Responsibility

November 09, 2022

An interesting study was published in the Journal of Economic Psychology in 2007. The authors examined the behavior of soccer goalies during penalty kicks. We’ve all seen the videos. Penalty kicks are difficult to block. Just as the opposing kicker prepares to strike the ball, the goalie makes a split-second decision – dive left or dive right. Sometimes the goalie blocks the shot. Most of the time the ball ends up in the back of the net. But after analyzing hundreds of kicks in professional soccer leagues, the authors of the study found a goalie has much better odds of success if he simply stays in the middle of the goal.[i]

If you ever happen to be unfortunate enough to encounter a Grizzly bear in the wild, there is one thing you must remember. Do not run. If you run, the Grizzly thinks you are prey. Grizzlies can weigh up to 900 pounds, run up to 35 miles per hour, and when they see prey, they chase it down and eat it. Nevertheless, there is a universal human impulse when confronted with a Grizzly. Run.

The goalie and the unfortunate hiker mentioned above both exhibit a powerful psychological impulse: action bias. That is, our human tendency to favor action over inaction even when doing so is detrimental. Importantly, there are many examples of choosing action over inaction working to our benefit. Most of the time it does.

But when it doesn’t, the results can be catastrophic.

Ken Murray, a physician and professor at the University of Southern California wrote a well-known article in 2011 entitled “How Doctors Die.” It is well worth your time to read. A summary: doctors don’t die like the rest of us. Here’s an excerpt:

Almost all medical professionals have seen what we call “futile care” being performed on people. That’s when doctors bring the cutting edge of technology to bear on a grievously ill person near the end of life. The patient will get cut open, perforated with tubes, hooked up to machines, and assaulted with drugs. All of this occurs in the Intensive Care Unit at a cost of tens of thousands of dollars a day. What it buys is misery we would not inflict on a terrorist. I cannot count the number of times fellow physicians have told me, in words that vary only slightly, “Promise me if you find me like this that you’ll kill me.” They mean it. Some medical personnel wear medallions stamped “NO CODE” to tell physicians not to perform CPR on them. I have even seen it as a tattoo.[ii]

Dr. Murray says futile care is typically administered at the family’s request to the doctor to do something. Additionally, if the doctor abstains from administering futile care and the patient dies (as most in these cases will regardless of medical intervention), there may be an investigation. Perhaps a lawsuit. For anything from malpractice to homicide.

Action bias…

Fidelity, the custodian of billions in investment assets, undertook a study to determine the common traits of their best performing accounts.[iii] They identified those accounts and contacted the owners. There was indeed a common thread among the best performers…

They had forgotten about their accounts.

Vanguard, another giant asset manager, embarked upon a similar study with similar results – account owners who made no changes to their account handily outperformed those who traded more frequently.[iv]

Action bias is one of an individual investor’s biggest enemies. How an investor behaves, particularly during moments of euphoria (see 2021) and fear (see 2022) is a critical determinant of their long-term investing success. Much like the goalie preparing to defend a penalty kick and the hiker encountering the Grizzly’s lair, action bias often propels investors to horrible outcomes.

Perhaps more importantly, action bias is far too prevalent among portfolio managers and financial advisors. They often find themselves in situations analogous to those of the physicians mentioned above. In 2021 when “pandemic stocks,” “meme stocks” and crypto tokens were making day traders rich, there was a powerful impulse for the advisor to just do something. In 2022, when the markets are a sea of red and their clients’ account values are going down, the same impulse reappears to just do something. Afterall, doing something provides a signal by the advisor to his clients that (a) he’s not oblivious to everything that’s going on and (b) he’s worth what you’re paying him.

This is the Peril of Responsibility. The greater the responsibility – a doctor overseeing his patient’s health or a financial advisor managing a family’s money – the greater the impulse to do something. Doing nothing while shouldering immense responsibility looks irresponsible to outsiders – like a goalie standing in the middle of the goal during a penalty kick. It feels reckless to the person ultimately responsible – as it must feel to play dead when confronted with a Grizzly bear. It is true for financial advisors, doctors, and other professionals… even when doing nothing will result in a better outcome, doing something feels like the better career move.

We named our firm Resolute in part based on a quote from an old Greek sage, Bias of Priene, who counseled, “Be slow in considering but resolute in action.” You can see that statement plastered on the home page of our website. It is a principle we seek to live out every day. You won’t find us hastily making trades in accounts we manage. Each decision is measured against the natural proclivity to action. Every trade is made proactively pursuant to a plan rather than reactively to the market’s spasms or the media’s headlines.

Søren Kierkegaard said far from idleness being the root of all evil, it is rather the only true good.

It’s a pity Kierkegaard lived before the advent of the modern stock market.

He may have been a great investor.

Sean Cawley, CFP®


Neither asset allocation nor diversification guarantee against investment loss. All investments and investment strategies involve risk, including loss of principal.

Content here is for illustrative and educational purposes only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.

This commentary reflects the personal opinions, viewpoints, and analyses of Resolute Wealth Management. It does not necessarily represent those of RFG Advisory, clients, or employees. This commentary should be regarded as a description of advisory services provided by Resolute Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.

[i]Bar-Eli, M., Azar, O.H., Ritov, I., Keidar-Levin, Y., and Schein, G. (2007). “Action bias among elite soccer goalkeepers: The case of penalty kicks.” Journal of Economic Psychology. 28(5), 606-621.

[ii] Murray, Ken. “How Doctors Die.” November 30, 2011.

[iii] Crosby, Daniel. The Laws of Wealth. Harriman House, 2016. Pg. 16.

[iv] Crosby, Daniel. The Laws of Wealth. Harriman House, 2016. Pg. 16.