Indecent Exposure for Your Portfolio

“‘Subliminal’ is about how we misinterpret our behavior because we’re unaware of what our unconscious minds are doing.”
–Leonard Mlodinow

“I saw a subliminal advertising executive, but only for a second.”
–Steven Wright

Once upon a time, if you went to the movie theater, you were bombarded with advertising.

  1. Yes, I know that if you go now, you’re bombarded with advertising.

The difference is that now, the advertising happens before the movie starts and doesn’t occur during the movie itself.

Back in 1957, a market researcher inserted subliminal ads into movies for just one frame. You can read more about his experiment and see some of the ads here. Movies back then had a rate of about 25 frames per second, meaning that you saw the ad for about 40 milliseconds.

I know. 40 milliseconds sounds like an odd way of stating how long these moviegoers were exposed to the subliminal advertising, but hang with me. There’s an explanation below.

The researcher, James Vicary claimed that sales of popcorn and Coke skyrocketed because of those frames. Unfortunately, he lied about the evidence.

Despite the lack of evidence about the impacts, the FCC subsequently stated that it would revoke the licenses of broadcasters who used subliminal advertising.

However, just because Vicary could never back up his claims about increased sales of Cokes and popcorn doesn’t mean that those brief exposures to information had absolutely no impact on the subconscious at all.

The subconscious – notably the limbic system, or what I call Monkey Brain because that’s the part of the brain that we share with our simian cousins – is a busy bee. Yes, long-time readers know that Monkey Brain is inherently lazy and would rather sit on the couch, watching television and eating Doritos than go out and do hard work. I promise to tie these two together.

To explain why the subconscious is such a busy bee, let’s imagine that we’re taking a road trip to a place we’ve never been. We plug in our GPSes or we consult our maps, and off we go. We have a grand day at this place and then we drive home.

Which trip seemed to take longer: the way out or the way back?

The way back always seems shorter. That’s because the brain, notably your subconscious, is taking notes on everything it perceives. Since it’s all-new, your brain is working extra cycles, causing your perception of time to slow down. That’s because, way back when, when Monkey Brain was just a mere caveman, danger lurked everywhere. Monkey Brain needed to know where the woolly mammoth was going to charge from and where to run. However, on the way back, your brain has already seen it all before, so it’s not really taking the detailed notes that it did before. It’s familiar and comfortable, and so your mind is freed up to think about other important things in life, such as what color Smurfs turn when you choke them. Thus, the trip back seems quicker even though it takes the same amount of time. You can read more about it here.

Monkey Brain likes familiar things. It’s less taxing on his grey matter because he doesn’t have to devote energy to understanding them. He can create opinions about the things he knows and no longer worry about them.

Why We Notice the Flashers

Even though Vicary wasn’t able to prove that his subliminal movie advertising had an impact on viewers, there is no doubt that the viewers’ Monkey Brains all noticed the ads.

Furthermore, it’s pretty likely that not only did they notice the ads, but they felt more liking for those brands after the subliminal advertising.

Adelphi University’s Dr. Robert Bornstein and Gettysburg College’s Dr. Paul D’Agostino conducted an experiment where they showed students photographs and Welsh figs for very short periods of time and then measured how much the students liked each.

Full disclosure: I have no idea what a Welsh fig is.

They showed the items for either 5 milliseconds or 500 milliseconds and recorded whether or not the students recognized the items and whether or not they liked the items.

In all cases, the more the students were exposed to an item, the more they liked the item. 1 exposure barely moved the needle on a liking scale of 1 to 7, but 20 exposures caused the students to like an item much more.

The big jump though, was in the length of exposure.

If a student saw an item for 500 milliseconds (half a second), then the liking increased by about .5 after 20 exposures.

If a student saw an item for 5 milliseconds (1/200th of a second), then the liking increased by about 1 point after 20 exposures.

However, the students had no idea that they were exposed to the images that they liked when they only saw them for 5 milliseconds. They were very aware of the images they saw for a half a second.

5 milliseconds is less time than it takes for the brain to cognitively process an image – a process that takes, when uninterrupted, 13 milliseconds.

So, exposure, even brief, increases our affinity and liking for something.

How Does Affinity and Likability Affect Our Investing?

Simply put, we invest in the stocks that we like and that we think we know. Individual investors are much more likely to invest in a company they’ve heard of rather than one they haven’t heard of.

Furthermore, we’re much more likely to invest in stocks whose headquarters are near us, a phenomenon known as local bias.

Why is that?

Repeated exposures!

You drive to work. Every day, you take the same route. You drive by the same companies and see the same billboards.

After a while, Monkey Brain will start to develop an affinity for those companies.

Furthermore, even if you don’t see those companies on your commute, chances are you like where you live. Therefore, any company that is headquartered where you live must be a good company. It gets to experience what is known as the halo effect – it gets good press in Monkey Brain’s way of thinking because it’s associated with your hometown.

So, next time you’re thinking about what to invest in, remember, that Monkey Brain has a team of investments that he’s rooting for. These investments have no correlation with potential strong stock performance, such as, say, profitability or growth. Instead, he’s seen them before, even if just the briefest flash of a mention, and that causes him to fall in love with them.

Remember, don’t fall in love with your investments. It may cause you to hate your bank account later.

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