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The Dangers of FOMO
FOMO. fear of missing out: fear of not being included in something (such as an interesting or enjoyable activity) that others are experiencing. -- Merriam-Webster Dictionary
George Pillari
November 09, 2023
As we shall see, even calloused, professional investors are susceptible to FOMO. But how can this be? If we remember the old rule of “follow the money” things come into focus. Professional investors are charged with investing other people’s money. These professionals have accountability not really to themselves or their dreams, but to the investors that have entrusted them with making their money grow.
Professional investors that are trying to deliver financial returns do not want to face their investors and say, “Yeah, we did miss the next big thing.”
It is this dynamic that makes FOMO inevitable and almost predictably repeatable. What is even more confounding is that these investors are highly educated and sophisticated businesspeople.
The consequence is that FOMO starts small and builds to a crescendo, usually the collapse of a business and the wash-out of the investment.
It is well documented that humans are more likely to respond to fears and threats than the rewards of pleasure. Perhaps it’s a primitive neuro-biological reaction but one that is relevant to this discussion.
Avoid situations where there is a rush to “get in” and little fear of failure. For this, you need to trigger not a reaction of exuberance, but that primitive reaction of fear and threat. Think “Why is there all this pressure to rush into this?” instead of “I better hurry to get in before I miss it.” Use the fear-threat emotion to develop and refine your FOMO radar..
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