The Two Big Strategic Mistakes That Investors Make
Research finds a discrepancy between what people plan to do when trading—and what they actually do.
The Two Big Strategic Mistakes That Investors MakeMatt Chase
When Florida governor Ron DeSantis signed a bill into law in late March to ban social media access for children under 14, it was among US lawmakers’ most sweeping attempts to limit kids’ exposure to platforms such as TikTok, Facebook, and Instagram. It was by no means their only one, however. From Arkansas to Utah, lawmakers have been looking at ways to keep young people offline, or at least to keep their socializing there.
The swell of interest in such laws comes amid growing recognition that social media can have negative consequences for people’s mental and emotional well-being. Among the academic evidence, a study led by Jean Twenge at San Diego State University finds a strong correlation between depression among teenage girls in the United Kingdom and their use of social media. In May 2023, US surgeon general Vivek Murthy issued a statement warning that “there is growing evidence that social media use is associated with harm to young people’s mental health.”
But there’s a paradox here. Social media connects us to other people, helping us maintain old relationships and even establish new ones, and research has repeatedly found that relationships are core to happiness. In a seminal 2002 study, the late Ed Diener and University of Pennsylvania’s Martin E. P. Seligman found that strong relationships were essential to high levels of happiness, and Chicago Booth’s Nicholas Epley and University of California at Berkeley’s Juliana Schroeder have found that even brief interactions with strangers are surprisingly enriching. Shouldn’t social media be making us all happier?
We may find clues to the answer in a parallel enigma set within a very different context: the disparate farming cultures that have grown up in various regions of China. Chicago Booth’s Thomas Talhelm has studied this to understand how the regions’ history of farming rice or wheat shaped the way people think. His work is helping to illuminate how otherwise similar populations end up with different attitudes and ideas about everything from wearing masks to getting divorced. And it may explain why, sometimes, greater interconnectedness can end up making people less happy.
A decade ago, Talhelm and colleagues from the United States and China published a paper demonstrating that Chinese students who had grown up south of the Yangtze River, where the climate has made rice the traditional subsistence crop, displayed a greater tendency toward collectivism—characterized by tighter-knit, more interdependent communities and a stronger commitment to maintaining durable, stable relationships—than their peers north of the Yangtze, where wheat farming dominates.
Along with this cultural trait, there was a cognitive one: people from rice-farming regions were more likely to think “holistically”—in terms of functional relationships between people and things—than “analytically,” using abstract, top-down labels to categorize the world. (An analytic thinker, for example, is defined by psychologists as someone who sees a train as being related to a car, a bus, a boat, and a plane. A holistic thinker would see the train as being related to railroad tracks and the coal powering the engine.)
Differences across these characteristics were reflected in the various behaviors and outcomes the researchers observed. People from rice-growing areas were more loyal: in a test where a friend behaved badly, students from southern, rice-growing regions were less likely to punish him than were northerners. They were also less likely to get divorced.
Farmers working on the terraced rice fields in Yunnan, China. Photo by Shelyna Long/Getty
Residents in wheat-farming regions, on the other hand, were more likely to produce patents for new inventions—an outcome that the researchers associated with analytic thought, and that prior research has found to be linked to individualism.
These differences, the researchers argued, arose from the cultures of these regions, and the cultures in turn were formed by the type of subsistence agriculture historically practiced there. Rice farming traditionally requires a great deal of labor—much more than one family can provide—and substantial amounts of water, usually fed to the paddies by elaborate irrigation systems connecting whole communities. As a result, rice-farming societies grew to value cooperation and trust between close friends and neighbors. Wheat farming, which is less resource intensive, led to societies in which individualism was not only tolerated, but prized.
By keeping confounding factors such as ethnicity and education constant across test groups, the researchers were able to narrow in on subsistence type as the likely cause of the difference—unlike most previous studies in this vein, which made their comparisons across religious, national, and even continental divides. Moreover, when Talhelm and his colleagues tried mapping the results to other theories of the origins of cultural differences, such as the notion that capitalism and economic growth move cultures away from collectivism and toward individualism, none fit as well as subsistence theory.
In research published this year, Talhelm and Hong Kong University of Science and Technology PhD student Xiawei Dong find that farming doesn’t need to persist for centuries in order to leave its imprint on local culture. They compared groups of contemporary farmers on two state farms, a rice farm and a wheat farm located just 56 kilometers from each other, established after World War II in what was then the Ningxia province. The farmers who initially worked these farms were, the researchers say, assigned to either rice or wheat effectively at random.
Nonetheless, just a few generations later, the farmers on these farms demonstrated the same crop-based cultural differences observed in China more broadly, with the rice farmers exhibiting more collectivistic tendencies—though the difference between the two groups was smaller than in the earlier comparison of the rice-growing south and wheat-growing north.
“This suggests that rice culture can form in the length of a single human’s lifetime, but we should not overlook the effects that accumulate as cultures build reinforcing institutions such as family clans, local dialects, and regional governments,” Talhelm and Dong write.
With Wenzhou-Kean University’s Alexander S. English, Talhelm also finds evidence for another broad cultural trait associated with rice farming: tighter social norms. Tighter norms mean less tolerance for deviations from accepted rules and expected behavior, and they have been found to be correlated with collectivism. Talhelm and English argue, however, that collectivism doesn’t fully explain their finding; the tighter norms are in part due to rice farming itself, they say, and its historical reliance on established rules for sharing labor and water.
“You don’t have to actually be a farmer for this to have an effect. Living in the culture created by farming is enough.”
— Thomas Talhelm
In other research, Talhelm has found the rice-wheat divide is associated with differences in a number of other, more specific behaviors and outcomes as well. For instance, in a series of studies, Talhelm and various coauthors find that people in rice-growing regions of China were quicker to mask up in the early days of the COVID pandemic, and were better in general at limiting the spread of COVID—except during the Chinese New Year at the outset of the pandemic, when their case counts were substantially higher, driven perhaps by the greater holiday travel their close familial and social bonds required.
People who live or grew up in rice-farming areas of China also tend to be more emotionally perceptive than their counterparts from wheat-growing regions, Talhelm and his collaborators find. In one study, college students raised in rice-growing regions were more accurate at identifying emotions on the faces of actors in photographs. Another study involved the same task but focused specifically on a province through which the rice-wheat border runs, comparing the performance of study subjects just over the border on one side or the other, and finds the rice effect was even greater. This tracks with the collectivist, interdependent profile of the rice regions, the researchers suggest: being more reliant on others makes reading their feelings a more useful skill, and spending more time with others means more opportunities to fine-tune those perceptions.
The rice-wheat divide can even be felt in Starbucks. In a 2018 study, Talhelm, Beijing Normal University’s Xuemin Zhang, and University of Virginia’s Shigehiro Oishi find that people in wheat-growing areas were substantially more likely to visit a Starbucks alone: on weekdays, there were 10 percent more solo visitors to the coffee chain in wheat regions than in rice regions. Starbucks patrons in wheat-farming areas were also much more likely to move a chair that created an obstacle—and thereby exert control over their environment—than were people in rice-farming areas, who were much more likely to adapt themselves to their surroundings. Doing things on one’s own and emphasizing personal control of one’s environment have both been linked to individualism in prior research, Talhelm, Zhang, and Oishi explain.
Not only is the idiosyncratic influence of rice or wheat farming pervasive, but technology that shapes social relationships also has long fingers: the social values subsistence farming imprints on a culture apply as much in cities as in the countryside, among people whose ancestors never planted a grain of rice or a seed of wheat, Talhelm and his colleagues have found. “You don’t have to actually be a farmer for this to have an effect,” says Talhelm. “Living in the culture created by farming is enough.”
In 2023, Talhelm, Cheol-Sung Lee of Sogang University, and Dong published a paper noting an additional distinction between people from rice-farming and wheat-farming regions: degrees of happiness.
The researchers analyzed national surveys in China taken between 1999 and 2014 and find that people in rice-growing regions reported being less happy, on average, than those in nonrice-growing areas. The reason, Lee, Talhelm, and Dong argue, is a culture of social comparison created by farming rice, but not by growing wheat: “When people plant independently from each other and have fewer opportunities to observe each other [as is the case with wheat farming], they have more room to accept differences,” they write. “Thus differences in output might sting less.”
To test whether social comparison could explain why people in rice areas were less happy, they looked at something people often compare—money. In both rice and wheat regions, people with more money were happier. But the effect of money was much bigger in rice-growing areas. Other social-status markers such as career prestige and education also mattered more for people’s happiness in rice areas.
Rice farming encourages interdependence, more so than wheat farming, the research suggests. And according to the analysis, these distinct agricultural environments can influence happiness.
The researchers also asked 212 rice and wheat farmers in China about their impulses toward social comparison. The results of the questionnaire indicate that the rice farmers, men and women ranging from 24 to 72 years old, were much more likely to compare themselves with friends, with others on the farm, and with family members than were their wheat-farming peers. And people who reported more social comparison were less happy, a finding that aligns with prior research as well.
These findings could help to explain what Talhelm calls the East Asian happiness paradox: per capita GDP is a strong predictor of how highly a given country’s citizens rate their life satisfaction, yet many East Asian countries, including Japan, China, and South Korea, have lower average happiness scores than would be suggested by their national wealth alone. In an echo of the social media mystery, this is particularly surprising given the collectivist bent of these countries in comparison with the West—their emphasis on strong and lasting relationships with family, friends, and neighbors seems like it should make them overperform in terms of happiness. Instead, the data show the opposite happening.
Social comparison could be at least part of the explanation for these surprising outcomes, Talhelm says. “Interdependent, collectivistic cultures do prioritize relationships,” he says. “They spend more time with other people; they are more likely to make choices that avoid disrupting relationships; they’re more likely to invest in relationships. All of that is true. And yet, it also seems to come with this side effect of social comparison.”
The happiness gap between those in wheat- and rice-farming areas may also suggest why social media, despite its potential for building and maintaining relationships, seems to leave many people feeling less happy. When each of us has a publicly visible social status quantified by friends, followers, and likes, and when our online acquaintances allow us to see only the most flattering aspects of their lives through a carefully curated and edited set of photos, videos, and comments, social comparison is all but inevitable.
In an analysis of Facebook’s effect on college students’ mental health, Bocconi University’s Luca Braghieri, Tel Aviv University’s Ro’ee Levy, and MIT’s Alexey Makarin find evidence consistent with this. Examining answers to student-health surveys around the time Facebook was introduced at various US colleges, they find not only that the arrival of Facebook had detrimental effects for students’ mental health, but also that “the pattern of results is consistent with Facebook increasing students’ ability to engage in unfavorable social comparisons.”
There is a problem with the notion that some societies are collectivist and others individualist: a number of studies have failed to stand this up or have produced counterintuitive results. Some past research has found Americans to be about as collectivist as Filipinos, and more collectivist than people in Japan; both findings contrast with cultural stereotypes and expert perceptions.
Talhelm believes the problem lies in the research methods. More specifically, he says social scientists have not used precise enough definitions of collectivist and individualist behavior. Instead, their survey questions measure, as a proxy for collectivism, feeling positive about or helping other people generally. In one widely accepted measurement framework, for example, participants are asked on a scale of 1 to 9 if they feel good cooperating with others. “You’ve got to specify whom you’re talking about,” says Talhelm. “‘Others’ is not good enough.”
Instead, he argues, the difference in mindsets hinges on whom you are ready to help—and a better term than collectivism might be responsibilism. Using questions looking at the targets of a person’s magnanimity, he and colleagues surveyed people around the world for a 2023 study that finds individuals from Eastern cultures tend to feel a high degree of responsibility for a close circle of friends and family; beyond that, they feel they owe others less. In Western cultures, by contrast, individuals are often as happy to help a stranger as their sister. “It’s like utilitarianism’s argument that you should care as much about someone halfway around the world as the person next door,” says Talhelm. “Some people in the West really live that.” (For more about this research, see the infographic “A better measure of collectivism.”)
Even if the concept of collectivism has been muddled in some of the academic literature, Talhelm’s research lends support to the idea not only that there are cultural differences in people’s attitudes about their personal relationships, but that these differences are linked to fundamental features of those individuals’ local history and environment.
Teasing out explanations for cross-cultural differences can be a challenge—comparing any two countries, for example, will inevitably entail sorting through many variables that might explain any disparities. But studying the rice-wheat divide in China allows Talhelm and his collaborators to home in on the legacy of subsistence farming. It’s a legacy that has proved to be far-reaching, touching people and aspects of life and even parts of mental well-being that are otherwise isolated from the particulars of water-logged rice paddies or lonely wheat fields, but that nonetheless operate under their invisible influence.
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