To take more risks, try a dose of nostalgia

I started teaching at Nanyang Business School about two years ago. Every semester, a few students would ask for a day off from lectures because they have appointments at the Housing and Development Board for the selection and balloting of flats.

“What is the ballot all about?  You are a university student. Why do you need to own a flat now? Don’t you live in the dormitory or with your parents?’’ I would always ask. 

It strikes me that, even for first-year university students, they seem to be very certain this is how their life will pan out: Get the education credentials, secure a good job, accumulate Central Provident Fund savings, meet a potential life partner, get in a queue to buy an HDB flat, get a housing loan, get married, and move into the flat.

I joked about this with a colleague who was from Hong Kong and has been teaching in Singapore for more than 20 years. In her words, this is a path for the young people in Singapore.

She has had countless graduates giving up their dreams of furthering their studies or starting their own business, because they are afraid of the risk of taking this uncertain path — the risk of not having a stable financial income seems too daunting to many. 

In between a less risky path of getting a job and a flat and a more risky path that does not lead to immediate returns, most of the graduates choose the less risky path.

So, how could we motivate people to take more risks Singapore? Taking risks never feels comfortable, but it is unavoidable and necessary for anyone who aspires to achieve greater goals and for any society where innovation is essential for growth. 

To address this question, some counterintuitive findings in social psychology might be instructive.

Take for instance how researchers have found that Chinese people, compared to Americans, take more risks in financial decisions because they have more financial support from family members. 

In other words, a large number of family contacts “cushions” the downside of suffering losses in risky investments. This cushion effect has also been found in online communities, where people who have stronger relationships with other community members are more likely to make risky decisions. 

In this sense, security and sufficient support are essential in enabling people to take more risks. 

Another commonly assumed idea is that risk aversion is often manifested by a tendency to stick with the status quo and not trying new things. 

However, my research partners and I found that inducing people to think of the past sentimentally can reduce the human tendency of avoiding risks and provide a psychological cushion that encourages people to take more risks. 

Although many people doubt whether it is healthy to dwell in the past, research conducted by Professors Tim Wildschut and Constantine Sedikides from the University of Southampton has shown that nostalgia is a predominantly positive social emotion. 

When people are asked to think nostalgically and write down their thoughts, they usually think about relationships with ‘’close others’’, such as family members, romantic partners, and friends.

The same research also suggests that when people write about their nostalgic thoughts, they feel more socially connected, loved, and protected.

Based on this insight on the psychology of nostalgia, my research partners and I suggest that nostalgia creates a psychological cushion that facilitates risk-taking. 

Nostalgia would increase people’s perceived family support, serves as a psychological cushion, and results in increased financial risk-taking.

For example, in one study, we recruited a sample of business owners in the United States. We asked how frequently they experienced nostalgia and what their investment strategies were.

We found that business owners who experienced nostalgia more frequently were more likely to run their business using more risky strategies, such as taking bold, wide-ranging actions to achieve the company’s objectives and preferring high-risk projects with chances of high returns.

The link between nostalgia and risk-taking has direct implication in motivating more risk taking. While many entrepreneurs or risk-takers may be in a risky pursuit by themselves, they are not alone psychologically. Their memory bank is filled with moments with their loved ones. 

And we know that this past memory matters in creating a psychological cushion that enables people to take more risks. A secure environment and a happy upbringing for youngsters play a critical role in making a deposit into this memory bank. 

When we are afraid of taking risks, we should think about the happy moments in the past surrounded by loved ones. This feeling of nostalgia can motivate more risk taking.

As a psychologist, I understand that people are risk averse and thus I should not be surprised by what my students told me. After all, it is having citizens who strive to have a good life that builds a prosperous society.

But I hope that the past success and the current security that Singapore has achieved in the last five decades will serve as a strong cushion that enables the young people to take risks and be bounced back quickly when faced with challenges.

ABOUT THE AUTHOR:

Zou Xi is an associate professor at Nanyang Business School at Nanyang Technological University.  The research mentioned in this article is co-authored with Margaret Lee (University of California, Berkeley), Tim Wildschut and Constantine Sedikides (University of Southampton).