How Denial, Stories, and the Fear of Being Wrong Shape the Markets, and Us
✈️ Opening Hook: The People We Can’t Let Go Of
Amelia Earhart disappeared over the Pacific in 1937. Her body was never recovered. Her plane never found. And nearly a century later, we’re still chasing her ghost, clinging to fragments of aluminum, scattered bones on remote islands, and radio signals from long-dead stations.
Tupac Shakur was shot in 1996. Officially, he died in a Las Vegas hospital six days later. But for decades, fans have insisted he faked his death. That he escaped. That he’s living in Cuba, waiting for the right moment to return.
Two icons. Two mysteries. And one undeniable truth:
We are wired to struggle with unresolved endings.
Especially when those endings hurt.
If that sounds like grief, it is.
If that sounds like investing, it is that too.
♻️ The Parallel: Uncertainty Hurts. So We Replace It With Belief.
The markets don’t give us closure.
A company collapses and never explains why.
A promising startup flames out in silence.
An IPO you believed in drops 60%, the CEO disappears from public view, and the investor updates stop coming. There’s no press release, no earnings call, no neat headline to make sense of what happened. Just loss, and silence.
Take Theranos, for example. It wasn’t just a company that failed. It was a promise, a vision of futuristic medicine that many believed in. Investors lost hundreds of millions not just because of deception, but because they wanted to believe that vision was real. People held on, even when the red flags were undeniable. They didn’t just invest in a machine. They invested in a story.
Like Earhart’s last transmission.
Like Tupac’s final breath.
Like a stock chart that flatlines and never recovers.
So what do we do?
We build stories.
“She made it to an island.”
“He’s still alive somewhere.”
“This stock is just misunderstood. It’ll bounce back.”
And this is where behavioral finance begins.
🧠 Behavioral Breakdown: The 5 Invisible Forces at Work
Let’s look at the psychological machinery behind both the mysteries and the money.
1. Pain-Avoiding Psychological Denial
Charlie Munger called it one of the most dangerous tendencies of all.
When something is too painful to accept, the brain builds a protective story around it.
The mother who believes her missing son is still alive.
The investor who holds onto a failing position because “it’s not really a loss unless I sell.”
We don’t deny because we’re stupid.
We deny because reality hurts.
Just like some people can’t accept Earhart crashed, or that Tupac died, investors sometimes can’t accept they made a mistake.
And that denial can be subtle. It doesn’t always look like full resistance. Sometimes it’s just a quiet turning away, a refusal to open the brokerage app, a sudden switch to long-term language: “I’m not worried, I’m holding for the future.”
That might be true. Or it might be a lie we tell ourselves so we don’t have to feel the weight of being wrong.
We don’t want to believe that something we cared about is gone. So we convince ourselves it’s still there. That it’ll come back. That if we just hold on long enough, the market, or the story, will give us a different ending.
But in investing, clinging to pain often just extends it.
2. Narrative Fallacy
Our brains crave story more than truth.
That’s why people are drawn to the idea that Amelia landed on Nikumaroro Island and survived for weeks. It’s why Tupac supposedly left behind clues in lyrics and videos. We don’t want randomness, we want plots.
The same thing happens in finance.
We assign meaning to market moves that might be random.
We explain away stock drops with stories instead of facts.
“This dip is just manipulation.”
“Wall Street’s just sleeping on it.”
“This company has a vision, you’ll see.”
We want to believe the crash has a deeper reason.
That it’s not just chaos.
And when we tell ourselves those stories, we start making decisions based on vibes, not variables.
That’s where investors lose money. Not from ignorance, but from conviction unmoored from data.
In investing, a good story is seductive. It makes you feel smart, early, special. But if the story isn’t supported by fundamentals, cash flow, market share, actual business performance, then you’re not investing. You’re imagining.
3. Confirmation Bias
Once we want something to be true, we start hunting for evidence.
Believers in Amelia’s survival point to every ambiguous photo, every fragment of wreckage.
Tupac truthers dissect song lyrics like sacred texts.
And investors?
We find a bullish Reddit thread, a tweet from a CEO, a slightly-better earnings report, and we cling to it.
Meanwhile, we ignore:
- Debt piling up
- Users dropping off
- Cash burning
We filter the world to match our hope.
And in doing so, we blind ourselves.
In The Psychology of Human Misjudgment, Munger talks about how powerful this tendency is, and how it’s nearly impossible to escape. Once we’ve taken a stance, our brain moves into lawyer mode: it builds a case, not a search for truth.
The cure? Relentless self-questioning. Asking, “What would it take to prove me wrong?” And if you can’t name an answer, you’re not investing. You’re defending.
4. Loss Aversion
Psychologically, losses hurt twice as much as equivalent gains feel good.
It’s why investors will ride a losing stock into the ground but sell a winning one too early.
It’s why some people would rather believe in a conspiracy than confront the finality of death.
Letting go is painful.
Selling at a loss is painful.
Saying, “It’s over” is painful.
But sometimes, it is over.
So instead of selling a loser and moving on, we double down. We average in. We tell ourselves we’re being patient.
But the market doesn’t care about our pain. It just keeps printing prices. And if we can’t walk away, we turn a temporary loss into a permanent scar.
This is why portfolio management is emotional work. It’s not about beating the market. It’s about being honest enough with yourself to say: This didn’t go how I hoped. And I’m okay with letting go.
5. The Endowment Effect
We overvalue what we already own, whether it’s a belief, a stock, or a memory.
If you’ve already committed emotionally to the idea that Tupac is alive, or that Amelia survived, you’ll hold that belief tightly. You own it now.
Same with investments.
We think:
“I’ve held this stock for 3 years, I can’t give up on it now.”
But holding it doesn’t make it more valuable.
It just makes it harder to let go.
Investors often confuse time invested with value retained. But the market doesn’t refund sunk costs. And neither does the truth.
This is why many investors stay in bad trades, bad funds, or even bad financial relationships. The emotional cost of admitting it’s time to move on feels heavier than the financial loss itself.
💔 The Emotional Core: Why We Build Stories Around Loss
We don’t do this because we’re weak.
We do it because we care.
Because we want things to mean something.
Because the finality of disappearance, whether it’s a plane, a person, or a portfolio, is unbearable when it’s unexplained.
But that emotional instinct, left unchecked, leads to:
- Holding broken stocks too long
- Staying loyal to ideas that no longer serve us
- Mistaking story for signal
- Confusing hope with strategy
The healthier thing is to grieve. To feel the loss. To tell ourselves:
“That investment mattered to me. And I was wrong. And now I know better.”
That’s how you grow. That’s how you move on. That’s how you become unshakeable.
💼 Investor Takeaway: How to Stay Rational in a World That Isn’t
✍️ 1. Write Your Sell Rules Before You Buy
Don’t wait until you’re emotional. Define your exit strategy before you enter.
📉 2. Accept That Some Losses Are Silent
Not every stock will give you closure. Some will just fade. Let them.
📊 3. Track the Data, Not the Story
Revenue. Cash flow. Debt. Margins. Ignore the press releases and side quests.
👤 4. Separate Belief From Identity
You’re not your portfolio. You’re not your past picks.
You’re allowed to change your mind.
🧠 5. Practice Saying: “I was wrong.”
Charlie Munger said it best: the ability to change your mind when the facts change is a sign of intelligence, not weakness.
🔬 Final Thought:
We may never know what happened to Amelia Earhart.
Tupac may never come back.
And some of our investments won’t either.
But our job is not to believe the market into behaving.
Our job is to stay clear-headed, especially when it hurts.
Because in the end, the best investors don’t chase ghosts.
They build discipline. They accept reality.
And they move forward, eyes open.
This blog is read in 50+ countries (and counting). If you’re a student, teacher, or lifelong learner from anywhere in the world, I’m honored you’re here. Economics belongs to all of us
The Broke College Student 
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