The action bias, or the desire to do something rather than nothing when you have just been through a terrible experience, plays a powerful role in our lives. It influences individuals and companies, investors and leaders. You can see the action bias on display in current thinking on the housing and economic crises, in the bitter debates over the war in Iraq -- even in discussions about how to fix a football team that's a perennial loser.
When people suffer losses and confront the possibility of even greater reverses -- it doesn't matter if you are talking about a terrorist attack or a meltdown in retirement savings -- it is psychologically difficult to do nothing, to hold course. This is true even when the action you contemplate produces an outcome that leaves you demonstrably worse than you were in the first place.
