Study: No Sleep and You’re at Risk to Make Risky Financial Decisions

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Here’s a research finding that the people running Vegas casinos seem to have known all along: When it comes to evaluating the risks of winning or losing money, sleep-deprived individuals tend to be more optimistic than their well-rested counterparts. No wonder casinos are open 24/7, no one ever knows what time it is, and the culture encourages gamblers to stay up all night long.

According to Duke University neuroscientists, whose findings are summed up in Medical News Today, people don’t think straight after a night of sleep deprivation. OK, anyone who has had an infant in the house already knows that. But studies show that sleep deprivation has specific impact on the brain’s ability to assess risk. Basically, when you haven’t had enough sleep, the brain is more likely to focus on positive outcomes and to ignore potential losses involved in gambling scenarios. MRIs actually show “increased brain activity in brain regions that assess positive outcomes,” as Medical News Today puts it.

What’s the takeaway here? Always get a good night’s rest before making any major financial decision. Then, when you’re well-rested and ready to pull the trigger, my advice would be to sleep on it again before actually deciding.

In terms of gambling, everyone knows the house always wins. Now it’s apparent you’re especially likely to lose if you’re exhausted. As one of the study’s authors explains:

“Late-night gamblers are fighting more than just the unfavorable odds of gambling machines; they are fighting a sleep-deprived brain’s tendency to implicitly seek gains while discounting the impact of potential losses,” said Vinod Venkatraman, the lead author and graduate student in Psychology and Neuroscience at Duke.

Q&A with ‘The Lottery Wars’ Author Matthew Sweeney