Investing Lessons From the Indianapolis Motor Speedway

I probably shouldn’t say this, but what the heck: Much, if not most, behavioral finance research is boring. Long studies written in Academic-ese remove its psychological thrill. Take Prospect Theory or myopic loss aversion, which finds people hate losses more than they enjoy equivalent gains and take excess risk in hopes of avoiding loss. It is an easy trait to observe and feel, and its implications are deep, common and fascinating, but the research papers detailing it? Bit of a slog, sorry. Dozens of pages about random people playing games of chance, all in the passive voice, and they don’t give actionable takeaways. How can investors beat this mindset? Or channel it into something useful?

Thankfully, investing isn’t the only endeavor where psychology looms large. We also have sports, which Yogi Berra taught us is 90% half mental.^[i] And we have sportsmen and women who are happy to explain the mental pitfalls and how they overcome them. Lucky for us, in the run-up to this Sunday’s Indy 500, the driver of Andretti Global’s #28 car, Marcus Ericsson, went on a podcast and explained myopic loss aversion and how he deals with it.

He wasn’t talking about it in the financial sense, but rather his history with the world’s biggest motor race. He won it in 2022, then finished second in 2023 and again in 2025 before a post-race technical infraction triggered a retroactive disqualification. At most races, second place means a podium finish, champagne and a trophy. But at the Indianapolis Motor Speedway, second means loss and heartbreak, crying in your helmet because you gave it everything while the laurel-wreathed winner bathes in milk and glory.

So in the May 7 episode of his Trackside Extra podcast, Fox Sports’ IndyCar pit reporter Kevin Lee asked Ericsson the logical question: “Does finishing second hurt more than winning feels good?”

Ericsson’s response: “Yah, I definitely think more about the two times I finished second in ’23 and last year than the year I won in ’22. Because I think it’s just natural that you are thinking about those times where you’re like, what if I did this, then could I have won?”^[ii]

There it is! Confirmation that the pain of the loss looms larger than the joy of the equivalent gain, which is what Daniel Kahneman and Amos Tversky showed in their groundbreaking paper on the subject in 1979. Only, simple and relatable. No thought experiments. No long sentences and $10 words. Just honesty.

He didn’t stop there, which is where the investing implications enter. Loss aversion is a natural human trait, but it also erupts from experience. In talking with investors over the years, I get the sense no one starts investing with theoretical loss aversion influencing their decisions. Instead, it gets seared in after people endure that first big market decline and feel the pain of seeing their portfolio value drop. You get that pit in your stomach and think, I have to prevent this feeling.

This leads to a crossroads where people decide what they will do with this feeling: You can let it control you, or you can control it. Ericsson admitted he has done both. When Lee asked if last year’s loss and disqualification affected the rest of the year, he didn’t mince words: “Yah, I really think it did. … I think it really took a toll on myself and my whole crew that was painful. And I think it sent us into a negative spiral for the rest of the year that we didn’t manage to get out of.” Eventually, he finished the season placed 20^th of the 27 full-time drivers.

Investors can easily spiral, too, letting their emotional reactions to market volatility repeatedly dictate their decisions. You can see that in things like fund flows, which often show mass selling after stocks drop. They react to the pain by cutting the chance of future pain. Problem is, people tend to do this after sharp, sudden drops, which are usually fleeting. They sell after the decline, turn the paper decline to a realized loss, then miss the recovery that would have quickly erased it. But missing that gain doesn’t feel as bad as enduring a much bigger decline would have. At least I didn’t lose even more becomes a mental, emotional or ego security blanket. Accordingly, these folks have a hard time fathoming and fixing the error, which leads to poor long-term returns as they repeatedly sell at the wrong time or even avoid stocks entirely. It is a devastating, expensive spiral.

But there is another way. You can choose to take control by learning from your mistakes and finding something positive to take with you. Back to Ericsson: “I work a lot with mental training, and it is a big area where I think you can make a difference. And that’s one where my mental coach always tells me, whenever you don’t win, you always learn a lot. So that’s how I see it as well, both in ’23 and ’25. I learned a lot from those times and it makes me stronger going forward.” He has spent a lot of time reviewing tape, watching his rivals, studying what they did at the end of the race, determining his exact mistake, and learning what he needs to do to execute that final pass (or avoid being the victim of it). If he is in that last-lap shootout again this year, he says he knows exactly what he will do differently. He is a man with a plan and a glint in his eye.

You can do the same thing—embrace your investing mistakes as learning opportunities. Don’t pretend they didn’t happen, and don’t shun responsibility for them. Accept that you made a choice to buy/sell/hold that went against you. Recall what your reasoning was, find the specific point where you were wrong, and then think about what you can do to reduce the chance of being wrong that exact way again. If you made an emotional decision that didn’t work out, don’t beat yourself up for being irrational. Look back and find the trigger, then consider what you can do differently next time to avoid that reaction. If fear was the culprit, think about how to calm your nerves when your body’s fight-or-flight response kicks in. If greed was, think about how to tame it and keep grounded expectations.

Remember, too, this is a lifelong endeavor. If you have never made an investing error, congratulations on your first trade! The reality: No one is perfect. Anyone who has invested for some stretch of time has erred in some measure—maybe big, maybe smaller. Embrace it. Tell people about it and what you learned from it. And be ready to embrace a new learning opportunity when you inevitably mess up in a different way. Failure isn’t final unless you let it be.

And as for our pal Marcus Ericsson? He outqualified his teammates for this year’s race and will start 17^th of 33 drivers Sunday. The Andretti team’s cars look good in race trim, and he has 500 miles to chase through the field. May the best man or woman win.