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Earlier this week, I was reminded of my 40th birthday party, which somehow took place 11 years ago.
During the party, my wife surprised me by placing photos of me from different stages of my life around the room. For a brief moment, I wondered if I had misunderstood the purpose of the gathering. It felt less like a birthday party and more like something you do at a memorial service.
She assured me that was not the case.
One photo stopped me cold. I was about eleven years old, wearing absurdly short shorts and an Alf t-shirt. Not ironic. Not retro. I willingly wore a shirt with Alf’s face on it. It’s the kind of photo you instinctively want to make disappear.
What surprised me wasn’t the photo. It was the reaction.
Everyone glanced at it, smiled, and moved on. No one lingered. No one commented. No one cared. The only person truly uncomfortable in that moment was me.
That realization stuck with me because it says a lot about how we experience embarrassment, and how much influence it has over our decisions.
We Are Harder on Ourselves Than Anyone Else
Most of us dramatically overestimate how much attention others pay to our mistakes, awkward moments, and perceived failures. Inside our own head, embarrassment feels loud and enduring. Outside of it, it barely registers.
Behavioral science calls this the spotlight effect. We assume a spotlight is trained on us when, in reality, everyone else is busy managing their own internal dialogue.
This matters because embarrassment doesn’t just feel bad. It changes behavior.
When people feel embarrassed, they are more likely to avoid conversations, withhold information, and delay action. They ask fewer questions, admit less uncertainty, and revisit past decisions less honestly.
Embarrassment interferes with learning.
How Embarrassment Shows Up in Investing
In financial decisions, embarrassment often shows up as silence.
An investor feels embarrassed about a past mistake, buying something speculative, selling something too early, reacting emotionally to headlines. Rather than revisit that decision, they mentally file it away and move on. The lesson never gets extracted.
Advisors experience this too. Admitting uncertainty or acknowledging that a recommendation didn’t play out as expected can feel uncomfortable.
But good decisions require reflection. They require feedback loops. They require the ability to look backward honestly without turning that reflection into self-punishment.
Embarrassment can shut those loops down.
Why Vulnerability Improves Judgment
What I noticed that night at my birthday party was how quickly embarrassment lost its power once it was shared.
The tension dissolved. Laughter followed. Then stories, not about me, but about everyone else. Once one person shares something uncomfortable, others tend to follow.
This isn’t just a social phenomenon. It’s a behavioral one.
When people feel safe admitting mistakes, decisions improve. Conversations become clearer. Risk is discussed instead of avoided. Emotions are acknowledged instead of leaking out through impulsive behavior.
From a decision-making perspective, vulnerability reduces noise. It lowers defensiveness and creates space for better judgment.
Self-Awareness Is Not a Soft Skill
Self-awareness is often treated as a nice-to-have trait, something secondary to intelligence or experience.
In reality, it’s foundational.
If you can’t examine your own emotional reactions, embarrassment included, you can’t fully trust your conclusions. You’ll avoid certain information, overweight comforting narratives, and rationalize instead of recalibrating.
This is a core theme we explore inside the Behavioral Advisor Academy. Advisors rarely struggle because they lack technical knowledge. They struggle because unexamined emotions quietly shape conversations, recommendations, and timing.
Once embarrassment is recognized as a universal human response rather than a personal failure, it loses much of its influence.
A Better Way to View Past Mistakes
That photo didn’t reveal that I was embarrassing at eleven. It revealed that I had changed.
The same is true for financial decisions. Looking back and cringing is often evidence of growth, not failure. If nothing in your past decision-making makes you uncomfortable, it likely means nothing has improved.
The problem isn’t embarrassment. It’s letting embarrassment dictate behavior.
Once you recognize that most people aren’t watching as closely as you think, and that vulnerability tends to build trust rather than erode it, the calculus changes.
We start using past experiences, including the undesirable ones, to make better decisions going forward.
And yes, I would still absolutely destroy that Alf shirt if it ever resurfaced.
Related: Most Investment Mistakes Start Before Money Is Ever Invested