As an example of this, let's say that you've paid $100 into a fund, only to realize that the opportunity that you were hoping to exploit turns out to be extremely stupid, like a timeshare that you didn't really want. (Because let's say you hate traveling, it's somewhere you don't want to visit, and it's kind of small for you.) You are faced with the following beliefs:
- I am a smart person
- I paid $100 for this
- It's extremely stupid
One of these has to go. You could go reverse sour grapes and convince yourself that you actually did want the timeshare and it's not stupid in any way. You could somehow believe that you didn't actually invest the money. (It was actually for the hotel stay on your vacation, or something else.) You probably won't decide that you're actually a dumbass who shouldn't be trusted with so much as a dime, because you probably respect yourself. Thinking of yourself as a fool is both harsh and very depressing.
Lately I've been reading a lot about George Orwell, Propaganda, and particularly Mr. Orwell's writings about nationalism and totalitarianism. He points out this phenomenon in his field (literary criticism) and nation (UK, 1940) occurs practically constantly. He gave constant examples of people wildly bending facts that implied things that they didn't like. His fellow critics often saw books in political terms, currying favor when the implied politics agreed with them, and loudly denouncing any implied disagreement.
He goes on to demonstrate how you could determine if a person was a Fascist by asking them to name the title of Haile Selassie, leader of Ethiopia. Anti-fascists would translate his official title to "Emperor," Pro-fascists would leave it untranslated (and thus threateningly foreign) as "Nagus." These terminologies were required by the person's beliefs about the Italian invasion of Ethiopia, specifically the justification. Pro-fascists saw it as the civilization of an uncivilized country, Anti-fascists saw it as a cynical land-grab.
This concept affects us today because more and more operations involve a psychological aspect. Wars are fought in which one side can win without firing a bullet, but instead by persuading their would be enemy not to fight. In peace time, advertising seeks to sway your behavior into buying the sponsor's products or services. Advertisers therefore have to minimize this effect, if not for honesty's sake, then for the hope of getting a repeat sale and good word of mouth.