A study was conducted in 1998 at Columbia University by professors Claudia M. Mueller and Carol Dweck where they took a large group of fifth graders and separated them into two groups to complete puzzles. After solving the puzzles one group of children were told they did so well because they were so smart, the other group was told they did well because they worked so hard.

An interesting discovery happened in the next round of puzzle solving. The children who were told they were able to solve the puzzles because they were smart chose easier puzzles and didn’t try as hard to solve any of the more difficult puzzles. They were less motivated and found the exercise boring.

The children that were told that they were successful due to their own efforts and hard work ended up working harder and longer on the more difficult puzzles and enjoyed the whole experience more than the other group. Believing that their own efforts led to their success motivated them as they knew they were in control of their own results.

The study was an example showing the powerful effects of where people see their locus of control. Locus of control is a person’s belief system on where the location of control for their life is at. People can believe they determine their own outcomes in their life by their actions or they can believe the outcomes in their life are outside their control and determined by their circumstances, government, or a higher power.

Studies on the locus of control have repeatedly shown that an internal locus of control is the keystone habit that keeps people motivated. You must believe and feel that you have control over the outcomes in your life and that you can change your circumstances through the right efforts. To feel highly motivated you must take responsibility for what you do and what happens both good and bad.

People with an internal locus of control believe they determine their destiny short-term and long-term. People with a external locus of control believe their life is determined by outside forces out of their control.

The theory of the locus rule originates from the idea of how the belief in the locus of control determines motivation. The locus rule measures the degree you believe in your own power to control your own life through your actions. The locus rule is like a volume dial on your motivation. The more you believe that you determine outcomes the more motivated you are to try to accomplish goals.

This theory of the locus rule was proposed by Dr. Julian B. Rotter, the psychologist who developed the Locus of Control concept. By taking responsibility for things that happen to you in your life it keeps you motivated as you believe your efforts matter. That locus rule makes you the captain of your destiny.

What is a locus of control example?

Students with an internal locus of control will blame low grades on their failure to study enough, while students with an external locus of control could blame their teacher for being unfair, bad at their job, or a poorly designed test for their own poor grades.

Investors with an internal locus of control will blame their own company research or timing for losing money, while investors with an external locus of control could blame the stock market itself for their losses.

Discretionary traders with an internal locus of control will blame their own entry and exit strategy and timing for losing money, while traders with an external locus of control could blame the algos, market makers, the market itself, or the Federal Reserve for their losses.

Business owners with an internal locus of control will blame their own business plan or choice of location for not being profitable, while business owners with an external locus of control could blame customers for not being profitable.

Politicians with an internal locus of control will blame their own campaign and messaging for losing an election, while politicians with an external locus of control could blame the voters for losing an election.

How does an internal locus of control affect your motivation?

When you have an internal locus of control, you will believe you have personal control over your own life through the actions you take. This allows you to believe your decisions, efforts, and work matters. When you’re successful, you believe that you doing the right things with the right amount of effort created the win.

Your motivation level is mostly determined by how much you believe your efforts determine your outcomes. Low motivation comes when you believe what you do doesn’t matter much due to external factors holding you back. Hopelessness is the end result of losing the belief that anything you do matters at all towards an outcome.

The victimhood mindset is an example of the belief in a current external locus of control that purposely targets you and holds you back personally. The belief that you are a victim of circumstances removes responsibility from you and your actions and transfers the reason for an outcome to external factors believed to be beyond your control. The victimhood mindset drains people of their energy and motivation as they believe they can’t win.

The locus rule is a mental model you adopt for seeing the positively correlated relationship between your own actions and your results.

You can use the locus rule to create motivation and energy for accomplishing your goals by adopting the following beliefs.

  • Believe that your actions have the most impact on your results and not other external factors.
  • See the connection between the effort you give and the success you achieve.
  • Believe that if you see someone else being successful you can model that success.
  • Understand the law of cause and effect.
  • Believe that hard work can beat talent when talent doesn’t work hard.
  • Become the captain of your own destiny.
  • Adopt a growth mindset over a fixed mindset. Read more about a growth mindset here. 

Our motivation for taking action and doing hard work is mostly determined by our belief on whether it matters or not and if it benefits us. If you want to motivate your employees show them why their efforts matter. Teach your children what the rewards are for hard work and that they determine their success in life. Move your own locus of control to your own efforts, beliefs, and plans. Believing that hard work does pay off in the long-term moves your locus of control to internal factors. Follow the locus rule that outcomes are based on the belief that your own effort matters most.

How To Stay Motivated (The Locus Rule)
Image created by Holly Burns

By Steve Burns

After a lifelong fascination with financial markets, Steve began investing in 1993 and trading his accounts in 1995. It was love at first trade. After more than 30 successful years in the markets, Steve now dedicates his time to helping traders improve their psychology and profitability. New Trader U offers an extensive blog resource with more than 4,000 original articles, online courses, and best-selling books covering various topics.