Any payoff thoughts on the 2016 trifecta of England leaving the European Union, Cubs winning the World Series and a bombastic reality TV billionaire becoming President? Now, consider your information outlets and how they shaped your viewpoints (if any) leading up to the aforementioned events. We’ve all heard the old maxim: you are what you eat. It’s an an old wives’ tale otherwise I’d be a pepperoni stained Bud can. But what about how we think? What are our nutritional sources for digesting information and formulating our thoughts, beliefs & convictions? Chances are they are simply used to substantiate a previous opinion – otherwise known as confirmation bias.
Confirmation bias is the godzilla of all misconceptions. It’s the tendency to seek out & interpret new information so that it becomes compatible (confirms) with previous observations. Doesn’t matter if it’s religion, politics, sports, careers, finance; basically our individual worlds. And we all do it. Consider the presidential election which elicited polarizing views – your vote was likely determined well in advance. You bullet pointed your candidate’s attributes just in case you were put on defense. You probably also had a arsenal of verbal granades for the opposing candidate. It’s also likely your news sources were fortifying and your social aquaintances are like minded. Breitbart for Red and Huffington Post for Blue. You might have ‘crooked’ or ‘deplorable’ bookmarked.
Why do we do it? Possibly because it soothes any internal conflict. It also builds confidence if we’re not alone – proverbial safety in numbers (herd effect).[i] While confirmation bias can be comforting; it can also be defeating and expensive. Consider your investing views. How do you determine what kinds of investments align with your financial goals. Do you have a preconception and simply seek validation? Are you open-minded to fresh or contrary research? For example: Uncle Max believes government spending is out of control: resulting in higher interest rates, a plummeting dollar and skyrocketing gold. So he subscribes to a bunch of gold bug & prepper publications/blogs. He has pawn shops on speed dial. Mobs are a more extreme illustration: the united, repetitive chants provide simplistic confirmation for the crowd’s cause. Critical thinking is turned off.
Maybe it’s not even our fault. Charles Darwin hypothesized the brain actively ‘forgets’ disconfirming evidence after a short time. Banjo playing Warren Buffet maintains: “What the human being is best at doing is interpreting all new information so that their prior conclusions remain in tact.”[ii] We like to have steadfast dogmas. We value conviction. We categorize an unwavering belief as ‘principled’. Leave the wishy washy to meteorlogists and newsletter theorists.
Can this bias be tempered? Sure – since you’re still reading, there’s hope! Consciously seek out divergent information. Be open minded and ask internal questions – what can go wrong? Am I missing something? Heck, I watched Fox, CNN and MSNBC election night just to challenge my inherent prejudice – and clear my throat.. Guard against discrediting contrary evidence. If investment XYZ keeps failling – why? As writer Aldous Huxley stated: “Facts do not cease to exist because they are ignored.” Likewise, I aways contend if the facts change; so can my mind.
[i] Tendency for individuals to mimic the actions (rational or irrational) of a larger group
[ii] Rolf Dobelli, The Art of Thinking Clearly, (Harper Collins 2013), 19-20
