Any time I address investors, clients, advisors or planners, I am speaking first to ME. There is no condescension or judgment here, just a call for something better. Furthermore, I argue that virtually every directive has an exception, especially this one. Nevertheless, if you are easily offended, I encourage you to please stop reading now, as this is one of the times that I heed the words of wisdom from British novelist Kingsley Amis, “If you can’t annoy somebody, there is little point in writing.”
Okay, enough of the chitchat, away we go! If you believe you are an independent thinker, you are not. In fact, after we form our worldviews, we only embrace information that confirms our opinions while ignoring, or rejecting data that suggests that we might be mistaken. In the final analysis, we simply do not distinguish information objectively. Moreover, if I cannot persuade you that my observation is spot on, then perhaps you are guilty of the so-called confirmation bias phenomenon.
So what is confirmation bias? Since this is my column and I am in a curmudgeon mood, I will describe it my way: Folks see what they look for and hear what they listen for. In other words, people resist factual information that contradicts one’s deeply held values and beliefs. When we fall prey to confirmation bias, the last thing on our mind is “disconfirmation.” Stated more simply, one-sided folks have essentially no interest in seeking evidence to disprove their feelings. Sadly, our ego takes over and we are more concerned about being right instead of arguably learning the truth. No facts or convincing evidence will likely ever be enough to persuade peeps to change their opinion. Yes indeed, confirmation bias has an inescapable grip on these questionable tunnel vison people and it won’t let go!
I would rather cover myself with the fleas of a thousand camels than partake in a conversation where confirmation bias is present, which regrettably happens too often for me. I find this type of dialogue incredibly, indescribably and excruciatingly nauseating. It makes me physically sick. To some degree, we are all guilty of the confirmation bias behavior wonder, regardless of if we believe it or not. All that we have to do is journey over to the political and investing arena where confirmation bias is rampant!
What I find remarkable is that most peeps truly do not believe they are demonstrating confirmation bias, but amazingly, these same people have no problem accusing the other side of exhibiting prejudice. I put forth that the reason politics are chaotic and disturbing at times and people are impulsive and illogical comes down to one displaying confirmation bias. No matter what is said or presented will convince me otherwise! Did you catch that? I just demonstrated an example of my confirmation bias!
During the 2016 presidential election battle between Donald Trump and Hillary Clinton, you probably found yourself in a political “debate” with friends. Those who loved Trump and detested Clinton, or vice versa, felt so strongly in their position that nothing could alter their position. Frankly, debating different views regarding politics or religion is seldom a debate, as most folks have their mind made up beforehand, regardless of the facts. Disturbingly, both sides avoid, undervalue or disregard any opposing views regardless of the relevancy. In the end, the debate is akin to ludicrous behaviors demonizing the other side instead of trying to better understand it.
The same goes with the media. We only watch the channels that favor our views and opinions while essentially ignoring all stations that will present a different viewpoint. This is confirmation bias in action. In the final analysis, regardless of whether we are on the right or left, we argue that the other side is biased and absurd in their thinking.
While I am regrettably guilty of having strong, stubborn convictions, and yes, I regrettably fall prey to confirmation bias, I am obsessed with searching for different perspectives. In other words, I seek out qualified people who disagree with me to find out why. I want to know what I don’t know. Where could I be wrong and why? What am I missing? Who else should I speak with to deepen my knowledge?
Questions like these help to protect me from the danger of this behavior phenomenon. For investors, confirmation bias is a dangerous predisposition that I witness far too often. We are the biggest risk to our long-term wealth creation, as our emotions repeatedly make us strangers to common sense. I believe the major mistakes investors make today are behavioral, especially during times of fear and greed where one often disputably does not make decisions based on facts. Instead, one is guided by their emotions and deeply held beliefs (biases).
In closing, the fact of the matter is that we repeatedly dismiss and blatantly ignore opinions of others if they do not conform to our self-constructed worldviews. Yes indeed, our brain is a yes man (woman), telling us only what we want to hear. Nevertheless, perhaps there is hope that with more education and awareness, there will be less of this annoying behavior trait in the future. However, I suggest that the immortal words of Dr. Phil state this probability more accurately, “It simply ain’t gonna happen!”
