Confirmation bias

Last week I wrote about one type of excessive self regard, loss aversion. This week I continue with a different theme related to excessive self-regard, confirmation bias. When you start looking for information that matches your former beliefs and reject the information that doesn´t confirm it, you can suffer from confirmation bias. This happens, when this leads you to a wrong conclusion. For example, you can start looking for evidence against climate change, instead of looking for evidence for it. The more ego, time or effort you have invested in your prior beliefs, the more likely you will suffer from confirmation bias. It doesn´t mean you are always wrong, but the likelihood will increase.

Ideology is the worst source of confirmation bias

Ideology is the worst source of confirmation bias. It creates the worst kind of mistakes. Any ”ism” is bad for you with large doses. It doesn´t matter whether you have a blind faith in capitalism, socialism, environmentalism, or any other ism, you probably suffer from confirmation bias. When you suffer from ideology, you create a self-reinforcing feedback loop in which all the information you seek, all the people you meet, and all the decisions you take, strengthen your beliefs. After this goes for a while, you have created a bubble for yourself where you cannot see any good in anything that is against your beliefs. After this feedback loop has worked for years, you become delusional. If this goes too far, it happens to anyone. No matter what you believe in.

Track records, and trying to destroy your best ideas are best antidotes

Lets face it. Any track record that is long enough is a better way to see how things are than any belief you can have about your skills and abilities. For example, if you are a bad investor and have a track record of losses in the last ten years, you shouldn´t believe you are a great in investing. Also 90 per cent of Swedish drives believed that they were better than average drivers. It is easy to understand that some of them are wrong. Instead of believing it, they should focus on how many accidents or near misses they have had. Poor performance leaves clues. No matter whether they are losses in financial markets or accidents while driving, long term results are the best predictor of future success. Do not believe in short term results. They don´t tell enough to you.

Peer reviews are used in many scientific disciplines to evaluate the quality of research. However, it creates possibilities of confirmation biases effecting on the results. Reviewers are people who are likely to suffer the confirmation bias of their own if they are wrong. They have probably done the same research in a bit different way and are getting the same results. If peer reviews do not align with track records of reality, believing in the latter option is the best option. For example, efficient market theory has affected on financial market research for decades. But mathematical results of the reality of the markets do not confirm it. Still, many business schools teach students efficient market theory for their students. Without going into details, the probabilities that efficient market theory gives to extreme daily fluctuations of the markets are much smaller than what has happened in the markets.

Try to create a habit for destroying your best and most important ideas. It helps you to focus on the right ideas. For you to do this, search for the smartest possible people who don´t believe you are right. This is quite easy in modern world. Then figure out why they believe in their own conclusions. You can also stay close to people who are willing to give you contrarian opinions, when they think you are wrong. People who are more willing to get to the truth than being right. You can also share your best and most important ideas to your enemies. When they are willing to explain what you did wrong or why they disagree, you can understand your ideas much better. Today, it is easy to tell the public what you think. I recommend you to do that.

This is all for now. Until next week,

-TT