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August 04, 2009

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Kirk Kinder

This is a very timely post as the debate between the recession is over and a bear market rally rage. However, this post applies to every aspect of our lives. Try convincing a Republican that Obama is doing a good job or a Democrat that Obama is failing. It is a monumental task becasue we cling to our beliefs and embrace only those who support our views.

Truly successful individuals can weight the merits of any position and develop their viewpoint based on a thorough analysis.

The key to learning about behavioral finance is it allows us to understand our natural behaviors and try to improve upon them. As an investor, your best bet is to have an investing philosophy or system and stick to it. Just keep the emotions in check and you will succeed long term. Of course, this assumes your system is based on logic and not emotions like day trading.

Kent @ The Financial Philosopher

You are absolutely correct! Political and moral issues, such as abortion, are arguments that are lost before they begin. Neither side of the argument can be convinced to change their respective position.

I have also learned to open my mind to opposing views as a result of behavioral studies extending from my financial work.

Great points, Kirk. I hope to hear from you again...

David

Good tips, Kent.

I know this is something that I have to watch out for when looking at macro or big-picture viewpoints - try not to get too bogged down in bearishness on X or a bullish viewpoint on Y.

It's great to have a strong view and make up your own mind on a given issue, but it's also easy to get slowly drawn into a persistent theme ("we're bearish on stocks" or "the economy's fine, stupid!") and parrot the outlook of others, especially when they are the views of people you respect.

This is why I often like to engage people in all types of discussions. Whether you're talking about economics, the environment, or the fate of the country, it's good to hear other other points of view and learn what other people have to say. Even if you believe strongly in your position, you might find that your argument needs a little work :)

Jimcos42

Three investment topics immediately come to mind relating to this: (1) the death of the EMH, (2) the dissing of asset allocation as an effective investment strategy, and (3) the resistance to passive management.

I've also found that if I read wide enough and deep enough, I'll find equally compelling positions on both sides of a question. Yet, as an investor, I need to choose my own position.

So I adopt a point of view but always ask, "What happens if I'm wrong?" That helps to keep me grounded.

Kent @ The Financial Philosopher

Great points! Many strategists and theorists are what I call "displayers of knowledge" -- their primary motivation is to appear knowledgeable and their secondary motivation is to appear "right" -- neither or which are difficult undertakings.

I wonder what their marriage is like? Have you heard the saying, "Do you want to be 'right' or do you want to be happy?"

Humility is among the highest and most valuable of virtues and their is a point at which knowledge must give way to judgment.

I often tell my 8-year old son, who loves to prove himself 'right' and his 4-year old brother 'wrong,' that their can be no winner to an argument -- Even if you are right the one you have proved wrong no longer likes you...

Thanks for commenting!

Kent

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