More of “Don’t Believe Everything You Believe”
Five years ago I wrote about Confirmation Bias (Don’t Believe Everything You Believe). This refers to our tendency as humans to seek only information that reinforces our previously-held beliefs, and the negative impact of applying that bias to our decision-making. It’s now 2021 and we are in the midst of some of the biggest examples of this irrationality in my lifetime. Just last month we saw a crowd of Donald Trump supporters storm the U.S. Capitol under the false belief that he had actually won the presidential election but somehow had it illegally stolen from him. This despite the total failure of every one of more than 50 court cases initiated by Trump or his allies to try to get the courts to nullify the election results.
This past week, in the wake of a cold-wave weather event in Texas that caused over 10% of the state’s population to lose electricity & heat for days, the media reported that Texas Agriculture Commissioner Sid Miller and Montana Senator Steve Daines, among others, publicly asserted that wind turbines and other unreliable (their words) power sources were the cause. The state’s power grid operator subsequently revealed that those sources actually caused only about one-third of the outages. The rest was due to failures by the standard “reliable” power sources such as natural gas & coal.
It’s pretty likely that those Trump supporters, anti-environmentalists, and even anti-vaxxers in the midst of the COVID pandemic developed their opinions only after lengthy exposure to falsehoods expounded by friends, associates, various media sources, and even politicians themselves. Try confronting one with the facts. I’m pretty sure you won’t change any minds unless those unquestioning believers choose to accept you into their limited world of information sources.
I chose to use a couple of political examples because confirmation bias is absolutely rampant in that arena right now. You can find online sources that support almost any belief no matter how extreme. But my area of expertise is financial planning, and that’s where I have particular concerns. Confirmation bias can be deleterious to your financial health. Consider those investors who bought General Electric at $30 per share (as of this writing it’s $12.50) based on an online newsletter. Or those who earlier this year bought GameStop stock at $300 per share ($46 now) or Tesla at $850 (now $700) because “everyone else” was doing it.
How can you overcome confirmation bias? In my previous post I provided some suggestions with respect to investment decisions. But I feel compelled to broaden the approach in light of what’s happening in the world right now. First, you have to recognize that everybody (including you and me) has this bias. If you accept that, you then have to be open-minded enough to seek out sources of information that promote the opposite of things you believe. Finally you should apply critical thinking techniques equally to both your trusted and untrusted sources of information before reaching your conclusions. That involves learning how to distinguish between factual supporting evidence and lies & opinions when determining the truthfulness of assertions. How to do that is beyond the scope of this posting. But it is a skill that will pay off handsomely, especially when it comes to managing your money.