MEME: Confirmation Bias

A Simple Strategy for Shaking Confirmation Bias
[TIP ‘o’ the HAT to: The Big Picture by Barry Ritholtz 

A Simple Strategy for Shaking Confirmation Bias
Brett N. Steenbarger, Ph.D.

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One of the most insidious cognitive biases affecting investors and traders is confirmation bias. Once we hold a particular view, we tend to prefer processing information that fits with that view. What’s worse is that, because of our bias blind spots, we commonly recognize biased thinking in others, but not in ourselves. We know from research in psychology that fresh inputs and mental flexibility are essential to creativity of thought. When we become locked in confirmation bias, we cease to innovate.

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We are properly discerning about the food we put into our mouths, but not so much with the information we choose to process.  Fresh inputs, chosen for their quality, provide a healthy intellectual diet and catalyze creative thinking.  If we’re not regularly surprised by what we read and discuss, the odds are good that our brain’s diet has turned stale.  And that’s a danger zone for confirmation bias.

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Brett N. Steenbarger, Ph.D. is Clinical Associate Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY and works as a performance coach for hedge funds, proprietary trading firms, and investment banks.  He is the author of the TraderFeed blog and several books on trading psychology.

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This is one of my (many) concerns.

I try and avoid it (and many other biases) by confirming external evidence.

Probably would be a good exercise t itemize all the biases. Mind map anyone?

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One Response to MEME: Confirmation Bias

  1. I see confirmation bias in action all the time on both sides of the smoking issue and also in talking to extreme liberal/conservative friends. I escape it to some extent by the amount of reading/critical-analysis I do of smoking studies (although I recognize while I’m doing so that I *am* reading them through my own tinted lenses {no cracks about a nicotine tint though, OK? ;> } and by the fact that I regularly hang out and chat politics with *both* extreme conservatives and liberals.



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