Overcoming our Blind Spots

Quick Insight

We are subconsciously deepening our commitment to some information and rejecting others. This can cause us to miss important information and to make bad decisions. As you review information or options ask:
● Can I believe this?
● Must I believe this?

We are blinded by what’s called the confirmation bias. It’s defined as:
“A subconscious search for information to confirm the hypothesis previously assumed while at the same time avoiding any confrontation of facts that could be contrary to the opinion so far expressed” - Adam Szyzska in Behavioral Finance: Investors, Corporations and Markets (Baker and Nofsinger, editors)

In less technical terms, we search for information that supports what we believe and ignore information that challenges our opinions.

We have two different filters we use for accepting information as fact, depending on how we’re predisposed to the claim:
● When confronted with claims we favor, we ask, “Can I believe this?”
● When confronted with claims we disfavor, we ask, “Must I believe this?”

A fun exercise is to ask both questions when you are considering controversial information. It forces you to ask the filtering question that you don’t naturally use.

Try this when you are considering different strategies. Notice the strategies you are quickly drawn to and the ones you quickly dismiss. Use the exercises above before committing to or discarding either of them.

I wish you a clear view of all the options. I wish you well.

- Rob Stephens

Further Insight

Why We See What We Want to See on Psychology Today
Eight Ways Your Perception of Reality Is Skewed on Greater Good

CFO Perspective Resources

Video: How to Avoid Decision-Making Mistakes. - We all fall for business decision-making errors. Our emotions and snap judgments influence our business decision-making process more than we know. In fact, we are more likely to resort to a snap judgment when faced with a complex business decision. This video explains common business decision-making mistakes and how to avoid them.
Course: Behavioral Finance - Overcome your destructive financial impulses by understanding common thinking mistakes. With my Behavioral Finance course, you can avoid these costly financial decision-making mistakes. The course will help you to learn science-backed ideas to make better financial decisions.

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