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
CFO Perspective Resources
Get all the CFO Perspective resources with a FAST (Finance and Strategy Toolkit) membership.