Random Thoughts

Confirmation Bias.
It's charmingly sweet. Its seduction is almost irresistible. Its allure is intellectually stimulating, on par with certain illegal substances. For some, it's comforting to be surrounded by like-minded people who tend to agree with us. Others derive pleasure by swaying an argument by uncovering the title of an obscure "research" paper. Just Google what you are trying to prove and a plethora of supporting "documents" will come up. Journalists, doctorate students, investment managers, and even your mom are wired and incentivized to positively prove something. Fame, prestige, money, and higher levels of dopamine follow those who champion a thesis, not a skeptic.

And yet it's poisonous. Those who are unaware will blindly allow their brains and egos to be manipulated, despite being driven by the best of intentions. History is full of examples where a ruler's demise was slowly in the making due to the "yes" culture constructed. The science behind this phenomenon of the human mind is well established. We know why it happens. We know how it happens. A trained observer can easily spot this tendency in others. Despite all that, one needs a significant effort and dedication, not to step on this rake.

Friends who always agree with you could be driven by a myriad of reasons, not a single one of them to do with objective reality or honest probabilities. Professionals who manage other people's money derive their fees from actually investing client's capital. Nobody gets paid to sit in cash. A graduate student needs to formulate a positive hypothesis and write a paper on the subject. Proving a negative is just not a thing. A famous professor, with a reputation to uphold and tenure to reach, is incentivized to publish groundbreaking research. Perhaps cutting some corners in the process. An investor with a particular exposure or a pundit continuously spinning a certain message, especially after being proven correct on a few occasions, will talk one's book, and refrain from seriously entertaining opposing views. A journalist, who gets paid by the word count, needs a catchy title to attract readers to its publication. Writing a piece conforming to a reader's point of view seems only natural. A lay newcomer is often unaware of this deeper context and will be swayed by preexisting bias, if unchecked.

Be a skeptic. Understand the position from which a point is being made. Seek out counterarguments. Investigate the assumptions the researcher has made and the affiliations behind them. Observe how financial advice would stack up over time and against the alternatives. Ignore the prior costs. Be mindful of the incentives. Humbly accept the limitations of scientific knowledge and the inevitability of randomness. Above all, be comfortable with being wrong.

John M. Keynes has put it eloquently: "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally".

September 2023.

www.group-telegram.com/us/random_from_sherlock.com/82

618 viewsSep 13, 2023 at 16:27

Confirmation Bias.
It's charmingly sweet. Its seduction is almost irresistible. Its allure is intellectually stimulating, on par with certain illegal substances. For some, it's comforting to be surrounded by like-minded people who tend to agree with us. Others derive pleasure by swaying an argument by uncovering the title of an obscure "research" paper. Just Google what you are trying to prove and a plethora of supporting "documents" will come up. Journalists, doctorate students, investment managers, and even your mom are wired and incentivized to positively prove something. Fame, prestige, money, and higher levels of dopamine follow those who champion a thesis, not a skeptic.

And yet it's poisonous. Those who are unaware will blindly allow their brains and egos to be manipulated, despite being driven by the best of intentions. History is full of examples where a ruler's demise was slowly in the making due to the "yes" culture constructed. The science behind this phenomenon of the human mind is well established. We know why it happens. We know how it happens. A trained observer can easily spot this tendency in others. Despite all that, one needs a significant effort and dedication, not to step on this rake.

Friends who always agree with you could be driven by a myriad of reasons, not a single one of them to do with objective reality or honest probabilities. Professionals who manage other people's money derive their fees from actually investing client's capital. Nobody gets paid to sit in cash. A graduate student needs to formulate a positive hypothesis and write a paper on the subject. Proving a negative is just not a thing. A famous professor, with a reputation to uphold and tenure to reach, is incentivized to publish groundbreaking research. Perhaps cutting some corners in the process. An investor with a particular exposure or a pundit continuously spinning a certain message, especially after being proven correct on a few occasions, will talk one's book, and refrain from seriously entertaining opposing views. A journalist, who gets paid by the word count, needs a catchy title to attract readers to its publication. Writing a piece conforming to a reader's point of view seems only natural. A lay newcomer is often unaware of this deeper context and will be swayed by preexisting bias, if unchecked.

Be a skeptic. Understand the position from which a point is being made. Seek out counterarguments. Investigate the assumptions the researcher has made and the affiliations behind them. Observe how financial advice would stack up over time and against the alternatives. Ignore the prior costs. Be mindful of the incentives. Humbly accept the limitations of scientific knowledge and the inevitability of randomness. Above all, be comfortable with being wrong.

John M. Keynes has put it eloquently: "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally".

September 2023.

BY Random Thoughts