Tag: confirmation bias

Cost of Consensus in Financial Independence

“You pay a heavy price in the market for a cheery consensus” says the Oracle of Omaha, Warren Buffett.   The nature of human mind to seek out favorable facts, approvals and confirmations in support of what we already want to believe is called confirmation bias.   By nature, most of us have a strong confirmation bias because we […]

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Are You Biased? – Part 2

Please read Part 1 first to give you a background to this post.   This series is my attempt to look at important cognitive biases that prevent us from taking optimal decisions in life, career and investing.

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Image credit: andertoons.com

Our bias to conquer today is the Confirmation Bias.   As an investor or as an employee, we have all fallen victim to this at one time or another, or if you are like me, repeatedly!

We all like consistency in our life.  It simplifies our thinking and gives us a routine to follow.   While habitual consistency is our brain’s ‘low energy’ way to get through our daily life, you pay a heavy price for it when it comes to important decisions.   Confirmation Bias is our innate urge to look for those things that confirm your pre-conceived ideas/notions/decisions and ignore other things that raise red flags.   This bias dulls key facts that go against ideas and conclusions that we hold dear.  

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