Confirmation Bias

A few years ago I took a Clifton StrengthsFinder course at my church. The program is really neat (and isn’t just for churches). The idea is to take a personality test to find out what your biggest strengths are. Then you focus on using your strengths to be the best person you can be.

Of my five strengths, my favorite is one called command. To paraphrase the Clifton definition, command means that I take charge by forming an opinion and then feel the need to share it with others. I don’t shy away from sharing the facts, even when they are unpleasant. I challenge people to be clear-eyed and honest. Basically, I form an opinion and then try to convince everyone else I’m right.

With a gift like command I need to be particularly mindful of confirmation bias. It would be easy for me to only read things that prove my chosen point. Well, really that would be easy for all of us these days. Look at your Facebook feed and see who you pay attention to. Look at what news sites you read. If you’re not careful you will only read people who agree with you.

The same dangers of confirmation bias lurk for investment advisors. It would be easy for me to only read articles and academic pieces that agree that indexing and factor investing (hallmarks of my strategy) are the best way to do things. Instead I make a point to read a few articles that I completely disagree with, trying to keep an open mind while I do it. I maintain that the best way to keep conviction in my strategy is to try to poke holes in it. Investors who disagree with me help me do that.

Thankfully once I read a diversity of viewpoints first, I can still figure out what is right (indexing and factor investing) and try to convince everyone else to see things my way. Actually, that pretty much defines my job. J

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