20 Cognitive biases....

[Itsallaguess]

A description of 20 well-known cognitive biases, some of which may affect our investment decision-making processes....

https://i.imgur.com/WaxIolU.jpg

Be careful out there!

Cheers,

Itsallaguess

[colin]

In 2017 I think it was a TV program buy neuroscientist David Eagleman featured a course run buy the US Secret Service ( or some such). The design of the event was based around a fictional terrorist plot to bomb a US city and security service personnel and a student with no training or experience in security had to determine which fictional group were planning the attack, only the untrained student got the 'right' answer because apparently he had not accumulated the biases of the professionals . Unfortunately the course tutor at the end said that he could demonstrate to the security professionals that their decisions were influenced by sub conscious biases but he could not change them because they arose from the basic organizational structure of the mind.
But it must be useful to study such a list, especially the blind spot bias. But then sometimes I think that perhaps such biases make us what we are?

[SalvorHardin]

In a similar vein I'd add Charlie Munger's 1995 lecture "The Psychology of Human Misjudgment", where he looks the many ways in which peoploe make major errors in their decision making for a variety of reasons. It's rooted firmly in behavioural psychology, with examples such as Maslow's Hammer "to the man with a hammer, every problem tends to look pretty much like a nail".

Link below (it's over an hour long - I listen to it every few months whilst out walking). The MP3 can be found online, Amazon UK have it for a mere 79p

https://www.youtube.com/watch?v=pqzcCfUglws

The full text can be found online in many places as a PDF. Example

https://buffettmungerwisdom.wordpress.c ... ie-munger/

https://www.fool.com/investing/general/ ... ments.aspx

[TahiPanasDua]

Sorry, these present examples may at first seem off topic but they drive home the widespread nature of confirmation bias. However, they should help us to question our own investment views.

We are presently bombarded to the point of absolute frustration by confirmation bias on a daily basis by, sorry to mention it, Brexit argument.

Irrespective of our own views, it is everywhere apparent that advocates of either stance rarely if ever give credit to any of the points raised by their opponents, an essential feature of confirmation bias. Opposing views are assumed to be irrelevant, unimportant or mostly plain wrong. This results in rigid tribal stances.

Please don't use this post as an entry to political debate. I'll probably get censured for this by the invigilators.

TP2.

[OLTB]

I am in the middle of reading a wonderful book all about this called, "The Undoing Project" written by Michael Lewis (The Big Short).

The book centres on the academic relationship between Daniel Kahneman (Thinking, Fast and Slow) and Amos Tversky (Tversky's peers thought so highly of him, they devised a tongue-in-cheek one-part test for measuring intelligence. The Tversky intelligence test was "The faster you realized Tversky was smarter than you, the smarter you were"). These two cognitive psychologists seem to have had a lot of fun seeing what totally irrelevant information can sway individual thinking and decision making - important when making economic decisions.

When I've finished I'll post about it on the Book forum, but I really do recommend it as the cognitive biases as listed in IAAG's OP are subtle, but very powerful!

Cheers, OLTB.

[colin]

One cognitive bias mentioned on Radio 4s Woman's hour recently was the assumption which has been shown to be held by both men and women that men are competent at whatever task they may be assigned until experience demonstrates otherwise whereas women are assumed to be incompetent at the same task until experience demonstrates otherwise, of course in a job situation this may well mean that women never get the chance to demonstrate their competence.

[BusyBumbleBee]

One cognitive bias mentioned on Radio 4s Woman's hour recently was the assumption which has been shown to be held by both men and women that men are competent at whatever task they may be assigned until experience demonstrates otherwise whereas women are assumed to be incompetent at the same task until experience demonstrates otherwise, of course in a job situation this may well mean that women never get the chance to demonstrate their competence.

Apart from jobs requiring brute strength my bias is towards the female of the species after long years of experience with a wife, daughters, granddaughters and in my IT companies which had mostly female staff. Furthermore they are more loyal and hard working than the male. And co-incidentally they can park a car better than most males.

[Braziers]

I am in the middle of reading a wonderful book all about this called, "The Undoing Project" written by Michael Lewis (The Big Short).

The book centres on the academic relationship between Daniel Kahneman (Thinking, Fast and Slow) and Amos Tversky (Tversky's peers thought so highly of him, they devised a tongue-in-cheek one-part test for measuring intelligence. The Tversky intelligence test was "The faster you realized Tversky was smarter than you, the smarter you were"). These two cognitive psychologists seem to have had a lot of fun seeing what totally irrelevant information can sway individual thinking and decision making - important when making economic decisions.

When I've finished I'll post about it on the Book forum, but I really do recommend it as the cognitive biases as listed in IAAG's OP are subtle, but very powerful!

Cheers, OLTB.

You whetted my appetite; I couldn't wait for you to finished the book. A google and a surf, I arrived at this wiki page https://en.wikipedia.org/wiki/Heuristic ... ion-making