Emotions are the main cause and driving force in the stock markets.
Last week I shared some thoughts why understanding our mind as a tool that tries to live in an uncertain world is an important challenge.
Because the brain hums away invisibly in the background, we tend to overlook its contribution and take it for granted. Misunderstanding the working of our own mind does not, thankfully, prevent the mind from doing its work. Making errors about the inside of our head doesn’t change what’s there.
And that mind of ours tricks us all of the time.
We are biased.
We can never be immune to biases, but the more we know, the safer we will be from self-deception.
Be warned though:
Studying biases can in fact make you more vulnerable to overconfidence and confirmation bias, as you come to see the influence of cognitive biases all around you—in everyone but yourself. And that bias blind spot, unlike many biases, is especially severe among people like you – who are especially intelligent, thoughtful, and open-minded.
Here it comes: The process of overcoming bias requires 5 steps
(1) first noticing the bias,
(2) analyzing the bias in detail,
(3) deciding that the bias is bad,
(4) figuring out a workaround, and then
(5) implementing it.
For the steps 1) and 2) Buster Benson from the website “Better Humans” fastidiously categorized those biases into four problem zones:
Lack of meaning
The need to act fast
How to know what needs to be remembered for later
Then John Manoogian III put those 188 cognitive biases into a pretty awesome infographic for your viewing pleasure.
That is the easy part. It’s unfortunate how many people get through steps 1) and 2) and then bog down in step 3), which by right should be the easiest of the five.
Remember biases are lemons, not lemonade, and we shouldn’t try to make lemonade out of them—just burn those lemons down.
And then remember that the heart of Overcoming Bias is to make our stupidity obvious, even to ourselves.
So, with practice and conscious awareness (awareness is the greatest agent for change), you become more alert of these biases, and can prevent them from getting you into too much turmoil.
The other alternative is to choose blindly to remain biased, without any clear idea of the consequences.
This is not second-order rationality.
It is willful stupidity.
Disappointing blog post, right?
Where is that LIFE HACK? Where is that trick, shortcut, or novelty method that helps me to solve all of my cognitive bias issues right away?
I am afraid there are no easy Hacks for biases.
Ok, maybe then I should change the headline to “Cognitive-Bias-Awareness-Hack”. But it is too late for that now as I have already written it down. 😉
Humility is the ultimate antidote of biases and the most rational people are those who realize how irrational they can be. – Morgan Housel