Sunday, 27 February 2011

Cognitive Bias


“To neurophysiologists, who research cognitive functions, the emotionally driven appear to suffer from cognitive deficits that mimic certain types of brain injuries. Not just partisan political junkies but ardent sports fans, the devout, even hobbyists—anyone with an intense emotional interest in a subject loses the ability to observe it objectively. You selectively perceive events. You ignore data and facts that disagree with your main philosophy. Even your memory works to fool you, as you selectively retain what you believe in, and subtly mask any memories that might conflict. Studies have shown that we are actually biased in our visual perception—literally, how we see the world—because of our belief systems. This cognitive bias is not an occasional problem. It is a systematic source of errors. And it is the reason most people are terrible investors.”
Barry Ritholtz in The Washington Post
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2 comments:

  1. TO27 February 2011 at 22:32

    Is losing like learned helplessness? The dog that is given electric shock treatment for a period of time doesn't attempt to move to its adjacent area of safety, resigning itself to the prolonged agony of it's perceived helpless situation. The power of the negative mind.

    Regards,
    Jason

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  2. Mark28 February 2011 at 00:58

    Hi Cassini

    Thanks for posting this up.

    I do have a question though, did he give any suggestions as to how we can protect ourselves from these sort of biases, apart from taking the emotion and passion out of the equation.

    I for one believe that to get the best results you need to have a mixture of passion and emotional control (yes I know that is a paradox). You need the passion to drive you on and the emotional control to constantly make the rational decisions demanded by the our discipline.

    As to the ratio between the two I would say that it should be between 60/40 and 70/30 in favour of emotional control.

    Thanks again
    Mark

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