I derived this question from investing Guru by the name Ken Fisher. In 2005 Ken Fisher published a book on investing entitled: The Only 3 Questions That Count; Investing by Knowing What Others Don’t. It was an interesting book which could go out of print soon as other investment advice replace his advice.
In the book, Ken Fisher asks a major question which I think everyone be they investors or not should answer. Ken asks: “What heck is my brain doing to blindside me?”. Your brain and mind is a major determinant of your decisions and choices. How do you ensure that your brain does not blindside and make you choose bad decisions without even your awareness that you are making bad decisions? I am one of such people who has routinely made bad decisions even without realizing that I am making bad decisions. Ken Fisher argues that the tendency and likelihood to make bad decisions is mostly because of our evolved–brain and how human race has survived various calamities. However, in many instances you have to identify ways in which your brain can blindside you into making bad choices. Your brain can be a major asset or liability depending on how you use it and also your capability to identify actions that the brain is taking to blindside you from facing reality and facts. Some of these tendencies are:
- Overconfidence. This is thinking that you know so much even when you don’t. It is a misguided self-belief which is not based on fact. It is manifested in expressions of unfounded certainty. Individual who are overconfident manifest unfounded conviction in their beliefs, performance and overestimation of their personal capabilities. With overconfidence comes pride and overestimation of ones’ capabilities and realities which leads to poor decisions and choices that lead to defeat.
- Fear. It is mostly the opposite of overconfidence. Fear creates phobia and inaction. Fear paralyses and leads to procrastination. It can also lead to bad decisions, risk aversion which in the delays and procrastination leads to absolute failure and defeat due to inaction. It creates excuses and reasons for not acting.
- Confirmation bias. This is another tendency by the brain to blindside the individual. It manifests through the inclination to seek fragments of information and evidence that can support our preferences and viewpoints. Instead of seeking two sided evidence and making an objective decision, confirmation bias seeks evidence that is one sided to confirm one’s beliefs and choices. The aim of confirmation bias is to approve and support theories and decisions that the brain has already made in advance. This weakness leads to poor decision making.
- Order preference. It is the brain’s tendency to simplify decisions making. This is tendency to make choices based on preferences, appearances. It is making choices without evidence or any supporting reason. This also leads to wrong choices and decisions because there is no basis for making a particular choice. Such decisions tend to be irrational and shortsighted since they cannot stand the test of time.
Awareness of this four tendencies that the brain activates to blind side the individual in decision making is critical because it enhances the decision making. It helps the individual to engage in effective information gathering and evaluation in order to overcome these tendencies. You can buy Ken Fisher’s book from Amazon