Learn to Challenge Your Beliefs

Some of my early education was in science.  I did not know it at the time but the art of science is to develop hypotheses, find evidence to support or disprove them, replicate them and eventually improve them.  There is no finish line.

Somewhere in the past 50 years the methods have become fuzzier.  Real scientists may behave the old way, but others, instead of using falsifiability as a guide, now look for confirmation.  Psychologists are aware of the “Confirmation” bias. Little good comes from it.

Wikipedia says this about it:

Confirmation bias, also called confirmatory bias or myside bias, is the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.

All of us do it.  It is about presenting facts that support our theory.  It falls from the philosophical idea of truth.  Something is true or it is not true.  How many facts are required to support true before all other possibilities must, therefore, be not true.

Google is a useful resource in that almost any idea can be confirmed.  For example, I searched the phrase, “evidence of aliens on earth” and found approximately 29,100 links.  The phrase, “No evidence of aliens on earth” found 4.  So, maybe you or I are alien beings.  On the other hand, proving negative statements is impossible so “no evidence” really does not mean anything. Absence of evidence is not evidence of absence.

Investing should follow the path of falsifying instead of confirming.  You will be forced to use common sense instead of edicts from analysts and internet hucksters.

Take a look at the short sale statistics and their reasoning.  Look for your confirming ideas and then search for negatives.  Over the years, Johnson & Johnson has been a wonderful security.  Buy the stock is about twice as likely as a recommendation as sell the stock.  Both sides will have some validity.

It requires skill and discipline to look for contrary evidence, but it is intellectually honest.  Ideally you will find the stock you like is a good one because the ideas that deny that position are weak.

Sometimes a particular position is contextual.  My friend sold all his Wells Fargo and he is a smart guy.  There must be something terrible happening.  On further examination we might find he is in the midst of a divorce, or is starting or expanding his business or needs the money to ransom his mother-in-law from kidnappers. Context always matters.

The rule of investing and life is that no single fact or opinion can define truth.  Truth lies in the midst of the data chaos.  It is never clear.

Look for meaning.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  don@moneyfyi.com  866-285-7772

One Comment on “Learn to Challenge Your Beliefs

  1. This confirms the scriptural view that what we see and witness is only the partial perspective of the whole.We are therefore encouraged to embrace other view points to fully understand and develop as humankind because we have all come to understand and accept that nothing is really static in our world.What about the fact that we only use 10% of our brain capacity this calls for a robust review of our thinking ways if we are to become better human beings.This is true and it is educational and is not only applicable to financial planning but has far reaching influence and impact on life in general.Thanks once again Don for this piece we will learn especially the ones that are prepared to.You are really a fountain of knowledge

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: