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For Your Week Ahead - 11/01/2021

November 01, 2021
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Second Monday – For Your Week Ahead (FYWA)

My goal on “second Mondays” is to provide a quick educational session on a behavioral bias that might help you with choices you make in your professional, personal, and financial life. A study has shown that when financial professionals received education on these biases, their performance improved. Here’s hoping this can do the same for you!

 

Cognitive Dissonance Bias: When newly acquired information conflicts with preexisting understandings, people often experience mental discomfort. This can often lead to herd behavior – it is easier to go along than confront uncomfortable information. We also tend to seek out and believe information to preserve our opinions and beliefs.

 

Now you know! Here’s some behaviors to work through it:

  1. Check your sources. Are you reading sources you know will confirm what you already think?
  2. Check how you read. When reading something that brings up information you disagree with, what do you do? Do you find yourself skimming, or ignoring it? Do you start looking for ways the information might be wrong?
  3. Think about how you evaluate information. Do you have sources of information that you trust to guide your thinking, rather than the other way around? How do you decide what to trust?
  4. Have pre-set criteria. I’ve always appreciate the quote, “When the facts change, sir, I change my mind. What do you do?” Have mental models of what information would require you to change your mind, so if those changes come up, you are prepared for what to do next.

 

Here’s a thought experiment : just about everyone has an opinion about the national debt. If you were told in 2006 that the national debt in 2021 would be $28 trillion, what would you have said the state of America, the American economy, and the world would have to be? Now, think about the national debt in 2030 – what will it say about the state of America, the American economy, and the world if it is $40 trillion? How does it change your worldview if you are too optimistic? How does it change your worldview if you are too pessimistic?

 

I hope this can help you make better decisions this week!

Second Monday – For Your Week Ahead (FYWA)

My goal on “second Mondays” is to provide a quick educational session on a behavioral bias that might help you with choices you make in your professional, personal, and financial life. A study has shown that when financial professionals received education on these biases, their performance improved. Here’s hoping this can do the same for you!

 

Cognitive Dissonance Bias: When newly acquired information conflicts with preexisting understandings, people often experience mental discomfort. This can often lead to herd behavior – it is easier to go along than confront uncomfortable information. We also tend to seek out and believe information to preserve our opinions and beliefs.

 

Now you know! Here’s some behaviors to work through it:

  1. Check your sources. Are you reading sources you know will confirm what you already think?
  2. Check how you read. When reading something that brings up information you disagree with, what do you do? Do you find yourself skimming, or ignoring it? Do you start looking for ways the information might be wrong?
  3. Think about how you evaluate information. Do you have sources of information that you trust to guide your thinking, rather than the other way around? How do you decide what to trust?
  4. Have pre-set criteria. I’ve always appreciate the quote, “When the facts change, sir, I change my mind. What do you do?” Have mental models of what information would require you to change your mind, so if those changes come up, you are prepared for what to do next.

 

Here’s a thought experiment : just about everyone has an opinion about the national debt. If you were told in 2006 that the national debt in 2021 would be $28 trillion, what would you have said the state of America, the American economy, and the world would have to be? Now, think about the national debt in 2030 – what will it say about the state of America, the American economy, and the world if it is $40 trillion? How does it change your worldview if you are too optimistic? How does it change your worldview if you are too pessimistic?

 

I hope this can help you make better decisions this week!