Broker Check

January 10, 2022 – Second Monday – Behaviors & Biases

January 10, 2022
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My goal on “second Mondays” is to provide quick information 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 information on these biases, their performance improved. Here’s hoping this can do the same for you!

 

Representativeness Bias: When small samples represent entire populations.

 

On March 8th, 2014, the Malaysia Airlines Flight 370 vanished with 239 people on board. It was, and remains, a tragedy, one that presses on fears of flying and lack of control. However, the coverage of the event overshadowed how many flights safely land each and every day.

 

Someone close to me really does not like to fly, and this news was having negative effects. To counter those effects, I took to pointing out each and every day what the news didn’t – that 40,000 flights landed safely, each and every day that news of the search for MH370 was blaring down on us.

 

I stopped when I had reach 2,160,000 successful flights (54 days into the coverage).

 

In short, while this one event was tragic and it was worth having some people search diligently not only for the plane but answers as to what happened to avoid it occurring in the future, our collective attention was being pulled in by a very, very small sample that would affect how we feel about air travel.

 

How is a small – or even single – example of performance affecting your decisions?  Thanks for reading.