SIMON BROWN: I’m chatting now with Dr Gizelle Willows, the founder of Nudging Financial Behaviour. One of my favourite subjects is how our brains work, cognitive biases, behavioural finance. Gizelle, good morning, I appreciate your early morning time. In a recent blog post, you say, don’t argue with a vegan – which sounds alarming. But truthfully, what you’re talking about around here is that confirmation bias, something which I want to say is probably innately hardwired into us. In essence, we hunt out information that’s going to support our existing view. In other words, we are not analytical and critical. We just want the comfort of our view, whatever it might be, being supported and held up.
GIZELLE WILLOWS: Yes, absolutely. And we do it without even knowing that you’re doing it. It’s not necessarily an intentional thing. It’s just that things are comfortable for us, and we think in a belief system. And if there’s anything that confirms that belief system that’s easy for us to sort of mentally process, as opposed to things that say the opposite thing.
You mention you can’t argue with a vegan, but basically, we can’t really argue with anyone who has a particular food diet that they believe in, because that’s what they believe. And you’re going to find, if we take the vegan as an example, if they see any information that says, perhaps, dairy has essential nutrients, they’re likely going to scroll over it. Whereas, if they see something about how red meat causes heart disease, they are probably going to read it, they’re probably going to share it, they’re probably going to disseminate that with other people who have similar beliefs.
This is a thing we do very naturally. But what happens is we tend to sort of narrow that sort of field of information that comes to us that can potentially challenge our viewpoint.
SIMON BROWN: It’s that echo chamber. And I can’t help thinking that the internet has, if anything, made it louder. Thirty years ago, whatever my belief was, it was perhaps a little harder for me to find the information and a little harder to disseminate it. These days I can log onto the World Wide Web for almost whatever I believe. I can probably find hundreds of thousands of blogs and articles that will reinforce my belief. Is it worse in the age of the internet than it was back in the days when we just had to do a clipping and fax it, or phone granny about it.
GIZELLE WILLOWS: [Chuckling] Absolutely. It’s so much worse these days. Your internet and social media behaviour is just primed for this. The way you ask people a question is framed in the way you want the answer. Your favourite pages concern what you already believe. And social media is the best or the worst, [depending on] how you look at it. You will follow people who drive the same beliefs that you have. Social media algorithms will see you watching and reading the things that confirm what you really believe. And then they push out more marketing information that just comes full circle and makes you believe it even more. You don’t actually get that opportunity to see any sort of conflicting opinions about things.
SIMON BROWN: Yes, that’s exactly it. I ‘like’ things on Facebook, and Facebook [thinks], huh, we know what you like, so it sends me more and more of that. So how do I fight it? I mean, is it as simple as just me recognising that I’m a human, therefore I have this bias, and therefore when I believe something I almost need to actively go and find the contradictory views that are going to, frankly, be uncomfortable for me, but which are important for me to bring in. I’m thinking particularly that in money, in investing we need to look at that other side of the coin, so to speak.
GIZELLE WILLOWS: Yes, we do. We mustn’t be hard on ourselves. It’s nice to feel comfortable. It’s nice, when you want to have a conversation with someone, to have them say the things that you want to hear. When it comes to investing or spending money, we need to be particularly careful about this. I think the biggest risks will come in when we sort of become obsessed with a few companies or particular investment-type vehicles. And then we ignore diversification.
What I try to do when it comes to any investment decision, I have a friend who has a completely different investment [view] than me when it comes to investing. What I tend to do is, when it comes to bigger decisions about investing, I give this friend a call and I talk them through it. I know they’re going to disagree with me, but I want to hear why they’re disagreeing with me. Nine times out of 10, I still go with what I thought; sometimes what you believe is going to be the right outcome for you. But sometimes this person says something to me that just makes me think, wait a minute, let me just read a little bit more about that.
So first, when you are making those big financial decisions, just force yourself to [think], I know this is going to be uncomfortable, but let me just take in all the information I can, eke out disproving evidence, and then make a decision knowing that I’ve at least weighed up all the options.
SIMON BROWN: Yes. As you say that, I get a cold chill running down my back, because when I have a big investment decision, I phone a friend and they believe what I believe. And that is exactly the wrong thing. I’m actually using my friend as my confirmation bias. I like your point. Find someone who is kind of the opposite of you and can almost antagonise back.
Gizelle Willows, founder of Nudging Financial Behaviour, I appreciate the early morning time chatting about the confirmation bias.
Our poll today on social media – you’ll find it on our LinkedIn, our Twitter, our Facebook. Is this something that you are cognisant of when you’re researching investments? Are you are making sure that you are looking at both sides of those coins or are you, like me, probably phoning someone who thinks exactly like you do, and are therefore falling into the trap. Twitter, Facebook, LinkedIn – you can have your vote and your comments there this morning,
Listen to Tuesday’s full MoneywebNOW podcast here.