What is Confirmation Bias? How Confirmation Bias Lead to the Demise of BlackBerry

We are all guilty of seeking information that validates what we want to be true. It’s even easier than ever to find support or information that will support any position you wish to take. It has made building consense harder today because you don’t need to prove something inaccurate. You just how to show there isn’t 100% support. It’s why confirmation bias is such a tricky bias to catch.

The thinking most of us have is that we are open to new ideas, take in all the information possible about a matter, and then use our analytical thinking ability to reach a conclusion. But what happens is the opposite.

Most of us start with a belief or position we want to be true. Then we use our analytical thinking skills to find information that will support such a view, discounting any other information that might otherwise prove our position to be wrong.

Confirmation bias means that we automatically look for information that supports our prior beliefs because we seek affirmation of our views.

When it comes to investing, this can be dangerous because if you buy something because you want it to be true and fail to look at all the information, you might purchase a poor investment. After all, you only look for information that confirms it’s a good investment.

Confirmation Bias Lead to BlackBerry’s Demise

My personal experience with this was the famous BlackBerry made by Research in Motion (RIM). I was a huge fan of BlackBerry and the company as it was a Canadian company and was creating fantastic technology at the time. I joined all the BlackBerry blogs and consumed everything and anything that had to do with BlackBerry. I had such a strong belief in the company that I finally decided to purchase RIM stocks, which did not turn out to be a good investment, as we all know now.

Why did I fail to see all the warning signs about BlackBerry? Confirmation bias. All the information I was seeking was information that validated what I wanted to be true, which was that RIM was a good company. Eventually, they would figure out how to compete better with Apple. The blogs I listened to and news stories I watched were all sites that promoted RIM and wanted the same thing. When news articles outline what BlackBerry was missing compared to Apple, I would not read these as I thought they were anti-BlackBerry. I had created an information eco-system in which I couldn’t get all the information about BlackBerry and its actual performance in the marketplace. Instead, I made an environment where the only story that got to me about BlackBerry was stories about positive things it was doing, not what was happening in the marketplace.

Oddly enough, BlackBerry was also doing the same thing. One of the things people notoriously hated about BlackBerry was its browser. It was slow and could not handle sites well. The company didn’t invest much energy in improving the browser because their internal data showed that BlackBerry users didn’t use the internet very much. However, the reason BlackBerry users didn’t use the browser on their phone wasn’t that they didn’t like to browse the internet, but rather it was a painful and unenjoyable experience to browse the internet on their BlackBerry.

How to Avoid Confirmation Bias

Create a Balanced Information Eco-System

It’s impossible to reduce bias 100%; however, you certainly can do some things to reduce the likelihood of having confirmation bias. The biggest thing you can do is understand you should not be consuming information that only confirms what you want to be true. This is particularly true for money because money doesn’t care about your situation or belief system. Money is a human-created incentive system that believes humans can be rational decisions when making money decisions.

Therefore, to not fall for this trap, you need to research all sides of your investment. That means if you think a stock is a good investment, look for information that counters your belief, and then you can see all the strengths and weaknesses of such an investment that you may be missing. That’s what a rational person would do as they want to see all sides of the argument. The system will reward individuals who can do things consistently over a long period.

Be Open To Changing Your Position

It’s one thing to be open to hearing all sides, but the real challenge will come from learning to change your position when the facts do not support it. This is the most challenging thing for most people because sometimes what we believe is tied to who we are, and learning the belief you have is wrong can also feel like you are rejecting who you are. It’s important to know that values are not facts and realize it’s okay to change a value and adopt new ones if the old value no longer serves you. Everything you know and believe was taught by you by another imperfect human; therefore, don’t demand perfection from yourself or others but rather learn to be okay to change, as that’s what’s kept humanity moving forward. Evolving is part of the human experience. Therefore, learn to evolve when the facts in front of you call for it.

Once you are aware of confirmation bias, you can start making changes. You can begin to look at your information eco-system and ask yourself, am I simply consuming information that confirms what I want to be true? If you are, create a more balanced information eco-system to ensure you are getting all sides of a position. Remember, changing position when warranted is what makes us human.