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Confirmation bias: Fact or flawed presumption?
(See? I started with an interrogative. Always a sound technique. You just asked a question, revealing nothing of your own convictions.)
Do otherwise intelligent people fall victim to "confirmation bias"?
My proposition is that they do not. Implicit in my premise is that we are dealing with "intelligent" people. Faced with overwhelming evidence that a previously held conviction was flat-out wrong, an intelligent person will reason that, oops!, I have erred in my hypothesis, and I need to reconsider and act accordingly.
Consider an investor who performs due diligence and finds a company that has great unexplored potential for growth. Our investor invests.
That investor sees his chosen stock drop precipitously, for no apparent reason. No bad news, no apocalyptic event, no sector weakness, no technical-analysis warnings of looming doom.
How does our "intelligent" investor respond? Sell defensively? Or buy aggressively?
Due diligence means plumbing every possible source for hard data, for information, clues, seeking insight from all sources. The process is never-ending, with any investment, blue-chip or beta. If you don't watch closely, you can get sandbagged.
In the course of our investor's due diligence, he encounters denizens of the deep. They cast large shadows and foretell gloom and doom, using various and sundry tactics like a simple -- but plausible -- twist of truth.
A whale shark has a five-foot-wide mouth, more than 300 teeth, and lives about a century. It is among the biggest sea creatures -- yet it eats, lives on, survives by consuming the smallest.
In the world of investing, the smallest are the retail investors. Many of them are simply trying to pay their bills, some want to ensure their "golden years" are not fuelled by fried bologna, or cat food on sale.
In my scenario, the whale sharks are the touts -- boiler-room zit-faced brats or grizzled pros -- or cons. You know their false names and motives, and they are undeserving of mention here. Their menial task is to create doubt, to introduce the spectre of failure to our investor, who has otherwise performed in a dutiful fashion but finds the whale sharks' smeared feces on a wall of lies, distortions, deceit, twisted and perverted logic.
It seems to me that, with the mirror of independent thought from other intelligent investors, the concept of "confirmation bias" is immediately dissolved. It could not survive, in my view, without the Kool-Aid. And intelligent investors don't drink that.
Ergo, the whale sharks -- while a significant part of the investing eco-system -- have no useful function as contributors to this message board. They have, and they ruthlessly employ, other media on which to spread their feces.
No thank you. Not here, please.
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