Think about what shows up in your social media feed. It isn’t random.
The algorithm learns from what you click, what you watch, and even from what makes you slow down as you scroll. If you engage with a particular point of view, you’re likely to see more of it. What you’re less likely to see is the strongest argument on the other side.
The same danger increasingly exists when we research investments.
Search engines, social media, and AI make it incredibly easy to find information. But easy access to more information doesn’t necessarily give us a broader perspective. In fact, it can have the opposite effect.
Confirmation Has Never Been Easier
We naturally seek information that supports what we already believe. Technology can amplify that instinct.
Believe the market is dangerously overvalued? There is an endless supply of charts, articles, and commentary to support that view.
Believe artificial intelligence will transform the economy and drive markets higher? You can find just as much evidence supporting that conclusion.
And AI presents another challenge. Ask a question from a particular perspective, and AI often accepts the premise and builds a convincing argument around it. The result can seem like independent confirmation, even though we may have simply received a sophisticated version of what we were already inclined to believe.
The problem isn’t a lack of information. It’s that we may be surrounded by information without exposure to competing perspectives.
Search for What You Might Be Missing
Good investment research shouldn’t merely make us more confident in what we already believe. It should challenge us.
If you’re convinced an investment is attractive, deliberately seek the strongest reasons it might not be. If you’re convinced markets are headed for trouble, seek evidence that may contradict that view.
Technology has made it easier than ever to confirm what we already believe in.
The challenge is making sure we also identify what information might be missing. That is why you have me! Share your thoughts, concerns, and ideas so we can make decisions based on a full set of information, not just what an algorithm may be feeding your mind.
Stay relentless,
Scott
©Behavioral Finance Network