COMMITMENT-CONFIRMATION-CONSISTENCY BIAS

“The greater the ignorance the greater the dogmatism.” William Osler

“It is impossible for a man to learn what he thinks he already knows.” Epictetus

“People don't have ideas. Ideas have people.” Carl Jung

“Many men have the ‘courage of their opinions,’ few have the courage to abandon opinions.” Dickson G Watts

“The human brain is a complex organ with the wonderful power of enabling man to find reasons for continuing to believe whatever it is that he wants to believe.” Voltaire

"The human understanding when it has once adopted an opinion (either as being the received opinion or as being agreeable to itself) draws all things else to support and agree with it." Sir Francis Bacon

"If we are uncritical, we shall always find what we want: we shall look for, and find, confirmations, and we shall look away from, and not see, whatever might be dangerous to our pet theories. In this way it is only too easy to obtain what appears to be overwhelming evidence in favour of a theory which, if approached critically, would have been refuted." Karl Popper

“Sit down before facts like a child, and be prepared to give up every preconceived notion, follow humbly wherever and to whatever abysses Nature leads, or you shall learn nothing.” Thomas Huxley

“A man with a conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point.” Leon Festinger

“One of the signs of intelligence is to be able to accept the facts without being offended.” Richard Feynman

“The difficulty lies not in the new ideas but in escaping the old ones.” John Maynard Keynes

“People who have made no research of the subject pass strong denunciatory judgments.. it is axiomatic that men who know little are intolerant of a point of view that is contrary to their own.” Edward Bernays

“Changing your mind is hard because it’s an admission that the certainty you once thought you held was an illusion. The path of least resistance is to cling to beliefs for dear life.” Morgan Housel

“It’s a rare person who wants to hear what he doesn’t want to hear.” Richard Cavett

“It’s often hard to change your own attitudes and beliefs, especially those you may have held on to for some time. But you must be open to it. When you learn something that is different from what you thought, it may affect many conclusions you have, not just one.” Jamie Dimon

"Once we have made a choice or taken a stand, we will encounter personal and interpersonal pressures to behave consistently with that commitment. Those pressures will cause us to respond in ways that justify our earlier decision." Robert Cialdini

"One of the most difficult intellectual confessions is to admit you are wrong. Behaviourally we know we are subject to confirmation bias. Eagerly we wrap our minds around anything and everything than concurs with our statement. Too often, we misjudge stubbornness for conviction. We are willing to risk the appearance of being wrong long before a willingness to personally confess our own errors." Robert Hagstrom

“Man’s resourcefulness goes beyond simply protecting a belief. Suppose an individual believes something with his whole heart; suppose further that he has a commitment to this belief, that he has taken irrevocable actions because of it; finally, suppose that he is presented with evidence, unequivocal and undeniable evidence, that his belief is wrong: what will happen? The individual will frequently emerge, not only unshaken, but even more convinced of the truth of his beliefs than ever before. Indeed, he may even show a new fervor about convincing and converting other people to his view.” Leon Festinger

“It might sound crazy, but I think a good rule of thumb is that your strongest convictions have the highest chance of being wrong or incomplete, if only because they are the hardest beliefs to challenge, update, and abandon when necessary.” Morgan Housel

“Psychologists advise us that the more important the old concept of reality is to a person – the more important it is to his sense of self-esteem and sense of inner worth – the more tenaciously he will hold on to the old concept and the more insistently he will assimilate, ignore or reject new evidence that conflicts with his old and familiar concept of the world. This behaviour is particularly common among very bright people because they can so easily develop and articulate self-persuasive logic to justify the conclusions they want to keep.” Charles Ellis

"The average trader doesn't want to hear a painful truth. They want something in accordance with what they hope for. When they buy a stock they believe all the news, rumours, views and lies that are bullish, but just let some report come out that is bad or let someone tell him something unfavourable about the stock he has bought and he refuses to believe it. It is the truth that will help him and truth that he should want to hear, not something that will build up his hopes and causes him losses later." William D Gann

"In my judgement, all great traders are seekers of truth." Michael Steinhardt

“It is the peculiar and perpetual error of the human intellect to be more moved and excited by affirmatives than by negatives; whereas it ought properly to hold itself indifferently disposed towards both alike.” Francis Bacon

"We rarely seek out evidence that undercuts our first explanation, and when that evidence is shoved under our noses we become motivated skeptics - finding reasons, however tenuous, to belittle it or throw it out entirely." Philip Tetlock

"Charlie and I believe that when you find information that contradicts your existing beliefs, you've got a special obligation to look at it - and quickly." Warren Buffett

"We constantly need to be open to new information that may cause us to alter previous opinions or decisions." Ed Wachenheim

"You know, Darwin used to say that any time he got any evidence that flew in the face of his previous convictions, he had to write it down in the first 30 minutes or the mind was such that it would reject contrary evidence to cherished beliefs." Warren Buffett

"We strive to eliminate biases in our decision making that could cause us to reject new information or cling to erroneous beliefs." Seth Klarman

“What the human being is best at doing is interpreting all new information so that prior conclusions remain intact.” Warren Buffett

“Of course, if you make a public disclosure of your conclusion, you're pounding it into your own head.” Charlie Munger

“When one shares an investment thesis publicly, it can be more difficult to change one’s mind because the human mind has a tendency to ignore data that are inconsistent with a firmly held view, and particularly so, when that view is aired publically.” Bill Ackman

"I never liked talking to my limited partners about ideas I had, because you become somewhat wedded to it, it's harder to change your mind over time, you become pre-committed to your positions and so forth. That's always been my stance." Todd Combs

"If you speak up and put it [investment idea] on record, you end up getting too wedded to your thesis and that's dangerous because everything you’re invested in is a function of the facts and circumstances on a given day, it changes." Ted Weschler

“By publicly committing to an investment it may become harder subsequently to change one’s mind.” Nick Sleep

“The more public you become with your positions the harder it is for your ego to let go of a position. You can’t let your ego slow you down when the facts change. Don’t talk openly about your positions until you are strong enough to change your mind in front of the crowd.” Ian Cassel

“When you write things down, they typically become public, they are available for other people to see. So you want to be consistent in yourself but you also want to be consistent in the eyes of the people whose regard you care about.” Robert Cialdini

“In publicly disclosing his stock picking commitments, does the investment manager subtly and no doubt subconsciously rob himself of his objectivity and the options to change his mind? To deny this seems foolhardy. The question is, how many recognise the risk of dysfuctionality, and adjust their behaviour? Certainly those consultants and plan sponsors that insist on frequent, detailed, blow-by-blow reporting may be surprised to learn that their seemingly reasonable request risks being counter-productive.” Nick Sleep

“When you pound out an idea as a good idea, you’re pounding it in.” Charlie Munger

“I am always reticent about discussing current portfolio positions. It causes commitment and consistency biases which can hurt us.” Mohnish Pabrai

"Over the years, I began to realize that it was a bad idea to speak publically about stocks I own. The issue isn't that other investors might steal my best ideas. The real problem is it messes with my head. Once we've made a public statement, it's psychologically difficult to back away from what we've said - even if we come to regret that opinion." Guy Spier

“People tend to accumulate large mental holdings of fixed conclusions and attitudes that are not often re-examined or changed, even though there is plenty of good evidence that they are wrong.” Charlie Munger

“Insidious for investors are the following biases .. ‘Anchoring effect’ constitute a class of robust psychological phenomena showing that people adjust insufficiently for the implication of incoming information. We form beliefs around an anchor, and additional incoming data must fight against the inertia of the anchor, even when it is objectively irrelevant to the judgement at hand.” Frank Martin

“The consistency bias or commitment bias that comes from talking in a public group that Charlie Munger talks about where, If I stand up on stage and I praise a wonderful traits of Horsehead or Fiat, and later things don’t go the way I expect them to go, can be pretty powerful.” Mohnish Pabrai

"I believe it is important for investors to avoid seeking out information that reinforces their original analysis. Instead, investors must be prepared and willing to change their analysis and minds when presented with new developments that adversely alter the fundamentals of an industry or company. Good investors should have open minds and be flexible." Ed Wachenheim

".. we tend to respect people who think like we do. Did you ever hear someone say, “I think Bob’s a genius, and he thinks my views are all wrong?” That’s something few people would ever say. No, we tend to think highly of people whose opinions mirror ours." Howard Marks

“Everyone suffers from confirmation bias, ‘the tendency to interpret new evidence as confirmation of one’s existing beliefs or theories.’ It can be a plague of a fund management business and it has to be countered by encouraging constant challenge. Managers and analysts need to seek out contrary opinions and hold up their own theses to scrutiny. They need to know what their own biases are. They need to be challenged from within and without.” Paul Marshall

“Failure to handle psychological denial is a common way for people to go broke. You've made an enormous commitment to something. You've poured effort and money in. And the more you put in, the more that the whole consistency principle makes you think, ‘Now it has to work. If I put in just a little more, then it'll work’. People go broke that way, because they can't stop, rethink, and say, ‘I can afford to write this one off and live to fight again. I don't have to pursue this thing as an obsession in a way that will break me.’" Charlie Munger

"All of us want to read new information and have it confirm our cherished beliefs. I mean, it is just built into the human system. And that can be very expensive in the investment and business world." Warren Buffett

“Commitment is a very strong psychological problem that most humans have. Once you publically commit to a certain position and then later facts show otherwise to be able to own up to it and be honest to alter yourself. The only defence I’ve tried to use on that front is to try to be honest.” Mohnish Pabrai

"Simple inertia stops people from acting on blindingly clear signals that they should buy or sell. There may be huge downside risks on stocks they own. Reading a newspaper account of bad news at a company is much more likely to dissuade an investor from buying its stock than to cause someone who already owns the stock to dump it." Leon Levy

"People become overconfident because they never bother to document their past track record of wrong predictions, and then they make things worse by falling victim to the dreaded confirmation bias - they only look for evidence that confirms their preconceived hypothesis. The only protection against overconfidence is to systematically collect data, especially data that can prove you wrong." Richard Thaler

"Another indication is how passionately people defend things that makes no sense. The point is that beliefs that are completely invulnerable to evidence and passionately defended can be quite durable. It has nothing to do with fundamental logic." Colm O'Shea

"Humans in general are biased to look for confirmatory evidence. When someone is bullish oil, they tend to pick out the pro-oil arguments in whatever they read. Very few people train themselves to look for dis-confirming evidence. Psychologists have done tests about how humans approach problem solving and found we are somehow pre-programmed to look for confirmation and not dis-confirmation. What I try to do is look for dis-confirming evidence. It's a very difficult practice and I have to continually train myself to ask why I believe something is going to go down, not why it should go up." Jim Leitner

“We try and avoid the worst anchoring effect which is always your previous conclusion. We really try and destroy our previous ideas.” Charlie Munger

"Anchoring is a subtle and pervasive aberration in investment thinking." Ed Thorp

“Anchoring on a previous price is a mistake that I’ve often made, and I hope to do a better job guarding against this bias going forward.” John Huber

"If we only look to confirm our beliefs, we will never discover if we're wrong. Be self critical and unlearn your best-loved ideas. Search for evidence that dis-confirms ideas and assumptions. Consider alternative outcomes, viewpoints and answers." Peter Bevelin

"Charles Darwin used to say that whenever he ran into something that contradicted a conclusion he cherished, he was obliged to write the new finding down within 30 minutes. Otherwise his mind would work to reject the discordant information, much as the body rejects transplants. Man's natural inclination is to cling to his beliefs, particularly if they are reinforced by recent experience." Warren Buffett

“One of the most important skills for a portfolio manager to hone is to know when your investment thesis is incorrect & to acknowledge a flawed investment case. It's easy to force dissenting evidence into your existing in thesis or morph it into an entirely new investment case.” Dan Davidowitz

"Confirmation bias - believing what you want to believe and discounting contrary information - it has destroyed countless portfolios and businesses alike." Scott Fearon

"We were also well aware of the dangers of what social psychologists call confirmatory bias, in other words the tendency to collect all the information that agrees with your position and to ignore the information that doesn't. Behavioural theory teaches that the best antidote to this bias is to listen to the opposite side of the case and then dispassionately to identify the logical flaws in the argument." Barton Biggs

“You have to be very careful of ‘commitment bias’. A smart investor described it as the proclivity of investors to be very critical of ideas they don’t own and to read very dismissively of prospects of things not yet owned. But once owned to then view everything about a company in your portfolio favourably, as confirmation about why you own something. That’s something I try to guard against.” Thomas Russo

“It is incredibly important to seek out disconfirming as well confirming information. Having formed hypotheses, the natural inclination is to seek out confirming information. Given that there is so much information out there, this is not likely to be all that difficult to find. This makes it even more critical to seek out disconfirming information too. It is incredibly important to write things down. The human brain has a tendency to ignore or downplay hypotheses we disagree with and information that does not fit with our beliefs. The best antidote to this tendency is to physically write down competing hypotheses and all the facts. It is also important to write down the type of information, which, were it come to light in the research process, would invalidate a theory. This protects us from bending the theory to fit the facts rather than simply dismissing the theory.” Robert Vinall

“The very act of investing requires strong opinions. When you make an investment, you are asserting that your estimate of the proper price is better than the consensus opinion of all other investors. But why should that opinion be ‘weakly held?’ Because there is a good chance you are wrong and the faster you correct your mistake, the less it is likely to cost you. Psychology makes it difficult to stay receptive to new information, especially when that information runs counter to your thesis. Yet overcoming this resistance to non-confirming information is essential to investment success.’ Bill Nygren

Further Reading:
‘When Prophecy Fails,’ Leon Festinger, University of Minnesota Press, 1955.