Confirmation bias, and how to argue with yourself
The moment you buy, you acquire an interest in being right. That interest is now competing with your interest in making money.
Build a habit that makes disconfirming evidence easier to see, not harder.
How Confirmation bias works, in one picture
The same argument as the text, as a chain. Each step is what makes the next one possible.
The divergence that precedes most disasters
Reported profit climbing while the cash it supposedly generated goes nowhere. Either customers are not paying, or the sales were never really made.
- 1
Ownership changes what you notice
Before you buy, bad news about a company is interesting. After you buy, the same news is 'noise', 'already priced in', or 'a buying opportunity'. Nothing about the news changed. You did.
- 2
The internet will happily supply agreement
For any position, there is a forum, a newsletter and a chart that agrees with you. Finding them is not research, it is comfort. Research is the deliberate search for the argument that would ruin your day.
If you cannot state the bear case better than the bears can, you do not understand your own position.
- 3
Write the bear case yourself, before you buy
Not a token paragraph. The strongest version, argued as if you were being paid to short it. If you cannot construct it, you are not ready to own the thing.
- 4
Then go and find the smartest person who disagrees
A short seller's report on a company you own is the highest-value document you will read all year, precisely because you do not want to read it.
You can argue the bear case on your largest holding, convincingly, out loud.
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The moment you buy, you acquire an interest in being right. That interest is now competing with your interest in making money.
1,100+ companies across 17 exchanges, filtered on any combination of moat, valuation, growth and debt.