The 52-Week Low Formula: A Contrarian Strategy that Lowers Risk, Beats the Market, and Overcomes Human Emotion
by Luke L. Wiley
Chapter 13The Problem with Selective Perception and Confirmation Basis
He who knows nothing is closer to the truth than he whose mind is filled with falsehoods and errors.
—Thomas Jefferson
The moment a person forms a theory, his imagination sees in every object only the traits which favor that theory.
—Thomas Jefferson
Jacobian Inverse: When I watch the news, read research reports, listen to experts, or meet with analysts, I want to internalize and believe in only those insights that agree with my current beliefs. I would prefer to do this because it feels natural, congruent, and reaffirming. Why would I seek out data, facts, or insights that might cause me to possibly alter my current beliefs?
We like to think of ourselves as objective, particularly as it relates to our investment decisions. We like to think we can remove ourselves from emotion and look at evidence in a cold, rational way. But, of course, we rarely can. We can rarely remove our own expectations—influenced by experience and biases based on our perceptions—and look at something completely for what it is without presupposing what we expect to see.
Let’s say I want to know what the weather is going to be like this weekend. I see two people standing next to one another. One is an old friend, someone I have known for a very long time, someone I like and respect. The other is a person who, for one reason or another, I don’t like. He is a rival. This person gets my hackles up or rubs me the wrong way. I approach ...