Confirmation Bias — Seeing Only What You Want to See

Confirmation bias is a habit of the mind: you seek out, interpret, and remember well only the information that 'confirms' what you already believe. Conversely, you ignore evidence that shakes your belief or dismiss it as trivial.

British psychologist Peter Wason organized and named this concept in the 1960s. His '2-4-6 experiment' is famous. Participants are given the numbers 2-4-6 and asked to guess the hidden rule. The answer was simply 'three increasing numbers,' but people kept testing only examples that fit their own hypothesis of 'increasing by 2' (like 4-6-8) and hardly tried examples that would break their own idea.

In other words, we instinctively try to prove 'my idea is right' rather than checking whether 'my idea is wrong.'

It is not laziness but 'efficiency.' There is too much information in the world, and weighing all of it would exhaust the brain. So the brain first accepts information that matches beliefs it already holds, in order to reduce the burden of judgment.

The problem is that this may be comfortable but not accurate. When you gather only what supports your belief, even a situation that is genuinely fifty-fifty feels 'almost certain.' That breeds overconfidence, and leads to riskier decisions than necessary.

Confirmation bias can be especially costly in investing. Let's look at three classic traps.

First, you hold a losing stock for too long. Once you believe the asset you already bought will rise, you look only for the positive news that protects that belief and dismiss worsening signals as 'temporary.'

Second, you shut out opposing views. If you write off analyses or people who disagree with your judgment as 'just uninformed,' you are throwing away the very information that could save you.

Third, you neglect diversification. The stronger the feeling that 'this is a sure thing,' the easier it is to pour everything into one place—but that very conviction may be a product of the bias. In this way, confirmation bias makes you take the maximum drawdown (how deeply an asset falls from its peak) and the time it takes to recover the loss more lightly than they really are.

You can't eliminate it completely, but you can reduce it through structure.

① Deliberately look for opposing evidence. First write down, 'If I'm wrong, what would be the reason?' That is exactly the lesson of Wason's experiment. Don't confirm—disprove.

② Record your reasons for a decision in advance. If you write down why you bought and under what conditions you would change your mind, you won't be swayed by news later.

③ Check with long-term data instead of feelings. When you look at the numbers for 'what actually would have happened if you had bought steadily over a long time,' it puts a brake on the habit of seeing only what you want to see. 'The Return of Almost Everything' is a site I operate myself, and here it shows the case of buying all at once versus buying in installments, and even the drawdown and recovery period during a crisis—without hiding the maximum drawdown. You can use it to practice verifying with records rather than with your beliefs.