Rich Bello (speaker) explains that cognitive biases are usually unconscious “blind spots” and argues critical thinking requires training. He recommends starting with awareness, learning common bias types, being especially mindful for important decisions, and instituting processes that challenge bias—encouraging debate, presenting both bull and bear cases for investment ideas, roleplaying opposing views, and using a “strong opinions” decision framework (attributed to Stanford professor Paul Safo) that requires forming a hypothesis and actively seeking information that could refute it. The speaker shares firm practices and an anecdote illustrating how professional training (e.g., a defense attorney’s unwillingness to concede) can embed biased behavior.
Chapters
Critical thinking is the skill that we should all seek to aspire to. You want to remove all biases, beliefs and emotions from the equation, from your decision making process. Now, while you may be thinking, oh, now that I understand these, I'll just make sure not to make decisions without thinking more deeply about them anymore. Right? And that's a great start. But remember, these biases are usually unconscious. That's why cognitive biases are also called blind spots. So it takes some training of your mind to do it. This is a good area to get curious about. Get some training. If you don't, many times, you won't even realize about these cognitive. Realize you have a cognitive bias until it's too late. So how do you overcome the challenges of cognitive biases? As with most challenges, the first step is awareness. Be mindful that you have them. They're natural. We all have them. Get curious about them so you can learn about them. Learn the different types of common cognitive biases. Be especially mindful when you're making important decisions. Think about the factors that you're utilizing to make the decision. Explore whether any of the criteria you are considering can lead you to clues about any of the common and cognitive biases in making your decision. Be open to challenge your biases. Have processes for challenging your biases all the time. Encourage healthy debate. As I said before, on your team, look at other options. Challenge each decision. At our hedge fund, we'd have people present the bull and the bear case for any stock idea. We wanted to know the case for buying a stock, what was good about it and the case for selling it, what was bad about it. Right? Right. Have somebody take both sides of an issue and get to the truth. We also have a framework for a mindset in our culture that we call strong opinions Weekly held. It was a framework developed by Stanford University professor Paul Safo. This framework allows you to make decisions with incomplete information. First, develop a strong opinion or hypothesis about a decision that you need to make. Then actively gather information that either supports or refutes the hypothesis. The key, though, the key. If you come upon information that refutes your hypothesis, you need to change your hypothesis. Don't cling to your ideas in the face of conflicting information. Don't let ego get in the way. Right. In my firm, I actually take the other side of the position I strongly believe in. Much to the surprise of my colleagues, they scream out, how can you actually believe that? And I would say I don't. But we don't have anybody else taking that side of the debate. So I will. I want to get at the truth. So we need somebody to take the other side of the debate. You can also have fun with this by role playing. If you have a particularly stubborn team member, have that member roleplay and take the other side of a debate to present the conflicting view. Those that are able to do it effectively often are able to identify their cognitive biases. We once had an attorney that we worked with that was very smart. But every once in a while, it was clear that he was wrong about a particular issue. Everybody on the team saw it and was perplexed that he couldn't see it. I was sure he knew he was wrong, but he just couldn't admit it. I once asked a colleague of his about this. I said, how could this be? He's so smart and he doesn't seem to even have a big ego. His colleague said to me, rich, he's a former criminal defense attorney. He's trained never to give in to an argument, even if he's wrong. I got it.
