First-Rate Intelligence

Confirmation bias is the tendency to search for or interpret information that confirms our beliefs while ignoring or discrediting information that contradicts our beliefs. This creates all sorts of errors in judgement. Jamie Whyte, author of Crimes Against Logic, says “if someone is interested in believing the truth, then she will not take the presentation of contrary evidence and argument as some kind of injury.” This is challenging. It is even more challenging to intentionally seek out those that think differently, but it is what we should do. As Charlie Munger says, “I’m not entitled to have an opinion unless I can state the arguments against my position better than the people who are in opposition. I think that I am qualified to speak only when I’ve reached that state.” With that in mind...

  • If you believe in the efficient market hypothesis you should talk to someone who believes markets are inefficient.
  • If you believe in passive investing you should talk to someone who believes in active investing.
  • If you believe in investing in gold you should talk to someone who avoids investing in gold.
  • If you believe in robo advisors you should talk to someone who doesn’t believe they have a role to play.
  • If you believe in serving millennials you should talk to someone who only serves baby boomers.
  • If you believe in billing a percentage of assets under management you should talk to someone who charges a flat fee or monthly retainer fee.
  • If you believe in fundamental analysis you should talk to someone who believes in technical analysis.

Challenge yourself by challenging your beliefs. For example, Charles Darwin would weigh evidence that contradicted his hypotheses greater than evidence that confirmed them. In the words of F. Scott Fitzgerald, “the test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.”