Fake News and Failed Investments: Dangers of Cognitive Bias
Bias refers to the different predispositions one may have for or against something. This can be as small as a food preference or as serious as one's political, economic, and social beliefs. confirmation bias, the sunk cost fallacy, and loss aversion.
Arguably one of the most commonly known forms of bias, confirmation bias is the tendency to seek out information in favor of one’s current beliefs while ignoring information that conflicts with existing preconceptions.
One of the earliest experiments illustrating the concept of confirmation bias was performed by Wason and Evans in 1960. Their experiment, coined the “2-4-6 task”, challenged participants to uncover a “rule” that the researchers had in mind. They are given three numbers and participants were asked to propose three numbers of their own in an attempt to discover what rule is being tested. The researcher would answer their proposals with a simple yes or no, and once the participants felt ready, they would guess the rule.
Wason and Evans found that participants had a tendency to only test numbers consistent with their hypothesis. To clarify, when proposing a new set of three numbers, participants usually proposed triplets that they believed would follow the experimenter’s rule. In doing so, the subjects often failed their attempts due to their resistance towards testing triplets that were inconsistent with their own hypothesis. These results showed that individuals have a tendency to seek out evidence that supports their beliefs and hypotheses while ignoring evidence that does not, even if it can help them in the long run.
A more recent study was conducted on academic psychologists to test their tendencies when observing new literature. Andreas Hergovich et al. presented 711 psychologists with a questionnaire regarding their feelings towards astrology, followed by an abstract for a research paper outlining the attempts at predicting different behaviors (e.g alcoholism) using astrological methods. They were tasked with rating the quality of the abstract, and the results showed that psychologists would rate results qualitatively higher when it coincided with their own beliefs towards astrology, more often being results disproving astrological hypotheses. Although the results presented may have been properly acquired and possibly held value, they still showed bias towards results that aligned with their own beliefs.
The studies presented demonstrate the power that confirmation bias holds. Even professionals, who have been trained to avoid confirmation bias in their own work, can fall victim to confirmation bias if they have strongly ingrained preconceptions. Additionally, even when the path to the right answer is right in front of us, we still have a tendency to stick to our own hypotheses.
The sunk cost fallacy claims that individuals are more likely to pour resources (time, money, and effort) into an investment off the sole claim that they have expended a significant amount of resources already.
JoNell Strough et al. conducted a study to see how the sunk cost fallacy affects people of different ages. College students and older adults were sampled and presented with two scenarios. One scenario involved them paying over $10 for a movie and realizing the movie was terrible within the first 5 minutes. The second scenario followed the same guidelines, but removed the payment portion of the scenario. Most participants reported that they would continue watching the movie, even if they knew it was of bad quality. The findings indicated that younger adults were more likely to expend additional time on the movie if they had paid for the screening compared to older adults. Rather than using their time to complete other tasks or even find something better to watch, younger adults were seen to continue to expend more resources (time) for the sole reason that they had already made expenditures on the investment (money).
One possible explanation for the sunk cost fallacy, as stated by Dilip Soman, is loss aversion. Loss aversion is a principle stating that an individual will more strongly avoid losses than acquire gains of the same value. For example, individuals would feel more strongly about losing a sum of money, such as 20 dollars, than they would feel about gaining the same amount. This may be due to the tendency for younger adults to place more weight on negative information than on positive information, therefore placing a greater focus on loss avoidance with their investments.
Now that we know about some of the cognitive biases that can influence our perception and decision making, what areas of our lives are subject to negative consequences from these beliefs?
Think back to the last time a family member tagged you on some random Facebook post. Maybe the headline was something along the lines of “are your pets secretly plotting an uprising?”. Nine times out of ten you ignore these tags and move on with your day, but why did your family member feel compelled to read through it? Confirmation bias has become significantly more relevant with the freedom allotted in social media posts. When scrolling through the posts on their timeline, people would feel more compelled to click on and share the links that most align with their ideologies. Because of confirmation bias, your family member chose to pay more attention to the article about an impending pet uprising and gave it personal value. However, you may have chosen to ignore it because it does not add to any of your current beliefs.
In the 2016 presidential election, Hunt Allcott and Matthew Gentzkow found that fake news stories favoring Trump gained over 30 million shares on social media. Considering the massive amount of shares these false news stories had, it is safe to say that many people may have viewed these articles as favoring their current beliefs, in turn believing the information presented.
Danger arises when false information targets innocent people. During this mass sharing of fake news, a number of falsified articles regarding Hillary Clinton running a child abuse ring in a random restaurant in Washington fell all over social media timelines. According to the New York Times, this led to death threats directed towards the restaurant owner and known affiliates, who all had no clue what was going on. Rather than look for information verifying or falsifying the fake news, people instantly jumped to conclusions due to the idea that the article(s) they read were antagonistic towards their less favored presidential candidate.
In addition, the consequences of the sunk cost fallacy and loss aversion can be seen through social and economic lenses. One may invest their time in relationships that should have ended long ago, using the reasoning that they invested so much time into it that they want to make it work. Additionally, an individual may continue to invest their money in a brand or company that has not done well as of late, utilizing the reasoning that they don’t want to accept that all their money invested was for nothing. This mindset pushes people into deeper holes as they end up spending more time and money than they would have if they stopped beforehand.
Given the data presented from the aforementioned studies and articles, it is necessary to uncover our own personal biases and accept that they have the potential to cause more harm than good. In doing so, we can ensure we make decisions that benefit us and the people around us in the long run.
The LIFE Intelligence app takes note of the dangers of biases and teaches us how to make better decisions for more productive outcomes.
Its 9-mission (module) program provides comprehensive science across self, career, and relationship management. Mission 5.1 informs us of the poor judgements our brain tends to make without us noticing. Cognitive biases can arise as a result of quick decision making that our brains are geared towards. These mental heuristics can lead to irrational judgements, whether you're interviewing a new hire, going on a first date, making a big investment, or deciding where to go on vacation.
Mission 5.6 also highlights the dangerous impact that confirmation bias can have on our everyday lives. Overconfidence in our personal beliefs can lead to bad decisions that affect us and our loved ones, especially for professionals who aren't used to being challenged. Made for professional leaders, LIFE Intelligence teaches that even those most seasoned need to keep their biases in check. If you would like an on-the-fly resource to make sure your decisions are sound, download LIFE Intelligence free today.
References:
APA Dictionary of Psychology. Bias. American Psychological Association.
Jonathan St B. T. Evans (2014): Reasoning, biases and dual processes: The lasting impact of Wason (1960), The Quarterly Journal of Experimental Psychology,
Hergovich, A., Schott, R. & Burger, C. Biased Evaluation of Abstracts Depending on Topic and Conclusion: Further Evidence of a Confirmation Bias Within Scientific Psychology. Curr Psychol 29, 188–209 (2010).
Strough J, Mehta CM, McFall JP, Schuller KL. Are Older Adults Less Subject to the Sunk-Cost Fallacy Than Younger Adults? Psychological Science. 2008;19(7):650-652.
Soman, D. (2004). Framing, loss aversion, and mental accounting. In D. J. Koehler & N. Harvey (Eds.), Blackwell handbook of judgment and decision making (p. 379–398). Blackwell Publishing.
Allcott, Hunt, and Matthew Gentzkow. 2017. "Social Media and Fake News in the 2016 Election." Journal of Economic Perspectives, 31 (2): 211-36.
Kang, C. (2016, November 22). Fake News Onslaught Targets Pizzeria as Nest of Child-Trafficking. Retrieved December 12, 2020
