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Confirmation Bias
Misinformation is so prevalent today because we suffer from confirmation bias. This is the idea that we have a view of the world, and we will latch on to any piece of evidence that will support our viewpoint. So one form of confirmation bias is what I call naive acceptance. We accept something uncritically because we want it to be true. So as an example, in 2016, the UK had a referendum on Brexit: whether the UK should leave the European Union. So if I’m somebody in the UK who wanted to leave the European Union, then any statistic or study that claims that EU membership is detrimental to the UK, I will latch on to this.
Another form is blinkered skepticism, where we will rule out or ignore a piece of information because we don’t want it to be true because it’s an inconvenient truth. So let’s give an example. So Silicon Valley Bank, their own internal models predicted that they were taking on too much risk. They were invested too heavily in treasury bonds. If interest rates rose, then these bonds would fall substantially in value, and the bank might be insolvent. But people didn’t want this to be true. They thought we’ve got a great bank. We’ve got a great investment portfolio. If indeed the models are predicting that the portfolio is too risky, the models must be wrong. And so what they did is they conjured up different models with different assumptions to justify the portfolio that they had.
That is an example of both blinkered skepticism and also what I call biased search. If you don’t like the information that you receive, search for alternative information that gives you the answer that you want. You want the computer to say yes. You will spin the data so that you get the answer yes from the computer.
And why is this a particular problem nowadays? Because nowadays, it’s easy to gather information. So in the past, it might have been that you had to trek to the library and look at the Encyclopedia Britannica. But nowadays, there are studies written not only by academic scientists, but companies, and think tanks, and consultancies. Sometimes they could be a blog post or there could be a newspaper article. It’s almost always possible to rustle up information to support whatever view you want to support. And therefore, misinformation can spread because what is the stuff that is believed, it’s stuff that you want to be true even if it’s not actually true.
Black-and-White Thinking
You might think confirmation bias only applies to a couple of topics where you have a pre-existing view, something like climate change or immigration or gun control. There’s many topics about which there’s no pre-existing view. But this is where a second bias comes in, which is black-and-white thinking. Even if I have no pre-existing view about a topic, as long as I think that it will either be always good or always bad, then I can be prone to misinformation.
And so one example is carbohydrates, which the Atkins diet was about. So people might have pre-existing views about protein and fat. Right, fat sounds bad, right? Isn’t it called fat because it makes you fat? And protein is good, we learn in school that it builds muscle. But carbs, that sounds pretty neutral. But if we suffer from black-and-white thinking, we think that carbs have to be either always good or always bad. When in reality, some things can be moderate, and what this means is that they’re either good up to a point or only bad after a point. So if you take carbohydrates, scientific advice recommends that carbohydrates are actually good as long as they are within thirty to fifty percent of your daily calories. So the idea of avoid all carbs is actually inconsistent with that advice because you try to aim for zero when actually thirty to fifty percent is the correct range.
So with black-and-white thinking, we have an umbrella term and we think that umbrella applies to everything under that umbrella. So we think carbs are bad, that applies to all types of carbs, both simple carbs and complex carbs. But the real world is granular. This suggests that actually different things might work in different ways. So even if simple carbs are bad for you, maybe complex carbs are good. Or with cholesterol, often people think cholesterol is bad, but actually low-density lipoprotein, that is what’s problematic. High-density lipoprotein, that is good cholesterol. But if we want to view the world in black-and-white terms, we will denigrate everything under an umbrella, or we will praise everything under that umbrella. Whereas reality is much more nuanced and textured.
Many things are marbled. They contain both good and bad elements. And so why do I use the term marbled? It’s a bit like how marbled meat has streaks of fat running through it, so it’s not completely meat, nor completely fat. And so one example might be semiconductor companies. As an investor, many investors try to invest in green companies that don’t emit a lot of carbon. Now when you manufacture semiconductors, this releases perfluorocarbons to the atmosphere, and that is even worse than carbon dioxide in trapping in heat. However, semiconductors could be used in solar panels. They could be the solution to global warming. To denigrate semiconductor companies because of the carbon emitted in the production process ignores some of the benefits. But if we have black-and-white thinking, we like to classify stocks into green or brown, and so often semiconductors will go in the brown bucket just because of the pollution in the production process, ignoring the good to which the actual products can be used.