Biases

What this unit covers

Meet the few cognitive biases most likely to distort a money decision, confirmation bias, anchoring, overconfidence and recency bias, and how to catch each one.

By the end you will be able to

• Explain why feeling certain is not the same as being correct.
• Identify confirmation bias, anchoring, overconfidence and recency bias by their triggers.
• Apply the pause of naming the likely pattern before acting on a money decision.

How it starts: The Old Price in Your Head

1. You open a brokerage app to check a stock you sold two years ago.
2. It now trades 40 percent above the price you sold it for.
3. You feel certain it is too expensive, without reading the recent news on it.

Words you will meet

Confirmation bias

The habit of noticing facts that agree with what you already believe, and skipping the rest.

Anchoring

Letting an old number, like a past price, feel like the true value even after things change.

Overconfidence

Trusting your own judgment as more reliable than it actually is.

Recency bias

Expecting whatever happened most recently to keep happening.

In this module: Mastering Yourself

1. Biases (this unit)
2. Emotional Control
3. Decision Journals
4. Performance Reviews