Another Example of Cognitive Bias (the parable of the best ideas)

Many times best ideas don't work. This can be partly explained by
"...the best ideas......were simply the ideas managers spend the most time on..."
Mohnish Pabrai as quoted by Jonathan Shapiro, 2017b

This is linked to commitment and consistency bias, ie when the facts change, people cannot change their minds. For example, in investment, a mining analyst will prefer mining stocks even if it would be better to avoid the entire sector. At times intense research is only a partial mitigation of investment risk. In some cases it can create overconfidence and can actually increase the risk
"...research and conviction sounds like the right thing to do......there is a point where it can increase behavioural bias......on the one hand, we cannot make investments unless we spend time studying companies. But if you spend too much time studying a company you become biased..."
Mohnish Pabrai as quoted by Jonathan Shapiro, 2017b

Some ways to handle this

i) be aware of the bias
ii) reject ideas quickly so as to free up time and limit the accumulation of biases
iii) be unreasonable, ie look for a great deal

"...pitfalls of the human mental process cannot be eliminated; but they need to be recognised and  procedures should be designed to offset them..."
Richards Heuer as quoted by Jonathan Shapiro, 2017b

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