"....Confirmatory bias is all too common a mistake when it comes to investing and other spheres as well. In fact, it transpires that we are twice as likely to look for information that agrees with us than we are to seek out disconfirming evidence....
....This is a lousy way of testing a view. Instead we should sit down with the people who disagree with us most. Not so that we will change our minds... but rather so that we can hear the opposite side of the argument. If we can't find the logical flaw in the argument, we have no business holding our view as strongly as we probably do....
Kill the Company
So what can we do to defend our finances against this insidious tendency to look for the information that agrees with us? The obvious answer is that we need to learn to look for evidence that would prove our own analysis wrong....
....On investor really stands out as having tried to protect himself against the dangers of confirmatory bias: Bruce Berkowitz of Fairholme Capital Management. Rather than looking for all the information that would support an investment, Berkowitz tries to kill the company. He says:
'We look at companies, count the cash, and try to kill the company.... We spend a lot of time thinking about what could go wrong with a company... We try every which way to kill our best ideas. If we can't kill it, maybe we're onto something....' "
The Little Book of Behavioral Investing:
How Not to be Your Own Worst Enemy
by James Montier