Cognitive Bias

I'm currently reading a fascinating book (The Black Swan: The Impact of the Highly Improbable, by Nassim Nicholas Taleb). One of the topics discussed in the book (though not its main focus) is the way we humans habitually misinterpret (and therefore misunderstand) the world around us. I did some poking around the web to learn more about these cognitive biases, and ran across this Wikipedia page that lists 20 or so common kinds of cognitive bias, and points to pages explaining them. I was actually looking for information on "confirmation bias", and found this example on another Wikipedia page:

Among the first to investigate this phenomenon was Peter Cathcart Wason (1960), whose subjects were presented with three numbers (a triple):

2 4 6

and told that triple conforms to a particular rule. They were then asked to discover the rule by generating their own triples and use the feedback they received from the experimenter. Every time the subject generated a triple, the experimenter would indicate whether the triple conformed to the rule (right) or not (wrong). The subjects were told that once they were sure of the correctness of their hypothesized rule, they should announce the rule.

While the actual rule was simply “any ascending sequence”, the subjects seemed to have a great deal of difficulty in inducing it, often announcing rules that were far more complex than the correct rule. More interestingly, the subjects seemed to only test “positive” examples, triples that subjects believed would conform to their rule and thus confirm their hypothesis. What the subjects did not do was attempt to falsify their hypotheses by testing triples that they believed would not conform to their rule. Wason referred to this phenomenon as the confirmation bias, whereby subjects systematically seek evidence to confirm rather than to deny their hypotheses.

It's fascinating to read about all these cognitive biases, and understanding them can (I hope!) lead to a better ability to avoid them in one's own thinking. Taleb's book provides abundant reasons for investors to avoid these biases, but it's easy to see how avoiding them would improve just about any decision making. Taleb makes an interesting point regarding these biases: that most likely they evolved because they helped humans when we were in more primitive situations -- but today, in our modern, more civilized context, they often get in the way rather than help us...