Impact of Confirmation Bias

Impact of Confirmation Bias

Over the last month or so, I’ve been thinking a lot about confirmation bias.  I’m not sure exactly why, it may be from following the debt crisis too closely.

I’m not thinking about bias in a statistical sense.  More in how we attain, review, digest, & seek information.  A prototypical example of this seems to be:

Person believes that reducing government is a good idea.  He regularly seeks out the Wall Street Journal.  He enjoys reading the columnists.  Those columnists often cite the Cato Institute.  Over time, he develops a strong, positive opinion of the Cato Institute.  Next time he needs/wants economic data, he visits the Cato Web site.

Understanding all of us have a confirmation bias may lead to better marketing and selling.  If a wholesaler goes into a meeting (or begins a telephone call) with questions to understand the advisor’s decision-making process, then he may glean a bit into their confirmation bias.

Imagine an introductory question like, “Historically, how have you decided to add a new fund into your most commonly used fund lineup?”  If the advisor answers with performance and attribution analysis preferred from select third-party providers, then the sales team can lead with a detailed performance review, provided by that third-party provider (or something similar).  If the advisor answers with process and portfolio manager interest, than leading with investment decision-making information and PM team tenure is a better lead.

Understanding confirmation bias is just one tool to improving sales and account management.