Friday, May 1, 2015

The tendency to stop considering other possible explanations after reaching a diagnosis...

The quote below is from Peter Bevelin in his book Seeking Wisdom: From Darwin to Munger. It was in reference to a medical study, but I think it also applies well to investing. 
The single most common cause of cognitive-based errors was the tendency to stop considering other possible explanations after reaching a diagnosis.
When forming an opinion on a business or management team, it can be easy to ignore evidence or quit thinking when new information arrives, especially if the evidence contradicts the opinion one has already formed. And it can be easy to think that once an opinion is formed, the work is done and thus the effort to learn more to try and disprove that opinion stops.