Keeping An Open Mind Amid a World of Echo Chambers

Topic:

Devin Crago, CFA

March 13, 2017

Image used with permission: iStock/Rawpixel


Print & Share

Print

Keeping An Open Mind Amid a World of Echo Chambers

In today's world, there is no shortage of loud opinions. Recently, however, opinions seem to have become more "polarized". People are staking out positions at either extreme of an issue, rather than searching out a common middle ground.

Colin Powell, a retired four-star general and prominent figure on the U.S. political scene, recently offered the following solution to the issue of polarization in politics: “We need to stop screaming at each other, stop insulting each other, and start to be friends with each other like we were for so many years.” Part of the problem, he contends, is that “social media and news programs egg it on, making it difficult for Washington legislators to take more middle-of-the-road paths.” 1

This concern about the growing influence of social media goes beyond politics. For many, a genuine concern exists that social media has created echo chambers for too many people. Because platforms like Facebook and Twitter digitally filter the news you see according to what you have read or “liked” in the past, there is a fear that people are only exposed to views that match their pre-existing ideology. At its core, the concern is that we are no longer exposed to information we disagree with, because that information is partly filtered out by the recommendation engines of these technology giants. One click, and you are on the path to more of the same. Social media companies have tried to respond to this criticism, but the debate rages on.

At Nexus, we think remaining open-minded and avoiding the echo chamber is a critical part of successful investing. Why? Investors – like all people – are subject to various behavioural biases that can lead to poor decision-making. One of the most harmful is known as confirmation bias, which is the tendency to seek information that confirms prior conclusions and ignore evidence to the contrary. When you invest in anything – it could be a stock, a bond or even real estate – once you’ve made the decision to buy, there is a powerful tendency to look for information that confirms you were right, rather than information that suggests perhaps you were wrong.

Many bright minds in the world of investing and psychology have offered up suggestions for overcoming confirmation bias. Here are a few of our favourites:

  • First: seek out disconfirming information. If you actively look for information that proves you’re wrong, you often get to the truth faster than looking for information that proves you were right.
  • Second: talk to people who don’t share your opinion. It may be unpleasant, but it’s an effective way to avoid the echo chamber.
  • Third: be actively open-minded, as it helps you avoid clinging to a narrow point of view. However, as a wise commentator once noted, it’s good to have an open mind, but not so open that your brains fall out.

In our experience, following these three suggestions is a good discipline in the world of investing. Just as open-mindedness leads to better thinking in investing, so too might it help the discourse in politics and wider society today.

1 Wall Street Journal “Colin Powell Says U.S. Politics Too Polarized”  Feb. 16, 2017.

More Like This...

See another CRM2 blog post that may be of interest to you.

CRM2: The Nexus Approach to our CRM2 Reports

Topic:
CRM2
Excerpt:
With changing securities regulations coming into effect, investment firms are now required to provide individual investors with specific additional in

More Like This...

See another Foundations & Endowments blog post that may be of interest to you.

Donor Advised Funds: An Overview

Topic:
Foundations & Endowments
Excerpt:
As we approach the end of the calendar year, taxes and charitable giving inevitably surface as ”things to do” in peoples’ minds. Here, we’d like to

More Like This...

See another Human Interest blog post that may be of interest to you.

The Case for Openness – An Open and Shut Case?

Topic:
Human Interest
Excerpt:
From time immemorial, mankind has been open. Open to new ideas, open to trade, and open to migration – the three critical ingredients for progress.

More Like This...

See another Inside Nexus blog post that may be of interest to you.

The Nexus Growth Spurt (Pandemic Edition) Continues!

Topic:
Inside Nexus
Excerpt:
As Nexus continues to grow, we remain committed to maintaining the highest levels of client service. This requires an ongoing investment in talent and

More Like This...

See another Investments blog post that may be of interest to you.

The Long and Winding Road

Topic:
Investments
Excerpt:
Reading the newspaper is an unsettling activity these days. In almost every facet of life there is a concern that can rattle even the most stoic

More Like This...

See another Pearls of Wisdom blog post that may be of interest to you.

“Work, Work, Work, Work, Work, Work”

Topic:
Pearls of Wisdom
Excerpt:
This has been a busy year. I’ve had lots happening on the home front (a wedding!) and lots going on at the office (too long to list!) Managing work

More Like This...

See another Tax Planning blog post that may be of interest to you.

Saving in my Professional Corporation – It’s a Great Idea!

Topic:
Tax Planning
Excerpt:
The ability for professionals in Canada to incorporate their practice has existed for some time. Doctors, dentists, lawyers, accountants, and other

More Like This...

See another Wealth Planning blog post that may be of interest to you.

Dentists Get Their Financial Check-Up: Nexus attends the 2022 Ontario Dental Conference

Topic:
Wealth Planning
Excerpt:
In early May, we had the opportunity to attend the Ontario Dental Association’s (ODA) Annual Spring Meeting (ASM) in Toronto. Now in its 157th year,

On a Side Note…

See another CRM2 Nexus Notes Quarterly article that may be of interest to you.

No posts found.

On a Side Note…

See another Foundations & Endowments Nexus Notes Quarterly article that may be of interest to you.

Donor Advised Funds: An Overview

Topic:
Foundations & Endowments
Excerpt:
As we approach the end of the calendar year, taxes and charitable giving inevitably surface as ”things to do” in peoples’ minds. Here, we’d like to

On a Side Note…

See another Human Interest Nexus Notes Quarterly article that may be of interest to you.

The Case for Openness – An Open and Shut Case?

Topic:
Human Interest
Excerpt:
From time immemorial, mankind has been open. Open to new ideas, open to trade, and open to migration – the three critical ingredients for progress.

On a Side Note…

See another Inside Nexus Nexus Notes Quarterly article that may be of interest to you.

The Nexus Growth Spurt (Pandemic Edition) Continues!

Topic:
Inside Nexus
Excerpt:
As Nexus continues to grow, we remain committed to maintaining the highest levels of client service. This requires an ongoing investment in talent and

On a Side Note…

See another Investments Nexus Notes Quarterly article that may be of interest to you.

The Long and Winding Road

Topic:
Investments
Excerpt:
Reading the newspaper is an unsettling activity these days. In almost every facet of life there is a concern that can rattle even the most stoic

On a Side Note…

See another Pearls of Wisdom Nexus Notes Quarterly article that may be of interest to you.

A Table for None, Please; Working From Home on the Rise

Topic:
Pearls of Wisdom
Excerpt:
Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some

On a Side Note…

See another Tax Planning Nexus Notes Quarterly article that may be of interest to you.

Saving in my Professional Corporation – It’s a Great Idea!

Topic:
Tax Planning
Excerpt:
The ability for professionals in Canada to incorporate their practice has existed for some time. Doctors, dentists, lawyers, accountants, and other

On a Side Note…

See another Wealth Planning Nexus Notes Quarterly article that may be of interest to you.

Living to 100… Is 100 the New 80?

Topic:
Wealth Planning
Excerpt:
It’s a common saying that there are two certainties in life, death and taxes. While we have a pretty good idea when we get taxed, which feels like all