What Is the Algorithm Giving You?

Think about what shows up in your social media feed. It isn't random.

The algorithm learns from what you click, what you watch, and even what causes you to slow down as you scroll. If you engage with a particular point of view, you're likely to see more of it. What you're less likely to see is the strongest argument for the other side.

The same danger increasingly exists when we research investments.

Search engines, social media, and AI make it incredibly easy to find information. But easy access to more information doesn't necessarily give us a broader perspective. In fact, it can do the opposite.

Confirmation Has Never Been Easier

We naturally seek information that supports what we already believe. Technology can amplify that instinct.

Believe the market is dangerously overvalued? There is an endless supply of charts, articles, and commentary to support you. 

Believe artificial intelligence will transform the economy and drive markets higher? You can find just as much evidence supporting that conclusion.

And AI presents another challenge. Ask a question from a particular perspective, and AI often accepts the premise and builds a convincing argument around it. The result can seem like independent confirmation when we may have simply received a sophisticated version of what we were already inclined to believe.

The problem isn't a lack of information. It's that we may be surrounded by information without being exposed to competing perspectives.

Search for What You Might Be Missing

Good investment research shouldn't simply make us more confident in what we already believe. It should challenge us.

If you're convinced an investment is attractive, deliberately search for the strongest reasons it might not be. If you're convinced markets are headed for trouble, seek evidence that may contradict that view.

Technology has made it easier than ever to confirm what we already believe.

The challenge is making sure we also discover what information might be missing. And that is why you have me! Share your thoughts, concerns, and ideas so we can make decisions using a full set of information, not just what an algorithm may be feeding your mind.

©Behavioral Finance Network