I had written about Cognitive Dissonance a few years back. You can read it here. Over the years, I have collected some more insights on the topic.
For the uninitiated, here’s a definition from Wikipedia —
In psychology, Cognitive Dissonance is the mental stress or discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values at the same time; performs an action that is contradictory to their beliefs, ideas, or values; or is confronted by new information that conflicts with existing beliefs, ideas, or values.
Leon Festinger, the psychologist who developed the theory of Cognitive Dissonance, figured that human beings do not deal with conflicting beliefs and perceptions by testing them against facts. They reduce the conflict by reinterpreting facts that challenge the beliefs to which they are most attached.
[show_to accesslevel=’almanack-all’]
Like all other behavioural biases, Cognitive Dissonance (CD) also has its root in human evolutionary history. Now, CD in itself isn’t problematic. The trouble arises when we try to get rid of it. CD causes a mental discomfort and often this tension is resolved by either changing our beliefs to align with our actions or to change our actions which confirm our beliefs.
The reality we experience is largely a product of our past experiences. And the undebatable truth about past is that there’s no uncertainty in the past. The events that happened have been experienced or documented. The events that didn’t transpire (but could have), were completely ignored. But imposing the certainty of the past to the future is where things go wrong. In fact, what’s true for the uncertain future is also true for the messy present.
The rational way to think about the future is to imagine multiple scenarios that can unfold and then assign probabilities to each possible outcome. Unfortunately, many of these probabilistic futures may be contradictory and even conflicting with our long-held beliefs. That’s a case ripe for CD which often leads us to poor decisions and blunders that are entirely avoidable.
Irrationality is precisely that — doing or believing something that has no foundation on the ground of reasoning.
Scott Adams, in his book Win Bigly, writes —
When we recognize ourselves acting irrationally, the simplest course of action for the brain is to generate an illusion that explains it all away. And so it does. Automatically. The fun part is that we are not aware when it is happening. Others might be able to see it happening in you as clear as day. But by its nature, Cognitive Dissonance is invisible to the person experiencing it.
In that sense, CD could be very dangerous because it can create illusionary world view which is very different from reality. And that illusionary worldview can lead to actions that could be counterproductive or even harmful.
How does a cigarette smoker manage to continue his habit in spite of knowing that it’s extremely harmful? How is it possible that an overweight and unfit person continues to gorge on unhealthy diet and ignore exercise? Because both of them have constructed a narrative that justifies their indulgences and they believe in that narrative wholeheartedly. To outside observers, these justifications might look like stupid rationalization but to the person experiencing the hallucination, it all makes perfect sense.
Paraphrasing Richard Feynman — the first rule is that you must not fool yourself and it’s easier to fool yourself. CD is a proven precursor to all sorts of self-deception.
And we all have that “stupid rationalizer” in us, albeit each one of us would exhibit this behavioural bias for different things.
It’s election time and no matter how hard you try, you can’t save yourself from getting exposed to a political debate either on TV, social media, WhatsApp groups, or social gathering. The funny thing about these debates is that they hardly revolve around facts. Most of these debates do start with rational looking arguments and people start throwing facts at each other but as soon as they find that their facts are either irrelevant or incorrect, they go into the CD mode. Twitter is probably the biggest hotbed of CD. Adams writes —
Over the years, I have noticed a variety of tells for when a person is experiencing Cognitive Dissonance. When people realize their arguments are not rational, they attack the messenger on the other side. If you have been well behaved in a debate, and you trigger an oversized personal attack, it means you won. When people have facts and reasons in their armory, they use them first. When they run out of rational arguments, they attack the messenger. That is the equivalent of throwing the gun at the monster after you run out of bullets. People are mean on the Internet all the time. Being an ordinary jerk might not be a tell for Cognitive Dissonance. But when you see an attack that seems far angrier than the situation calls for, that’s usually Cognitive Dissonance.
We live in a complex world and it’s unfair to expect the world to offer itself in a coherent and easily understandable way to our limited intelligence. When you see signs of CD in yourself, acknowledge it and tell yourself that it’s okay to be confused and conflicted.
Charlie Munger warned –
Recognize reality even when you don’t like it – especially when you don’t like it.
Lewis Wolpert, in his book Six Impossible Things Before Breakfast, writes —
Beliefs, once acquired, have a kind of inertia in that there is a preference to alter them as little as possible. There is a tendency to reject evidence or ideas that are inconsistent with current beliefs, particularly if they undermine central beliefs; this is known as the principle of conservatism. Cognitive consistency is another central idea in the psychology of belief. We are seen as information processors who seek cognitive coherence. A satisfying internal consistency about our beliefs – the stories we tell ourselves – is a fundamental part of human nature. Cognitive Dissonance refers to a universal cognitive process that makes us feel very ill at ease when we recognise that we hold conflicting beliefs, and so we try to reduce the conflict. We try, in our beliefs, to tell a consistent tale. Whenever there are two ideas that are psychologically inconsistent, there is a mechanism driving us to reduce this Dissonance, and thus change ideas or beliefs. So a smoker who also believes that smoking causes cancer might convince him or herself that it is an essential activity. There is some evidence that the differences between the left and right hemispheres of our brains are involved in this process. The right hemisphere feeds information into the left, and it is the left that has to form beliefs and deal with Cognitive Dissonance. We may only change our mind when the information from the right overwhelms the beliefs held by the left brain. We nevertheless have the capacity for self-deception, which includes the ability to hold two contradictory beliefs at the same time.
Being at ease with CD is hard. Very hard. It’s an unpleasant state of mind.
It’s CD rearing its ugly head when you see an investor throwing good money after bad money, i.e., averaging down on a bad stock where the evidence suggests that he should accept his mistake and sell his position.
Danish philosopher Soren Kierkegaard noticed —
The paradox is the source of thinker’s passion and the thinker without a paradox is like a lover without feeling.
A paradox creates CD. The rational way to resolve the CD is not to modify the actions to confirm the pre-existing belief but to challenge our belief and keep an open mind for a mind is like a parachute, it only works when it’s open.
[/show_to]
[hide_from accesslevel=’almanack-all’]
- Spotlight: Big ideas from Value Investing and why applying them in your investment decision making will be a great deal
- InvestorInsights: Interviews with experienced value investors, learners, and deep thinkers
- StockTalk: Thorough analysis of business models of companies (without any recommendations)
- Behaviouronomics: Deep analysis of human behaviour and how it impacts investment decision making
- BookWorm: Reviews of the best books on Value Investing and related subjects
- Free Course – Financial Statement Analysis for Smart People (otherwise priced at Rs 5,900)
- Archives: Instant access to our huge archive from the past three years