Our biases can undermine how we look at everything. We all have a bias about something as much as we deny it. So we trick ourselves into believing that our decisions are solely rational ones. Our human nature is an exercise in self-deception. Many financial gurus have taken up behavioral economics (see here and here and here) in an effort to nail down how our addiction to narratives (good stories vs information) and our built in biases affect our decision making on investing.
What does weather come into all of this? I like to call it "Behavioral Meteorology" (I might be the first to coin this new discipline...probably not). Here's is an example that I guarantee has happened thousands of time in the last several days:
"Everyone is ready for the weather bottom to fall out. We're now in the midst of one of the warmest early fall stretches in recent years so our inner thermostats are a bit skewed. This early October warmth has lead to speculation of what this winter will be like. We scrounge up our distant memories of winters gone by and start making comparisons to what lead up to the winter in question. In the span of minutes, we create a stripped down analog of what this winter might be like using what information we have. The results are everything from "this winter will be very cold and snowy" to "this winter will be mild like the last few winters." We get preemptively testy. We fear the unknown winter. We start to question the weather forecasts more than usual. We jump to irrational conclusions..."
No surprise with any of this. We've all done this.
Its Behavioral Meteorology at its finest. The psychology (which I wrote about HERE) goes like this:
Transition seasons are very hard to take both physically and
mentally. Our preconceived notion of Decembers and Januaries featuring snow and
cold have been replaced with rain and milder air. These changes don't sit well.
It makes us feel uneasy holding onto these conflicting ideas. Psychologists call this "Cognitive
Dissonance". How many times recently have you had a conversation with
someone and they said, “What is the deal with this crazy weather…what is going
on here?” The uneasiness in the question is palpable.
No one likes to feel uncertain or conflicted. Weather most times exists in a perpetual
"grey" area. It’s this built in randomness that causes frustration
and conflict. Most of the time, we grossly underestimate the significance of
randomness. We all have a built in motivation to reduce conflicting ideas by
altering the existing conditions in our mind to create consistency.
In the case
of understanding the weather, we do this by 1) either believing the weather
information which best fits our comfort level or 2) we alter its importance in
our mind or 3) we just plain criticize it. Sometimes, it’s a blend of all
three. This inclination to favor information that reinforces our comfort level
is called a "Confirmation Bias". The problem is that by creating
"consistency" through favoring information , we create a new false
interpretation of the weather which we believe to be true. Rather than looking
objectively at the reasons for the change scientifically (science scares
people), most people tend to use an overly simplified and often inaccurate
scientific explanation of the weather to ultimately confirm their
predispositions. For events that require object analysis, our own human nature deceives us. In this case, our biases "cloud"--no pun intended--our judgment of the weather.
So as we transition to the winter season and the temperatures start to fall and we see our first snow, remember your biases and how they work in deceiving the way you look at the weather and the forecast.
Our therapy session is over. Have a great weekend!
