Did you accept your data due to Confirmation Bias?
Confirmation bias (also called confirmatory bias or myside bias) is a tendency for people to favor information that confirms their preconceptions or hypotheses regardless of whether the information is true. As a result, people gather evidence and recall information from memory selectively, and interpret it in a biased way. The biases appear in particular for emotionally significant issues and for established beliefs. For example, in reading about gun control, people usually prefer sources that affirm their existing attitudes. They also tend to interpret ambiguous evidence as supporting their existing position. Biased search, interpretation and/or recall have been invoked to explain attitude polarization (when a disagreement becomes more extreme even though the different parties are exposed to the same evidence), belief perseverance (when beliefs persist after the evidence for them is shown to be false), the irrational primacy effect (a stronger weighting for data encountered early in an arbitrary series) and illusory correlation (in which people falsely perceive an association between two events or situations).
Today’s New York Times tells a story of Japanese longevity data. Japan has long thought itself to be the home of a large fraction of the world’s oldest people. The myth of self was that the Japanese lifestyle was healthier than that of any other people and the longevity was a result.
A google search on “The secret of Japanese Longevity” turns up 400,000 web pages that extol the virtues of Japanese diet and lifestyle. But the news story says that as many as 281 of these extremely old Japanese folks cannot be found. The efforts to find them revealed numerous cases of fraud and neglect. This investigation started after they found that the man who had been on their records as the longest lived male had actually been dead for over 20 years! Someone had been cashing his pension checks for those years and neglecting to report the death.
The secret of Japanese Longevity may well be just bad data.
But the bad data was accepted because it confirmed the going in belief – the belief that Japanese lifestyle was healthier.
The same sort of bad data fed the Sub Prime crisis. Housing prices were believed to never go down. So data that confirmed that belief was readily accepted. Defaults on Sub Prime mortgages were thought to fall within a manageable range and data that confirmed that belief was accepted.
Data that started to appear in late 2006 that indicated that those trends were not going to be permanent and in fact that they were reversing was widely ignored. One of the most common aspects of confirmation bias is to consider non-confirming data as unusable in some way.
We try to filter out noise and work only with signal. But sometimes, the noise is a signal all its own. And a very important signal to risk managers.
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