2014-08-31

Blind-spot bias, the smarter you are, the worse it is

This should give anyone pause --

So, You Think You’re Rational?: "People... think the other side is biased into making bad decisions. They rarely assume that they, themselves, might be just as biased. Psychologists have a name for this: blind-spot bias. It's a bias that prevents us from realizing how biased we are. And it is pervasive in investing. Behavioral finance is one of the fastest-growing branches of psychology... Because people can reason and tell themselves stories, they're able to make up all kinds of excuses to justify their mistakes – even the same mistakes they criticize others for... Ironically, the smarter you are, the worse this gets... Why? Because the smarter you are, the more elaborate and sophisticated stories you can tell yourself to justify your bad decisions. An average investor could never convince themselves that leveraging your balance sheet 30-to-1 with subprime mortgages was a good idea. You need to be Harvard stupid to do that. The more rational we think we are, the more self-deluding we engage in, and the more biased we become.... Those least susceptible to biases share a common trait: they're skeptical of their own beliefs... George Soros once said: "I think that my conceptual framework, which basically emphasizes the importance of misconceptions, makes me extremely critical of my own decisions. I know that I am bound to be wrong, and therefore am more likely to correct my own mistakes."..." (read more at link above)

Lesson for ICANN and the domain name industry? An average domain name registrant or investor could never convince themselves that to "explode the internet" from just 22 gTLDs to more than 1300 gTLDs in a first-round roll-out was a good idea. Only donuts or someone Stanford stupid could do that.





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