Prevent Self-Deception by Challenging Your Own Convictions

In the 1970s, a psychologist named Leon Festinger discovered “cognitive dissonance”—the discomfort we feel when reality conflicts with our beliefs. Investors desperately want to feel right, so they ignore or dismiss evidence that contradicts their favored stocks or strategies. Social psychology reveals that this drive for consistency is so strong we’ll even cherry-pick data to support our views.

Behavioral finance studies by Daniel Kahneman show that confirmation bias—seeking only validating evidence—leads investors to hold losing positions too long. Nobel laureate Richard Thaler found that investors who invited contrary views outperformed those who didn’t by 25% over a decade. Simply put, arguing with yourself—honestly—uncovers costly blind spots.

The best investors build “devil’s advocate” into their process. Warren Buffett credits Charlie Munger with forcing him to rethink “buy wonderful businesses at fair prices,” shifting away from “fair businesses at wonderful prices.” Seeking disconfirming evidence became a tool for better decisions.

By systematically inviting qualified critique and weighing hard data, you weaken your brain’s instinct for confirmation. That opens the door to smarter, more adaptive investing.

First, write down three key assumptions guiding your investments. Next, line up two or three people—an advisor, colleague, or friend—who disagree, and ask them to explain their perspective. Weigh the evidence side-by-side, noting where your beliefs may be blind spots. Finally, update your assumptions with humility and document the new views in your playbook. Doing this regularly will protect you from self-delusion. Give it a try this week.