You are different, right?

Hi,

How much are you really able to be your best self in your daily life? You know, the person you imagine yourself to be, and what society expects you to be?

How good are you really at applying your strategy, tactics and selection criteria to your investing and decision making in general?

Among the long list of mental biases, one that makes it hard to deal with all of them is the Superiority bias. We are simply blind to our own flaws and as an extension think situations do not apply to us.

Today I want to shed some light on this duality we all have, whether we admit it to ourselves or not and how to prevent it affecting our decision making.

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As a kid I was always drawn to horror stories for some reason, I guess because they are actually explorations of human nature once you look at them philosophically.

School didn’t pick up much on this cue to make schooling more interesting, but one story made it into one of the text books and is quite suited for today’s topic. It was the Strange case of Dr Jekyll and Mr Hyde, a novella by Robert Louis Stevenson, who I already liked a lot for his Treasure Island, the original pirate romanticisation.

Dr Henry Jekyll was a respected scientist quite interested in human nature and how we all seem to have both a good side and an evil side. To explore this duality further he crafted a concoction that once drunk would transform him into Mr Edward Hyde, a manifestation of his darker self.

The story is narrated by a friend of Jekyll as he observes strange violent events in the neighbourhood and starts noticing a connection between his friend and this evil Hyde character.

In relation to our Superiority bias this is exactly what happens to us. Obviously we don’t have violent evil sides, I hope! What I mean is that we have our strong emotional sides that drive us towards behaviours that are not in line with our ideal selves.

We commit actions that we wouldn’t plan to do in a fully rational state of mind, and then we don’t think about it that much or notice at all. It is as if once in a while we drink Dr Jekyll’s concoction and run around as our own version of Mr Hyde.

We snack sweets when we are supposed to be on a low sugar diet (guilty), we chase riches instead of focusing on providing value (main mistake I did in my early startups), we buy shitcoins because damn it would be so nice to get lucky (I stopped doing this, then managed to buy Terra anyhow), we say we don’t gamble then we find a long list of assumptions disguised as fact to convince ourselves to invest in a stock (yup).

Then when we look at ourselves we see we are being healthy, not chasing riches, being rational and thinking independently. No recollection of our Mr Hyde taking the steering wheel.

Worse, as you read this, you are probably thinking “nah this does not apply to me”. I used to do that all the time until I learned better. If you happen to recognise yourself, rejoice, you are further ahead than most.

This is why we often say that as humans we aren’t perfect, to err is human, etc. We dismiss and excuse our lapses into emotional frenzies.

Now don’t get me wrong, life would be boring if we didn’t give into emotion once in a while.

Our problem is that if we cannot see our behavioural lapses, we have a hard time learning from our mistakes and cannot see why our path towards our goals is slower than we would like.

The superiority bias is a total optical illusion, it keeps our inner Mr Hyde alive and hidden.

We don’t want to get rid of Hyde, what we want to do is to be aware and manage, maybe educate and motivate him/her a bit in some cases.

Managing Mr Hyde is hard work. It requires self awareness, introspection and reflection. It does not come naturally and is a maturation process through life. Also don’t mistake maturing for automatically solving it. Thinking experience automatically makes one wiser is again the superiority bias at play.”

So which side will you let loose this week?

Have a good one,

Chris

P.S.: This bias is also why it is important to have a proper routine, strategy, preferred tactics and asset selection criteria that suits your character. Without all of those, your own Mr Hyde will be running your investing for you while you think that is not the case.

Originally posted 13th November 2023 on ElliottSays.com

Thank you for reading! :)

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