One of the themes of the book is the criticality of being discerning with evidence, and not believing common myths about business, even if they confirm what we’d like to be true. It shows how the evidence paints a quite different picture of controversial issues such as CEO pay, shareholder activism, and share buybacks, to what we typically hear.
These incorrect views became influential due to confirmation bias – the temptation to accept any “evidence” that supported your pre-existing opinion, no matter how flimsy, and reject even serious studies that contradicted it. Given how unpopular capitalism is, often our pre-existing opinion might be that CEOs are overpaid crooks, shareholders are short-term pillagers, and share buybacks are undertaken to boost CEO pay at the expense of long-term investment.
Given how severe this bias was, even among policymakers, business leaders and respected newspapers, I opted to give my 2017 TEDxLondonBusinessSchool talk on this subject, rather than finance. The talk was elevated to a mainstage TED talk at the end of 2018, entitled “What to Trust in a Post-Truth World.”
Today, in the throes of the coronavirus crisis, confirmation bias and misinformation are even stronger. People who support lockdowns might latch onto the Imperial College study predicting 250,000 UK deaths without drastic action. Opponents tout the Oxford University study arguing that half the UK has already been exposed to the virus. (Neither study has been peer-reviewed). We get excited about miracle drugs that might cure or at least slow the virus, with US President Donald Trump placing faith in hydroxychloroquine without it being justified by evidence. We rush to believe a Plandemic video that coronavirus is a conspiracy, even though it’s presented by an anti-vaxxer with very weak scientific credentials.
Why is confirmation bias particularly rife today? For three reasons:
- The issue is uncertain. We know very little, simply because the virus is novel. We don’t know whether it will be slowed by the warm weather, or whether those affected are now immune. We can’t do the standard fact-checking, since we have few facts.
- The issue is important. Given its severity, almost every talking head wants to express an opinion. Scientists predict how fast it will spread, economists forecast its impact on the economy, organisational psychologists foretell how it will change our way of working. They may be genuinely trying to help, but their expertise many not be closely related to the virus. Many people have asked me how the crisis will affect the stock market, since I’m a finance professor. But my expertise is on individual companies, not markets. They shouldn’t be seeking my advice.
- The issue is urgent. The normal process of waiting for research to be peer-reviewed is too slow. Society is demanding answers now.
So, how do we avoid being duped by misinformation? The three practical tips in my TED talk remain relevant today:
- Seek other viewpoints. Given the huge range of opinions being expressed, you can almost always find “evidence” to support your view. If you think the market is too cheap and you’d like to buy stocks, you can find pundits advising you to do exactly that. Look for investors with a strong track record who express different views.
- Listen to experts. It’s particularly critical to scrutinise whether a person is actually an expert. Liverpool football club manager Jürgen Klopp declined to comment on the virus because he said we shouldn’t listen to someone just because they’re famous – but Elon Musk’s Tweet on hydroxychloroquine was highly influential, even though his expertise is technology and entrepreneurship rather than medicine. There are various doctors touting cures, but what are their credentials? What is the quality of the hospital where they’re practising? What is their past track record of peer-reviewed publications on pathology or epidemiology (rather than other areas of medicine)? And: peer review is evolving with the times. For example, the Centre for Economic Policy Research is publishing Covid Economics, which contains vetted, real-time papers. The peer review is not as thorough as for standard economics journals, but it achieves a balance of both scrutiny and speed.
- Pause before sharing. The crisis has highlighted how an individual’s actions profoundly affect fellow citizens. Social distancing and choosing not to panic-buy can literally save lives. Similarly, many citizens share what they believe to be information, on public social media or private WhatsApp groups, sincerely trying to help. But if this information has not been checked, then it’s dangerous. Often, people think that information can’t do any harm – if it’s not useful it can be disregarded, just like you can throw away a free gift. But that’s not the case. Misinformation is itself a virus that can spread quickly and get out of control. We’ve seen 5G masts vandalised under the unevidenced hunch that they accelerate the pandemic, and a man dying after taking hydroxychloroquine, potentially influenced by Trump’s claim that it might be a cure and – even if not – “it’s not going to kill anybody”. In addition to not sharing misinformation ourselves, we should be willing to respectfully hold our friends accountable if they do so.
Now doing the above steps for every piece of information might seem cumbersome. Thankfully, there are resources to help us, such as fullfact.org, BBC’s Reality Check, and Washington Post’s Fact Checker.
Coronavirus is a very serious pandemic. We need to be very serious about using the best evidence to defeat it and manage its consequences.
This article is adapted from an article originally published on Think@LBS