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Making Better and Unbiased Decisions

When it comes to making personal and financial decisions, we’re often our own greatest enemies. Jethro Goodchild, CIO of FWD Insurance, unearths insights on how human nature, behavioural biases and subconscious affects our ability to make better and unbiased decisions. He shares about why the average is the enemy of the good, the need to make mistakes in order to grow, and how optimism is good for social situations but bad for investing.


  • Standing out from the crowd and avoiding conformity bias
  • Why you must say ‘no’ to the path of least resistance
  • Becoming a rational, sceptical decision-maker


Are you prepared to acknowledge that your decision making is influenced by biases, or willing to accept if someone calls you out on that?

If you feel that you’re fully in control of your behaviour, you may not make it past the first and possibly highest hurdle: how to recognise and fix your behavioural biases and subconscious influences affecting your personal and financial decision making. Conformity bias, the fear of making mistakes, and the presence of optimism are the three biggest factors.

The topics I will deal with may be quite raw and confronting to some – it may be hard to admit that your behaviour is often out of your direct control, which often leads to people disbelieving and rejecting the concepts that I’m about to introduce.

A similar circumstance occurs in phone addiction; just like other addictions such as smoking or drinking, the biggest challenge is to admit that you are an addict. Truthfully, most of us can’t make it past that first step; despite massive evidence of phone addiction, most have trouble admitting it.

The same applies to acknowledging our psychological biases. Before reading the following, the biggest challenge is admitting that you have subconscious influence over your behaviour.


People will almost always push for a common consensus within a group to create and maintain harmony.

Whether we like to admit it or not, as human beings, we’re not psychologically built to stand out from the crowd. We’re naturally and heavily biased towards what our peers are doing; this influence likely predates to the hunter-gatherer era when we needed to stick together just to survive. By conforming, our ancestors were able to work harmoniously to fulfil their basic needs. It’s ingrained in our instincts as a species, long before we even considered investing, personal or professional growth.

In modern times, conformity affects us both consciously and subconsciously. The pressure to conform starts young, for example when wearing a common uniform in school. Eventually it grows to dominate your life, from the clothes you wear, to the way you speak and even the way you think and behave.

In the book Nudge, academics Richard Thaler and Cass Sunstein note how teenage girls are more likely to have children if they see their peers in similar situations, while students with good scores in university likewise have academically similar dorm mates.

While these subconscious biases can lead to both positive and negative impacts, I believe that conformity bias creates large negative influences when it comes to both personal and financial decision making. It inhibits individuality and creativity, key elements for personal growth and financial success.

Perhaps you had once set out towards a positive goal, like learning to control your anger, overcoming laziness, or becoming a more responsible person. You may also have wished to become more polite and considerate, develop new skills or change towards a more positive mindset. However, it’s very difficult to achieve the change you seek if you’re simply standing in a crowd and following everyone else. Worse still, you could also be mixing in the wrong crowd.

Conforming to the crowd largely leads to merely average outcomes, either on a personal or professional level. Fight this bias – if you seek to stand out, grow and be different, because conformity bias inhibits personal growth. Ongoing learning is the key to personal growth and better decisions, and your ability to do this is heavily compromised if you’re simply following others’ actions and standards.

Successful personal growth is tied to motivation, the desire to improve, and the willingness to strive to make changes. Step out of your comfort zone and do things that are uncomfortable but for your own good, while keeping an open mind and a desire to learn and grow.


I have lived in Asia for more than a decade, and I’m still awestruck by the strong food culture in the region. Asia boasts of a great history, culture and patriotic folks who love their national food, whether it’s Char Siu, Chicken Rice, Pad Thai or Jollibee’s ChickenJoy. Your parents have also directly or indirectly trained your taste buds from a young age to like certain foods, and this is difficult to retrain. These factors may seem innocuous, but they highlight another conformity bias, which is that people tend to eat the same socially accepted food as those around them.

Due to economies of scale, along with basic supply/demand needs and the human desire for convenience, socially accepted and popular food also tends to be the cheapest and most abundantly available. For example, big businesses are often biased towards putting the least healthy foods in our supermarkets and restaurants. Driven by a profit motive, they appeal to consumers’ tastes, food addictions and advertising dollars. To realise how big business and economics influences food presence in your supermarket, look no further than Coca-Cola’s domination of shelf space and visibility.

Most restaurants are simply a magnified version of a supermarket, as they offer a diminished range of food choices, driven by simple economics. Given their profit-driven nature, nutritional food becomes even more difficult to find. I’d go so far as to say that people are led to a false reality about nutrition due to the easy availability and accessibility of unhealthy food like McDonald’s.

This type of conformity bias makes us think that it’s okay to consume unhealthy food simply because it’s everywhere and everyone else is eating it – despite being aware of what is nutritious, we’re still inclined to adopt poor diets.

Thaler and Sunstein’s concept of investment goods vs sinful goods, as highlighted in Nudge, is very insightful. Sinful goods like alcohol, smoking, sweets and sugar offer immediate satisfaction with delayed harm, while investment goods like exercise, healthy food and dental care promote delayed benefits. Unfortunately, people instinctively gravitate towards the feel-good urges of sinful goods, including the most available, convenient and often the cheapest unhealthy food.

Another major source of influence in your daily life is social media. Thanks to social media and the growing addiction to being online, we’re exposed to socio-behavioural norms on an unprecedented level. Online media colours our perceptions of what we think people around us are doing. If we spend our lives online, we’re more likely to conform to influences there than the traditional/physical ones around us.

We’re living in an age where people tend to ignore or dismiss real-life folk and influences around them, in favour of receiving attention from the online world. Social media is so often fake, filtered and corrupted by business and personal interests (for example, blogging, political outreach and revenue generating strategies) that the lines between reality, others’ projection of their reality and advertising are increasingly blurring. For most of us, this toxic mix now represents our main source of social influence.


When investing, conforming to the pack leads to an average outcome. This may be fine if you simply wish to hold a balanced portfolio and achieve average long-term returns. However, if you seek to outperform on your investments, either due to your own decisions or those of your advisor or fund manager, you’ll be fighting a tough battle against conformity bias. By construction, generating outperformance is a zero-sum game; conforming to the pack gets you an average outcome. Invest differently and be willing to take risks where others will not, to stand out from the crowd.

In The Little Book of Behavioural Investing, James Montier shines a light on how going against the crowd makes people scared. Going against the herd not only triggers fear, but can possibly cause pain. This instinctive fear and pain drives us towards conformity and average investment outcomes.

With unprecedented access to information and the internet, the millennial generation is at risk of being more short-term focused than their predecessors, leading to a higher chance of making poor investment decisions and gravitating towards sinful goods. Over the past year, almost every millennial I’ve spoken to is investing in either digital currency, gold or other currencies. Although these might help you stand out from the traditional investing crowd, they are also highly speculative and plagued by the temptation to make a quick buck – none meet the well-documented characteristics of long-term investments.

It’s subconscious and naturally instinctive: are millennials less willing to analyse the detail and lacking the patience to invest? Or is the opportunity to speculate just too irresistible? The former will lead to poor financial decisions and less long-term wealth.

In all fairness, the millennial generation has access to information and opportunities that previous generations could only dream of. However, mobile phones and the internet promote short attention spans – when this is coupled with the natural human desire to find the path of least resistance, it could potentially lead to very poor personal and financial decisions.

Moreover, our tendency to want things quickly will further worsen the outcome. There are very few shortcuts to learning, growing and making solid long-term investment decisions. All require time and patience.

"The big challenge is the human desire to want things more quickly whereas the superior knowledge, access to the internet, research will never replace patience required to invest for the long term. Making a quick buck will never get easier and investing will never become short term.” -Howard Marks


Collaboration has been touted as the key to success across various industries, including the finance sector. Who hasn’t worked for an organisation that pushes the benefits of collaboration and idea sharing? The notion is particularly interesting when it comes to investment decision making.

However, too much collaboration in decision making also leaves you highly exposed to large psychological biases. Ultimately, these can lead to bad decisions and poor outcomes; lots of collaboration often leads directly to conformity bias, groupthink and consensus decision making.

You’ve probably been in meetings where a decision has to be made, but with more people taking part, it becomes increasingly likely that the final decision will seek to conform to most people’s views while upsetting as few as possible. A consensus decision often leads to a poor business decision or a bad investment. Investing requires you to weed out the bad apples and adopt the best ideas, not the average ideas of the group.

From experience, collaboration works when you have a small critical mass of decision makers (ideally one to five people) with implicit trust and mutual responsibility for the outcome of the teams’ decisions. Beyond that, it becomes increasingly difficult to avoid conformity bias and groupthink. The next challenge is to achieve the kind of cohesive teamwork, trust and chemistry required to produce great decisions. This can be more difficult than the actual decision making.

While collaboration is often necessary in business and investing, the key is to anticipate and manage behavioural challenges which can lead to less-than-ideal decisions. Be brutally honest if you have to – socially accepted pleasantries should not get in the way of making the right call.


Barack Obama once wrote, ‘Don’t let your failures define you – let them teach you.’ Indeed, fear of failure can prevent us from making tough but necessary mistakes and losses that guide us in the long run. Research by Amos Tversky and Daniel Kahneman has shown that the pain of loss is psychologically twice as powerful as the pleasure of gain.

To learn and grow both personally and professionally, you need to get out of your comfort zone and put yourself in uncomfortable situations. People generally hate to be in such situations, including losing. Losing is emotional – it’s painful to lose money, a sports match, a bet or even your wallet. However, you need to experience losses in order to learn the most and become a better decision-maker, fund manager or sportsperson.

What’s the best way to become a more emotionally resilient and determined person in life, who will make better long-term decisions, or willingly sacrifice present conveniences for future benefits? You get there by experiencing loss, and likely by a significant amount.

As human beings with emotions, we are subconsciously inclined to avoid fear, losing and mistakes; this bias is a massive inhibitor to personal and financial growth. It doesn’t come naturally to embrace loss, as we are psychologically biased to avoid a critical part of the learning process.

When you were a baby or a child, all your experiences would have been uncomfortable, with learning and growing set on an exponential curve. This constant discomfort could be why children and babies cry a lot. Indeed, learning and stimulation often feels very unnatural and uncomfortable.

As you grow older and make your own decisions, your confidence and knowledge grow accordingly, alongside complex emotions like ego and insecurity. More emotional struggles are created with parents pushing you through further learning curves like high school and university. In these difficult moments, our natural human instincts and biases trigger and drive us to stay in our comfort zone and look for the path of least resistance.

As we get older, our learning curve flattens significantly, to the point of stagnation or even sliding downwards. While the ability to learn decreases with age, these trends also happen because growth through mistakes and discomfort simply doesn’t come naturally to us.

“It is human instinct to find the path of least resistance to any goal. People will eventually gravitate to the least demanding course of action. Effort is at a cost, the acquisition of skill is driven by the balance of benefits and costs. Laziness is built deep into our nature.” – Daniel Kahneman, Thinking, Fast and Slow


Throughout your investing career, you’ll need to build processes, decision making frameworks and reliable, time-tested indicators. That requires testing and patience, which inevitably involves making mistakes to learn what works and what doesn’t. The path to making money and becoming a good investor is never a straight line. To become better at investing, you need to overcome the huge hurdle of loss aversion bias.

The psychological biases can grow even larger when investing very large sums of other people’s money as a fund manager. The fear of losing money is compounded by the possibility of losing your job or even your career. Often the best decisions are the most uncomfortable. You’re waging war on two fronts – fighting the behavioural battles along with trying to make the right decision from an economic standpoint.

Human beings are natural conformists with an inbuilt fear of losing and learning. Having the willpower and confidence to lose and invest differently is no easy feat. Yet great investors like Howard Marks, Stanley Druckenmiller and Warren Buffett did not get to where they are today without bravery and taking risks, a belief they share and have spoken about.


Sceptics and critics often come across as unusual, and make people feel uncomfortable or insecure. Beyond issues with social momentum, which promote acceptable criticism, they are a rarity on social media. Furthermore, life can be quite lonely and depressing if you live as a critical sceptic. Although it’s not the secret to a happy, social and positive life, scepticism is necessary for good investing.

Fund managers need a balanced, unbiased viewpoint for economic decisions. Attempting to beat the market creates just as many losers as there are winners, if not more. Good investing therefore requires a healthy amount of scepticism; if you approach an investment with high hopes on the potential outcome, you’re liable to make poor and ill-advised investments. Accounting irregularities, cashflow mismatches, suspicious business models – hold an optimistic outlook, and you’re likely to miss these crucial details. James Montier notes in The Little Book of Behavioural Investing that optimism is ‘the great life strategy but poor investment strategy’.

Worse still, it can happen subconsciously, leaving you unaware of the full scope of your decision even as you are doing it. For these reasons, it’s essential to have a consistent set of proven rules, indicators and guidelines. A framework of unbiased guidelines for decision making helps you combat sub-conscious bias that may result in you overlooking important aspects and deluding yourself from reality.

Despite this, optimism and overconfidence remain widespread in the finance world. It is fertile ground for natural human inclinations, with lots of smart people dealing with large sums of money. As a result of successful earnings, they become overconfident in their abilities and harbour optimism for the future.

Human ego and its complexities can wreak havoc on investment decisions. Imagine the human instincts that come into play when dealing with your own money, but further magnified when dealing with millions or even billions of dollars as a fund manager.

Seventy percent of fund managers think they are above average. Are they? You want to be the rational sceptic and turn on your critical mind when it comes to investing and important personal decisions. It’ll take time and patience to learn, but you’ll come out far ahead.


Howard Marks and Warren Buffett are calm and placid people. While some would say this makes them boring, these qualities are arguably the key to their good investing. They tend to avoid many of the pitfalls present in our subconscious and human feelings which often cloud us from making good decisions.

Whether it’s binge eating because you felt sad or skipping a gym workout because you didn’t feel like getting out of bed, the decisions you make in an emotional state of mind tend to lead to poor outcomes. While emotions make us human and let us enjoy the fruits of life, they are an obstacle to mastering the long-term patience required to invest and making good personal and financial decisions. Focusing on statistics and probability-based thinking can safeguard you from making hard choices when emotional.

Ultimately, self-awareness is the foundation of your journey to better decision making. You can’t implement all the subsequent steps if you aren’t willing to admit your flaws and weaknesses, while being confident in your strengths. Emotional intelligence will help you understand yourself and your own behaviour.

While this has been written with individual self-improvement in mind, don’t be afraid to seek the help of others when you need it. A financial advisor can offer you a trusted, unbiased view to add another dimension to your decisions. To understand yourself more deeply, why not visit a psychologist? Look beyond the stigma – it’s a worthy investment that takes your closer to your goal. You need not limit yourself to real-life advisors as well. While the influence of big business and advertising surrounds us both online and offline, good books are arguably still the least corrupted source of information that we can absorb.

Before following through with a decision, build and use a framework to arrive at it. Take a long-term view of your decision-making process, then create a structure that you can improve with time. At every step, play the devil’s advocate and ask yourself: would you buy this position from a neutral, impartial starting point? Or are you influenced by overconfidence, love for the trade, optimism, fear of loss, and conformity with the crowd? As humans, we may be inherently biased, but we are also capable of rational decision making.

“Understanding the psychology of the market can often be equally, if not more important at times than understanding the intrinsic value of an investment. Market cycles will always exist because of human emotions and our bias to under or overreact.” – Howard Marks


1. Prepare for Your Next Meeting

Prepare all the questions I’ve laid out in the previous chapter and be sure to answer them all prior to your next meeting. Add more questions that you think need to be covered and start referring to this list until it is second nature.

2. Follow up

Make a follow up plan for all your clients. Call or email 3 of them today with useful information and don’t try to sell anything. Provide information relevant to your industry, current affairs and quotes that are suitable.

3. Improve Your Reliability

Look at your meeting notes for the last quarter and check if you have done everything you promised. If you don’t have notes then make a list of your past meetings from your calendar and try to recall what the decisions were and what follow ups you need to do. Make sure you complete everything you have promised people.

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