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IPFS News Link • Oil

Is $10 Oil on The Horizon?

•, Andreas de Vries

It is of critical importance for strategists to understand and acknowledge this human tendency, as it causes one to easily fall prey to a number of cognitive biases, which prevent one from seeing things how they really are, and more important for the strategist, how they are likely to become.

One of the most famous cognitive biases is confirmation bias. As we prefer to be proven correct, we naturally incline towards information that confirms our views and try to ignore or reason away information that does not.

This tendency was on full display before, during and after the 2008 Global Financial Crisis. At that time most analysts were continuously behind the facts, consequently underestimating what would happen next, because reality went against ideas and conviction that had become loved in the financial community, such as the perfect market theory and the idea that through derivates risks could be managed away.