Self-transformation in Investment

A reader asked the following question in a comment. Since the original question is quite long, I have divided it into two parts for us to learn together:

Recently, I learned about a psychological effect called "confirmation bias," which is when most people unconsciously seek factors that support what they want to believe while ignoring objective facts.

How can investors overcome external factors to avoid falling into this situation? What are some methods: for example, finding those who oppose your views, or how to specifically transform oneself?

This question is profound and sharp.

I am truly flattered that a reader trusts me enough to pose such a question. Although I cannot answer it, I am willing to share some of my thoughts on this matter.

First of all, I believe that this "confirmation bias" is likely an inherent part of human nature, something that the vast majority of investors will encounter during their novice phase.

However, as one progresses, at least two fork points will appear:

The first: Can one recognize that they have fallen into "confirmation bias"?

The second: Even if one recognizes it, can they overcome or at least suppress this "confirmation bias" to ultimately achieve self-transformation?

Whether one can cross these two fork points determines whether the investor can elevate their level and stand out. If either of these fork points cannot be crossed, self-transformation is out of the question.

Let’s first look at the first point: Can we recognize that we have fallen into "confirmation bias"?

Let’s consider an example that we are all familiar with:

How did we come to accept Bitcoin?

I believe that the vast majority of readers, like me, thought it was "pyramid selling," "nonsense," and "fraud" when they first heard about Bitcoin.

The reason is simple: How can something with no "value" and no "credit" sell for money? Isn’t that fraud?

When we made this judgment, our thought process was certainly based on our existing knowledge and established perceptions.

But at that time, we certainly did not do one thing: that is, seriously look for information online, to see what Bitcoin really is, to read the Bitcoin white paper word for word!

What did we experience next?

In my own experience, I was first "conquered" by the surge in crypto assets.

Although I am not someone who easily changes my perception due to price fluctuations, this explosive growth did pique a bit of my remaining curiosity, and I wanted to see what it really was. This led me to read the Bitcoin white paper, the Bitcoin source code, and a series of materials on Ethereum.

After studying these materials, my understanding began to change dramatically—I realized I had been foolish; Bitcoin is definitely not a pyramid scheme, nor is it a fraud.

Looking back now, what allowed me to cross the first fork point in understanding Bitcoin?

I believe it was a little bit of curiosity and the action of seeking the truth, or more simply, curiosity and verification—these two key elements.

Here, I want to emphasize that verification means finding first-hand information and factual truth, not hearsay or following the crowd.

Moreover, I feel that if I had only changed my view because of the "conquest" of price, I would have merely seen Bitcoin as a speculative asset, without the subsequent process of verification. Without that verification process, I would not have developed a firm belief and determination to hold it, nor would I have been able to remain optimistic during downturns or steadfast during crashes.

So, the "conquest" by price was merely an opportunity, not the key to crossing the first fork point.

Now let’s look at the second fork point: Once one recognizes the presence of "confirmation bias," can they overcome or at least suppress this "confirmation bias" to ultimately achieve self-transformation?

In fact, even after recognizing their "confirmation bias," many people, including myself, still experience a lot of pain. Because at that point, "rebellious" thoughts begin to emerge in our minds.

This is a significant issue because it can easily lead to regret.

For those holding such views, they can feel very lonely, unable to communicate with those around them, even their closest ones may not understand or accept them.

Moreover, once these "rebellious" thoughts are accidentally voiced, they can be exaggerated to an extreme, and even if they are expressed mildly, they can be seen as heretical.

How many people like this live comfortably in the real world?

So, we can only silently bottle up these thoughts, bearing all the pain alone, solving and exploring all the doubts by ourselves.

Many people cannot bear this loneliness and pain, leading them to retreat. After all, for the vast majority, following the "herd effect" and aligning with the majority is psychologically the most comfortable, reassuring, and safe choice.

Being a "rebel" is too uncomfortable.

Additionally, regarding the "rebellious" thoughts themselves, they pose a significant challenge to our self-perception, and the risks are extremely high.

Because while we know it is not as the public understands, we may still feel it somewhat contradicts our own perceptions, even challenging our "common sense."

In this situation, it is even harder to talk about faith in its future, and in reality, the probability of its future failure is quite high.

At this point, I believe that an inclusive and courageous mindset becomes very important.

Inclusivity allows us to at least not reject "heretical views," and the subsequent courage enables us to have the guts to engage with "heretical views"—this courage does not require so-called "fearlessness"; as long as we are slightly brave enough to take a step forward, to reach out a hand, to approach it, to touch it.

If we can do the above, the subsequent obstacles will be much smaller.

Reflecting on my own experience, my approach was quite simple: I took a portion of funds that I could completely afford to lose and took a gamble.

And since it was a gamble, I certainly would not settle for trivial gains; I would expect it to become something significant. So I would never be overly ecstatic just because it rose by 20% or even doubled; I was willing to wait for it to transform from an ugly duckling into a beautiful swan, even if it went to zero in the process.

If it goes to zero, then it goes to zero; I will look for the next opportunity.

I believe that opportunities to change one’s fate are surely forged through time and patience.

Therefore, I think the key to crossing the second fork point lies in:

Getting used to loneliness and not being understood;

Trying to cultivate an inclusive and courageous mindset;

Taking a gamble with losses one can afford.

These are my personal insights and some immature thoughts on this question; they are merely reflections and fragments from my limited experiences.

I believe that investing is not a single event but a process. And this process is not only one of wealth change for an individual but also a process of personal growth.

I hope all our readers can enhance and elevate themselves in this journey.