Most of us have heard at least passing reference to our social media "bubbles." I won't try to go in-depth on what they are since it's outside what I want to focus on here, but basically you see what an algorithm thinks you want to see. It's pretty impressive from a technology and ad-revenue standpoint, but also hugely concerning for a number of reasons.

One major concern is how this exacerbates confirmation bias. Confirmation bias is the tendency that we all have to look for and put greater value on things that confirm or go along with what we already believe. This comes in a lot of forms, none of which help us make clear, rational decisions. And none of us are immune to it - even people who have spent their life researching it fall into the same traps as those of us who have never heard of it (although hopefully less often).

Confirmation bias can be actively seeking out information that supports what we believe, but not anything else. Or it can also be interpreting something that is not clearly evidence for or against your view as proof that you were right. If I believe something, I just want more evidence that I'm right. If I'm not careful I can miss glaring evidence that I was wrong because of overconfidence or excitement.

We're particularly prone to fall into this trap when there is an outcome that we want or would be better for us or when there are a lot of emotions involved, both of which are at play in the world of crypto. We all want financial security. We see opportunity in investing in cutting-edge technology and often truly believe in the mission of the projects we buy into. Or just really want that lambo. But those involve emotions and a strong desire for a specific outcome. That means the world of crypto is ripe for confirmation bias to run wild - and it does.

A great example of this is the world of memecoins. Everyone talks about FOMO and how emotions play a role in driving people to buy into these projects with no real use case. And it's true, that's a huge factor. What we often miss though is that confirmation bias is impairing our ability to think critically about the evidence in front of us, missing or ignoring key information that would tip you off about a scam or money-grab. I've fallen into this myself. I find a coin that's brand new and get excited - here's a chance to get in before anyone. I see the chart start to move up and there's FOMO and emotions driving the decision to buy, but also the part of me that sees the increase and thinks "I knew it, this is gonna moon." And that's confirmation bias. I wanted it to moon, so I decided it was about to. And I ignore the warning signs, buy in, and get rug pulled. 

A lot of us will follow specific subreddits, discord, telegram, or twitter accounts for the projects we invest in. These can be great for information on new developments in the project. But they also feed that confirmation bias. I have yet to join any of these where the other members are not constantly sharing messages about how great the project is and how the price will go up. Many (not all) can even be downright militant about drowning out dissenting voices or people who point out problems. That kind of echo chamber limits opportunity to see and evaluate the problems and downside with a project. You start to ignore red flags or just never hear about the problems because you aren't looking for them. You're only looking for more proof you're on your way to the moon.

So it's clear this can have a big negative impact on our ability to make good decisions and investments, but what can be done to minimize confirmation bias? A few important things:

• Reflect on whether you want a specific outcome before investing (pro tip: you do)
• Write it down. And write down the emotions you're feeling thinking about investing
• DYOR, but purposely look for the evidence that you're wrong. Start from the position that you shouldn't invest and find proof for that. Then look for the reasons to invest.
• Write all of that down too, the good and the bad, once you've actually looked at both sides
• Then wait and think about it for more than a day. If the pros outweigh the cons and it's a good project, 1 day won't hurt. If it's not, that day could help you think more clearly and avoid a scam.

• And never get your information only from the project-specific social media platforms. It will be biased and it will make you more biased in your evaluation and decision-making.

   

Remember, confirmation bias is human nature - it's just part of how we're all wired. You'll never eliminate it. You just want to be more aware of it and minimize it. Hopefully this helps you reflect on that part of your decision-making and avoid some common traps.