Why Making More Money Decisions Can Make You Too Sure of Yourself
In this column I explore a striking study showing that overconfidence in financial decisions often comes from the process of making the decision itself, not from actually learning anything new. Participants in the research were fed a series of neutral facts about a potential business investment. None of the details should have pushed them toward or away from the investment, yet their confidence kept rising after each new piece of information. Whatever their initial instinct was, it got reinforced step by step. The researchers call this the confidence–information–distortion cycle, and once you see it, you can spot it everywhere from crypto forums to meme stocks to debates about mortgages or insurance.
I also reflect on how easy it is for any of us to fall into this pattern. The more Reddit threads, YouTube videos or TikTok explainers people consume, the more certain they can feel even if the information adds nothing of substance. It is an echo chamber effect dressed up as research. In the column I share a few ways to counter it, like looking at information all at once instead of piece by piece, deliberately challenging your own view, or discussing your decision with someone who sees things differently. My favourite takeaway is simple. The moment you feel unusually confident in a financial choice is probably the moment to pause and try to prove yourself wrong.
Preet Banerjee
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