ABSTRACT

People exhibit the bias when they assume that everyone else knows what they know. This bias has a name which strikes one as immediately paradoxical. Knowledge is power, and knowledge can only be a good thing, we are inclined to retort. A more moderated form of the Curse of Knowledge may involve failing to adjust sufficiently for the different abilities of others. Moreover, otherwise healthy subjects who display a ‘hostility bias,’ tending to see others as harbouring aggressive tendencies, also exhibit Theory of Mind deficits. The primary interest in this bias will be the extent to which it can cause investors to be over-confident in their own abilities and risk too much too soon in their investment career. Conformity Bias is illustrated in two of the most famous experiments in social psychology. The single most powerful argument against succumbing to Conformity Bias is that it prevents one from engaging in contrarian investments.