Self-serving bias is a psychological phenomenon where individuals tend to attribute positive outcomes to their own personal attributes and abilities. However, any negative outcomes are blamed on external factors or situations beyond their control.
This bias allows people to maintain a positive self-image, protect their self-esteem and cope with failures.
Distorted Perception of Reality:
For instance, if an individual achieved a good result on a trade, they may attribute it to their intelligence and good analysis. But, if they had a bad result from a trade, they may attribute it to the difficulty of the market or the incompetence of their teacher. In this way, self-serving bias can lead to a distorted perception of reality and can affect how individuals interact with other people.
Self-serving bias can manifest in various ways such as:
– taking credit for success but deflecting blame for failures,
– overestimating one’s abilities and underestimating the contributions of others, and
– interpreting ambiguous information in a way that confirms one’s pre-existing beliefs.
Self-serving bias can lead to negative consequences such as:
– low empathy, and
– a lack of accountability.
It is important to be aware of this bias and actively work to overcome it by seeking out feedback, considering multiple perspectives, and taking responsibility for one’s actions.
Managing Self-Serving Bias:
1. Take a step back:
When evaluating your successes and failures, take a step back and try to view the situation objectively. Ask yourself if you would have evaluated the situation the same way if it happened to someone else.
2. Consider alternative explanations:
When evaluating a situation, consider alternative explanations for why things happened the way they did. Ask yourself if there are other factors that could have contributed to your success or failure.
3. Seek feedback:
Ask others for feedback on your performance, and listen to what they have to say. This can help you gain a more objective perspective on your abilities and efforts.
4. Focus on the process:
Instead of focusing solely on the outcome, focus on the process you used to achieve the outcome. This can help you recognize the role that your own abilities and efforts played in the outcome.
5. Acknowledge your limitations:
Be honest with yourself about your limitations and areas where you could improve. This can help you avoid overestimating your abilities and underestimating the role that external factors play in your success or failure.
By adopting these strategies, you can help yourself avoid self-serving bias and gain a more objective perspective on your successes and failures. Attending Wealthwise Education’s ‘Invest for Success’ Program will be helpful in managing the impact of self-serving bias when investing in the stock market.
Stock Market Investor Education:
‘Invest for Success’ – is a 4 week program starting with a 2 day in-person workshop + 4 x 1 hour online sessions over 4 weeks. Call us now for more information +61.2.9488.9900.
Read more: Top 5 Cognitive Biases Overview