The Hindu Business Line : Blame it on others!

I have the privilege of interacting with intelligent students, as I also deliver investment-related courses at some well-known business schools in the country. What is striking is that they suffer from self-attribution bias, especially after a class quiz or a test. What is this bias?

Take a typical class — some brilliant students, large number of average ones and some whose brilliance can be used elsewhere. Those who do well in the quiz attribute their performance to hard work. But who perform miserably have a reason — they blame the course facilitator for poor delivery!

Self-attribution bias

Self-attribution bias, thus, refers to attributing good outcomes to skill and bad outcomes to bad luck or outside (exogenous, as economists call it) factors.

All of us suffer from such a bias. Take cricketers. Often, a visiting captain praises his players after an away-test victory but blames poor umpiring, bad pitch or poor weather conditions for losing a game. Or consider the stock market. A typical investor will congratulate herself for picking the right stock if it moves up, but blame “market conditions” if the stock declines.

We should not suffer from this bias if we are rational, as classical economics assumes us to be. For rational beings do not commit the same mistakes often. Yet, we do. This prevents us from learning from our past mistakes. Researchers argue that we suffer from this bias because our brain works hard to make us believe that we are doing the right thing.

Need to introspect

So, when a student attributes his failure to the course facilitator or an investor to the market conditions, both may genuinely believe it to be so! One way to overcome this bias is to introspect. An investor, for instance, can keep a journal of all trades and analyse past mistakes. That way, she can attempt to overcome such mistakes and improve future performance.

Remember, good judgment comes out of experience. And experience comes out of bad judgment. But for that, we need to learn from past mistakes, not blame it on others.

(The author is an investment strategist.)

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