Cognitive bias can be a pitfall for many investors, and it’s unlikely we can ever fully escape its clutches. If we wish to see the world more clearly, our best chance is to create a culture of curiosity, openness and a genuine appreciation for intellectual honesty.
Julia Galef discusses this concept in The Scout Mindset. She argues that we can boil down our way of evaluating the world into two different attitudes: we are either soldiers who defend what we believe, or we are scouts who survey what is out there.
By default, we spend a lot of our time in our ‘soldier mindset’, where we see ideas as winners or losers. As soldiers, we are primarily motivated to defend our beliefs against arguments and evidence that might threaten them.
In contrast, the ‘scout mindset’ offers an alternative to our combative nature. A scout looks at new information not as a means of vindicating an existing belief but to establish the truth. Ultimately, a scout mindset is motivated by a desire to develop a more accurate picture of reality and what is correct, even when the truth could be unpleasant or inconvenient.
Scouts are curious. They relish the opportunity to gain new insights and are more interested in getting it right rather than being right.
Scouts are open to being wrong and are intrigued by data that counters their beliefs.
Finally, scouts are grounded. They don’t take it too personally when they are wrong, and don’t connect being right with their self-worth.
As investors, it’s fairly obvious which camp we would like to be in. Our work requires us to make a lot of judgment calls, and the more we can avoid distorting our perception of reality, the better our decision-making will be.
We can also apply this framework of thinking when assessing companies and management teams. Soldier mindsets might serve executive teams well in situations where they have deep experience and prior expertise, but in a rapidly evolving world where we have a constant stream of new information, this blinkered approach could hold decision-makers back.
Signs of a scout mindset might therefore indicate an ability to exercise better leadership. Leaders who can embrace a scout mindset may also be better positioned to accept new information and make better choices.
As actual investors, the ability to see things clearly, particularly over the long-term, is far more valuable to us than short-term victories. The abundance of opportunities that we have today makes being able to map out our reality accurately and honestly more critical now than ever before. A scout mindset can help us to do just that.