Authority bias comes when we put an extreme trust on authority, expert of a particular field. We just follow what they say and do not doubt on their opinions.
Whenever you are about to make a decision, think about which authority figures might be exerting an influence on your reasoning. And when you encounter one in the flesh, do your best to challenge him or her.
Business – Corporate has authority bias as founder, CEOs, directors pass an order and everyone follows it. If someone has viewed with proper data, facts and logic then also cannot challenge their order.
Successful business houses have the practice to invite better ideas from different employees group or department so that they get better insights for improving efficiency and operation.
Investment – Comeback to the stock market, we follow many of the celebrated investors, fund managers and we consider them as an authority. We do not argue on their opinion, investments thesis. We also tend to follow what they are doing. This behaviour is very rapidly affecting the majority of the participants. If Mr XYZ has bought ABC stock then the majority of us do not think anything and just run to buy ABC.
We should work on the preparation of process & checklist from listening, reading each guru, books etc. The process should be on what suits our temperament. It may be possible that few aspects may not be accepted by our process what authority says then we should not to do. Evolve from this bias can help us with becoming an independent investor rather than being depending on the authority.
This entire series will be review with various examples from books which are “Thinking, Fast and Slow” and “The Art of Thinking Clearly“.