Liking bias says that the more we like someone, the more inclined we are to buy from or help that person.
We like attractive people, have similar interests as us, having similar origin as us, similar personality as us and we like them.
When a salesperson a language similar to us, similar habits, hobbies then it has a higher chance to crack the business deal. Our mind tells us that the person is similar to us and that creates comfort in our mind.
Business – Advertisers also uses such concepts in their advertisements and they select different celebrities as a brand ambassador because people like them and that creates liking bias. Nowadays, advertisements telecast under various regional languages which can impact more to viewers’ mind.
Investment – When we give complement to others then it works like a magic. And slowly person starts liking us. Many companies put forward information which we generally like to see such as shareholders friendly management, huge growth potential coming forward, good dividends, asset-light business model, competitive advantage etc. and that creates liking in our mind towards the company. And once we start liking the company, we are not able to see the negatives of it. Rather than get trapped, we should see everything independently and need to be suspicious with everything.
Nowadays, annual reports are getting prepared by agencies that know about what investors like and what investors want to hear, so they print those things only. More people like the company, the more valuable it becomes. For overcoming this bias, we need to check everything mentioned in the annual report supported by data. For example – if they have mentioned assets light business model then they must have higher assets turnover, higher RoA, lower depreciation expense, etc.
This entire series will be review with various examples from books which are “Thinking, Fast and Slow” and “The Art of Thinking Clearly“.