Being told what we want to hear

The goings-on in Canberra did remind me of one of the more important parts of investing.

A man looks surprised as a woman whispers in his ear.

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I haven't written much here in the past week or so.

Partly, I've been busy writing for our Motley Fool Member Centre. Partly, I've been head-down-bum-up researching investment ideas.

And partly some of the 'big picture' stuff that's been occupying my time and attention didn't really feel like the sort of thing many of my readers would appreciate (largely Stage 3 tax cuts, a structurally unbalanced Budget, and a lack of commitment to policy in the national interest in Canberra).

On the latter of the three, consider yourselves lucky to have avoided a ranty monologue (but if you're interested – and perhaps masochistic – my Twitter feed has all of the gory details of my views on the big picture stuff).

One positive: the goings-on in Canberra did remind me of one of the more important parts of investing: leaving your biases at the door.

Yes, many of those who would profess to have a view on 'policy' are really just (poorly) dressing up their own self-interest by pretending that it's about the policy. That's not a shock (though I am regularly disappointed).

But investors can suffer a similar fate. Sometimes it is pure self-interest. Other times a more insidious foe: our own preferences and outlook.

I've written before about a mate who would never invest in the shares of a particular brewery, because he didn't like one of their beers. Never mind that millions of schooners were poured and stubbies consumed every year.

I heard from a correspondent that he wouldn't invest in a given retailer, because his experience as a customer was poor.

Others won't invest in some companies because they disagree with the ethics of the potential investees.

On the other hand, some people are so in love with a manager, company, brand or product, that you can't hold them back (and a Tuesday afternoon tip of the hat to the Elon Musk fan club! Thanks for reading.).

Is there anyone else I'm yet to offend? Probably not.

But hold your offence for just a minute.

See, I'm not saying you should ignore your experience as a consumer or customer. Or that you should betray your personal ethics. And god forbid I say Elon isn't the Chosen One. (Sorry.)

Indeed, these things can be important contributors to finding a great investment.

Finding Steve Jobs in 1985 would have been very rewarding.

Recognising that mainstream beer's heyday was over could have been a key insight.

Having a terrible – or great – experience with a company can be instructive.

These can all be useful.

Or not.

The key is to make sure you treat each data point not as an opportunity to confirm your existing views, but to add to your dataset.

The brewer could be on the way out… or it could be about to score with a new craft beer.

The retailer could be terrible… or you just hit a particular store on a bad day.

That charismatic CEO could be the next Steve Jobs… or the next Bernie Madoff.

That ethical flaw could be the downfall of the company… or immaterial to its future profitability

You get the idea.

It's harder said than done, of course. We all love to have our biases confirmed. We love the friend who badmouths our cheating ex. We want to be told we look good in that shirt. In short, we want our ego stroked, and little is more effective in that department than confirmation bias.

A rude retail worker? We'll latch on to any similar stories and tend to ignore the good ones.

A rockstar CEO and a rising share price? I'm a genius and she can do no wrong.

Bono doesn't like the business either? I knew I was in good company!

Turns out, Tesla's share price is down 16% this month, cigarette company Altria is one of the best performing stocks of the past 50 years and, well, if I see one more new craft IPA…

No, a month doesn't tell us anything. Altria's past 50 years may not, either, as smoking rules continue to be tightened. And just once I'd like to see craft lager, dark ale or pilsner on tap!

(The latter is a bit of a lie. I'm pretty partial to Tooheys Old or Guinness. Someone else can drink the craft beers.)

My point is that an investor's job is to look at the market for the product, and not be too self-referential. Your experience with a company or product can be a helpful starting point, but don't let it cloud your judgement.

I don't use, ahem, a lot of hair care products. But the market is huge. I'm partial to Australian Country music, but I wouldn't be buying up shares in music labels any time soon, hoping to make ten times my money when the rest of the country finally discovers it.

(Another aside: I took my young bloke to the Tamworth Country Music Festival last year and had a ball. Go, if you get the chance!)

But as for investing? Be dispassionate. Hate something that everyone else loves? Might still be a worthwhile investment. Love something that everyone else hates? Tread carefully, love can be blind.

Now, if you'll excuse me, it's back to Twitter to set the world to rights. At least it saves me yelling at the clouds!

Fool on!

Motley Fool contributor Scott Phillips has positions in Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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