What do your patient care errors have in common with financial mistakes that may compromise your retirement? Both have their underpinnings in the psychological strategies and tendencies we call heuristics.
The word derives from the Greek term “heuriskein” for discovery, but in the medical context we frequently think of these as these as mental shortcuts. Heuristics allow us to operate quickly despite the bewildering degree of complexity and uncertainty we encounter as we operate in the world but also lay the groundwork for disaster when they lead us astray. Let’s examine two mistakes and look at what they have in common: one that led to a drubbing in the stock market and the other that cost a patient his life.
A Market Misadventure
During the height of the market boom a young internist purchased shares of an exciting new biotech company poised at the forefront of tailored medical therapy based on genetic sequencing.
The stock nearly doubled, but as he rode the wild ride of the market’s fluctuations it became evident that the overall trend had changed. Almost daily monitoring of the press releases from the dynamic CEO helped reinforce his decision to hold the stock even after the dizzying drop that changed a strong gain to a significant loss. Finally after waiting months for the stock ticker to nudge back up to his entry point, he was glumly forced to face the loss.
The field of behavioral finance suggests humans are subject to cognitive predispositions leading to predictable errors. The first heuristic failure demonstrated by the unfortunate internist in our example is that of anchoring (see sidebar, p. 35).
The initial impression of the value of the company or particular price at which he purchased the stock has significance to him but is completely irrelevant to the value of the company once events and profit prospects changed. Thus, when new information about the company came to light, the focus should have been exclusively on the future valuation without regard to the past. That didn’t happen in this case. Our hapless investor had become anchored to the original price and refused to sell as it plummeted in the vain hopes that it would rise again despite the absence of evidence that this was likely.
Anchoring bias affects all of us and is as true in medicine as it is in the markets. The first diagnosis, which seems likely as we hear a case described, can be surprisingly hard to shake even when the facts on the ground have changed.
A second human tendency we see leading to both financial and medical calamity is the desire to be right. A strong self-image (and many physicians have a strong one, indeed) is bolstered by seeking information that confirms prior beliefs.
Unfortunately this confirmation bias can also cause us to overvalue the positive press about a company we are invested in and discount or not read at all things that might change our minds. Back in the clinical environment, examples abound where a physician becomes fixed on a diagnosis and orders tests designed to confirm the initial impression but fails to explore alternatives. The more invested in a diagnosis we become, the more selective we tend to be in seeking and interpreting data to reinforce our convictions.