12 Cognitive Biases That Prevent People From Being Rational

12 cognitive biases that prevent people from being rational. We thought this article was very interesting and informative. This category should really be labelled value investing and behavioral finance, but if anyone did not know now they do! The two topics are connected so having them in the same category is logical (IMHO). Below is a brief excerpt, the full article can be found here.

Before we start, it’s important to distinguish between cognitive biases and logical fallacies. A logical fallacy is an error in logical argumentation (e.g. ad hominem attacks, slippery slopes, circular arguments, appeal to force, etc.). A cognitive bias, on the other hand, is a genuine deficiency or limitation in our thinking — a flaw in judgment that arises from errors of memory, social attribution, and miscalculations (such as statistical errors or a false sense of probability).

H/T http://www.valueinvestingworld.com/