Tags: Google | choice | invest | oil

Google Is Costing You Money

By    |   Wednesday, 11 February 2015 07:56 AM

If you think Google and Facebook are free, think again. They can cost you dearly.

We live in an ambiguous world. None of us knows which stocks will go up next week, or what the Federal Reserve is planning, or if the government economic stats are right. The best we can do is make educated guesses.

The scientific method is to gather evidence, form hypotheses and test them. You might think modern information technology would make this easier. In some ways, it does, but it also creates obstacles.

Consider what happens when you look for information on Google (GOOG) or another search engine. Their systems consider all your other online activities and try to give you the answers you seek. Google leads you to what it thinks you want to know — and hides everything else.

The same happens on Facebook (FB). Your news feed gives you updates from people you "like." Those who you do not "like" simply disappear, leaving you in your own personal echo chamber. Ditto for Twitter (TWTR), though there we "follow" people instead of liking them.

This is a real problem. We spend most of our time consuming media that tells us what we want to hear. We don't get opposing views unless we actively seek them, yet opposing views are critical to making good decisions.

Our court system depends on an adversary process. So does scientific research. Even the Catholic Church uses a "devil's advocate" in canonizing saints. You could say our entire economy is a giant trial system. We constantly evaluate our choices against other possibilities. It is how we make good decisions.

This process stops working if we never see the "other" choices . . . but that's what our technology is doing to us.

If you were an energy stock investor about this time last year, you saw many stories saying crude oil would stay at $100 forever. You didn't see anyone predicting it would fall to $75 or even lower.

Is that because no one predicted it? Not at all. The Barron's cover story of March 31, 2014, said we were entering "an era of $75 oil." Had you read it, you might be a lot richer today, but you probably didn't. Google, knowing you were bullish on oil, confirmed your bias by showing you stories that were also bullish on oil.

How do you get around this? Employ your own devil's advocate. When you make an investment decision, look for people who say it is a bad idea. Seriously consider their arguments. This is hard because we don't like admitting we might be wrong, but there's a good chance we are.

Get out of the echo chamber now, while you still have some money left.

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If you think Google and Facebook are free, think again. They can cost you dearly.
Google, choice, invest, oil
Wednesday, 11 February 2015 07:56 AM
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