Reflections on the Pervasive Nature of Confirmation Bias

Last week in my behavioral economics class, we spent time discussing beliefs and what happens when new information arrives. This process is often referred to as belief updating.

Suppose I hold a particular belief. My natural tendency is to interpret new information in light of that belief. I look for evidence that confirms what I already think.

If information confirms my belief, I am likely to accept it as is. It feels right and requires relatively little mental energy, often engaging what behavioral economists call System 1, or fast thinking.

If information disconfirms my belief, I am less likely to accept it immediately. Instead, I may scrutinize it by asking questions such as:

  • “Is the source credible?”
  • “Is this just an exception?”
  • “Is there another explanation?”

That kind of scrutiny draws more heavily on System 2 – slower, more deliberate thinking that requires more mental effort.

There is something both elegant and troubling about this. Confirming information can be processed quickly and intuitively. Disconfirming information tends to require more deliberate analysis and more mental energy. That energy differential is an important driver of confirmation bias.

Borrowing an insight from the colleague who taught this behavioral economics course before me, the implication is that even randomly generated information can strengthen an existing belief. Information that supports the belief is accepted relatively easily. Information that challenges it is held to a higher standard. As a result, a belief can persist even when new information contradicts the assumptions on which it was originally built.

This should matter to anyone making decisions, especially managers, where the consequences can be amplified across an organization. Confirmation bias can show up in how we think about a current business strategy, a marketing campaign, an app design, a call script, an operational process, or virtually any other established way of doing things.

Of course, sticking with a current process can have benefits. Testing, redesigning, and implementing new processes can be expensive. Not every idea deserves a full-scale experiment.

But what if we had a relatively low-cost way to test counterfactuals? What if we could ask: What might happen if we changed this assumption, message, process, or design?

Tools can potentially help if we use them to challenge our thinking rather than reinforce it with confirmation biases.

I have been working with students and people in industry to explore A/B-testing ideas using AI synthetic subjects at scale. Used carefully (such as validating or calibrating AI synthetic subjects versus human subjects), these tools can help us rapidly test competing assumptions, explore a wider set of counterfactuals, and search for behavioral interventions that might disconfirm an initial view. Given the pervasive nature of confirmation bias, that process can often uncover opportunities for improvement that we would not otherwise consider.

The point is not to replace judgment. It is to use AI as a tool for testing many possible counterfactuals and helping us work within our mental limits while expanding the set of possibilities we are willing to consider.

Image source: Generated using Perplexity by Stephen Shu on September 21, 2026

In a World of AI, What Value Do We Add as Humans?

I’ve spent the summer with a new lift preparing to teach the core Behavioral Economics and Managerial Decisions course at Cornell (AEM 6140). Each year it gets more challenging to think about how we view AI, education, and the future of both work and life. Crafting a policy on AI has also been challenging. Admittedly, this may be the last year I can keep the policy that I’ve had for the past two years.

My general policy has been around embracing AI, but avoiding using AI for core ideas. I believe that some key learning processes and skills development are lost by delegating to AI in the wrong way.

The larger question I pose though is not around AI policy. Rather, I see the key question as what value do we expect to add as humans? This is the type of education, environment, and support structure that I aspire to build toward.

With that as backdrop, I wrote down five things that I will share with students today in the classroom. We add value by:

  • Orchestrating
  • Thinking holistically and linking ideas
  • Using system-level thinking
  • Persuading
  • Understanding and re-defining what it means to be human

“With AI, not of AI” (term coined with help of ChatGPT to solidify my thinking)

After I drafted my thoughts, I did query Perplexity.ai to try and gather thoughts expressed by others. I see some similarities and differences.

Upon further reflection, I viewed my concept of human value-add as being more organic and aspirational (i.e., something that we’ll need to practice and improve over time as opposed to achieving a milestone).

The Behavioral Way Summit II Madrid

I’m excited to be part of The Behavioral Way Summit II Madrid!

The second edition of the most important Behavioral Science event in Spain and Latin America will take place on 14th and 15th November. It promises to be an unforgettable experience!

Given my heavy involvement in industry and the application of behavioral economics, I’ll focus on some key things companies should consider as they either start or look to implement the next phase of behavioral initiatives. What have we learned in the past 15 years in the commercial space about taking science to the field? What are some business mindsets that worked when the field was younger but are no longer appropriate? What are some mindsets from business management that need to be added to make applied behavioral science even more effective?

My Future Self Podcast on Democratizing Nudges


Podcast timeline by YoutubeDigest:

  • 00:15   Exploring the democratization of nudges to enhance organizational awareness and accessibility of behavioral science, shedding light on various models and ethical considerations.
  • 05:02   Initiating a behavioral finance institute and delving into the intersection of psychology and economics, highlighting the importance of understanding behavioral economics in navigating financial decision-making.
  • 09:26   Analyzing the multifaceted aspects of retirement planning, including decomposing the problem, aligning goals, and acknowledging uncertain outcomes, while tracing the emergence of behavioral science from foundational work to its current application in various sectors.
  • 14:04   The expansion of behavioral decision-making groups in academic institutions has led to increased labor in the market and the emergence of boutique consultancies, advocating for the incorporation of behavioral economics principles across various business sectors, suggesting a gradual implementation approach starting with anchor areas to foster organizational learning and maximize effectiveness.
  • 18:41   Addressing retirement preparation as a marathon with potential hazards, emphasizing the importance of simplifying choices, enhancing financial literacy, and reframing savings concepts, while advocating for pension system adaptability to accommodate evolving work dynamics and longevity.
  • 23:27   Advocating for a balanced approach in encouraging smarter savings behaviors, addressing the diverse perspectives on longevity and health, advocating for increased research and collaboration, and fostering leadership that prioritizes sustainability and inclusivity in pension systems.
  • 27:56   AI, like ChatGPT, presents opportunities for automating tasks but requires human oversight to mitigate biases, particularly in decision-making processes where AI may inherit similar biases to humans, highlighting the importance of careful framing and consideration of alternative explanations.
  • 32:39   AI platforms exhibit strengths and weaknesses, offering insights into when to integrate them into decision-making processes while also emphasizing the importance of democratizing access, raising awareness, and simplifying usability to ensure broader adoption and equitable benefits for all.

Jump-Start Books for Consulting Project Classes

I teach a couple of consulting projects-type courses at Cornell. One is a Grand Challenges capstone-class for Dyson undergraduates in helping companies and organizations address one or more of the 17 UN Sustainable Development Goals. The other is a flagship-project class that is part the Masters in International Management program as part of the global CEMS Alliance, and it involves student collaborations and exchanges with 33 other top business schools and universities.

Each of these cohorts has different team compositions, problem statements, and situations to address for their client. Projects can involve diverse topics like addressing sustainability of the food supply chain and manufacturing capacity, promoting economic development and greater social equality in another continent, customer and market fit of a new product, workforce evolution given Gen Z, or marketing, branding, and product strategy for an international company.

Although projects are diverse and hard to find common bases of foundational knowledge, I have found it helpful to have bite-sized jump start material to help students get grounded. As part of the core, I have provided excerpts from my own book on bread and butter consulting concepts (for free), references to The So What Strategy for consultative communications, and a breathtaking short pocket reference to Scrum. These are all quite short books as evidenced by the spine thickness. People don’t have a lot of time to read given the heft and time pressures of projects.

Given that quite a few projects involve customer discovery, market fit, and/or diverse constituent interviews, I have decided to also add “Talking to Humans” as part of the reference books that I’ll draw from for these courses. It is a quick read book that can be completed in 1-2 hours. And it can be a great book to go back to for quick reference before doing any qualitative customer / product research.

Tao of Chao Podcast on Behavioral Insights and Decision-Making

Below is lightly-edited, partial summary of the podcast as generated by the AI tool, YoutubeDigest which uses ChatGPT technologies.

00:01 – 25:36

TL;DR: This episode of “The Tao of Chao” podcast features Dr. Stephen Shu, a specialist in behavioral economics. The discussion explores how our decision-making processes are influenced by biases and cognitive frameworks rooted in our primal survival instincts. With the increasing volume of information and opinions available, our brains struggle to process it all, leading to echo chambers and confirmation biases. The conversation highlights the importance of recognizing our fast and slow thinking capabilities and encourages reflective thinking to counteract these biases and make better decisions in an ever-changing world.

25:39 – 50:49

TL;DR: A thinking tool called “prospective hindsight” can be used to explore different outcomes by imagining a future event and examining the steps that led to it. Avoidance in decision-making can stem from complexity, trade-offs, or a reluctance to consider negative outcomes. While it is impossible to predict the future accurately, a detailed planning process that considers both logic and emotions can help make more informed decisions. In investing, scenario planning and understanding the transmission mechanisms of events can improve decision-making, but it is essential to be aware of biases and actively seek counterfactual information. The abundance of data does not guarantee better decision-making, and the importance of information depends on the context and the significance of the decision.

Reflections on Hong Kong UST DBA Program Session

This past week I gave a talk to students part of the Hong Kong UST DBA Program regarding implementing behavioral finance initiatives in companies. The talk covered some case studies that varied in different dimensions relative to the degree of integration of science and degree of organizational complexity. I have often emphasized that organizations that want to implement behavioral initiatives need to consider dimensions of Goals, Research, Innovation, and Testing (GRIT) among other behavioral-specific considerations (e.g., choice, information, process, and personalization architecture).

However, one of the most striking parts of the discussion for me surrounded the notion of ethics, which has come up a number of times in my discussion with students.

Although I was only able to touch on two angles in my HKUST talk, for the core classes I teach, I offer at least three different lenses for thinking about behavioral economics and ethics: 1) goal alignment between the company and the end user, 2) nature of behavioral intervention design (e.g., how much control does it exert), and 3) moral foundations and considerations (e.g., care/harm, fairness).

There are clearly other considerations that could come into play (e.g., to what extent comfortable sharing behavioral intervention thinking publicly; legal versus ethical 2×2). However, it is good that students think through ethical considerations. Things aren’t always as black and white as we’d might like, so it’s important to have multiple lenses through which one can evaluate situations.