Story Time: A Lesson in Confirmation Bias

I’ve always loved the sentiment, ‘I never lose. I win, or I learn’. We always love to celebrate our wins but it is undoubtedly the losses that present the greatest learning opportunities. This is the story of one such experience for myself that remains to this day, a bitter pill to swallow.

It has served as a pertinent reminder that despite every warning under the sun and every evident red flag, I was still capable of falling into the ‘this is different, it won’t happen to me’ trap and having confirmation bias lead the way. I like to think I’m quite self-aware regarding my inherent cynicism and contrarianism and perhaps this tale will offer some insight as to why.

It starts with my first ever NFT project on Ethereum which I shall not name for legal reasons (it’s basically dead in the water anyway). From the very beginning, the premise should have raised alarm bells. Mint the NFT. A percentage of mint revenue is pooled together and placed into ‘various yield earning strategies’ to pay out regular rewards to holders.

‘But this was different.’

The project was being touted by a reputable crypto community as well as various people I believed to be reputable as well. Immediately the confirmation bias started to kick in. An article was released on a website called BehindMLM, designed to expose potential ponzi schemes, that took aim at this particular project and some of the founders involved.

‘But this was from an author who clearly had a bone to pick and basically calls anything with an MLM structure a ponzi.’

And off we went. For a while there it was going along very sweetly. Regular rewards were the perfect weekly treat. They were more or less supporting a gap year that I was in the middle of. On one occasion, I used my  rewards to buy stationery for a school that I was volunteering at in Kenya. It was simply incredible. In fact, I was getting so involved in the community that I eventually became a moderator in the Discord.

Then things started to turn.

Certain behaviours and communications between the moderators and the founding team had me asking a lot of questions with not many concrete answers. Some things just weren’t sitting with me well. Eventually I quit, but I didn’t sell out of my holdings.

‘It was just a difference of opinion on how the team could have communicated. I know I’m a tad OCD and ultimately I just wasn’t a good fit for the way they wanted to do things. It was not a reflection of the project itself.’

Then everything finally came to a head. One day, an announcement was made that the rewards were being put on hold until further notice.

‘That’s alright though cause these things happen.’

I was very fortunate because over the course of the project’s life, I had adopted a very aggressive de-risking strategy involving trading a predictable range that the NFT floor price was bouncing within. By the time this was all happening, I was already risk-free and comfortably sitting in profit. Very few people were so lucky.

As the period of no rewards dragged on, the behaviour started to change. People started asking questions and they were met with bans and accusations of causing FUD. I immediately sold what I had left, but a large portion of the community were still holding on. Many were even taking the opportunity to accumulate more.

‘Stop being ungrateful and let the team cook,’ they would say.

Now, enormous allegations are being levelled at some of the project founders. I was lucky. Others were not. Looking back now, it should have all been so obvious and it was quite alarming how much confirmation bias carried me through until I eventually snapped out of it.

Nowadays, my thesis is this:

We inherently want to believe the best in people or things, but we also need a healthy dose of caution. Ask questions. Assess values. Assess motives. Keep an open mind.

Understand just how easily we can get caught in confirmation bias. Wanting to believe something is true has a weird way of messing with your head and we start making excuses for why ‘this time it’s different’.

In a space where there is always someone looking to capitalise on a moment of naivety, some cynicism is essential to keeping you out of trouble because it really can happen to anyone.

The moment you think you’re invincible is the prime time for someone to target you.

Thank you for reading my TED Article.