How Yoon made two common investing mistakes
Published: 19 Dec. 2024, 20:44
Updated: 20 Dec. 2024, 10:15
An Hyo-seong
The author is a stock market news reporter of the JoongAng Ilbo.
President Yoon Suk-yeol’s emergency declaration of martial law on Dec. 3 brings to mind the common mistakes investors often make. The first mistake is confirmation bias — the tendency to ignore evidence that contradicts one’s pre-existing beliefs while selectively accepting information that supports them. A classic example is when investors become emotionally attached to the stocks they own, ignoring numerous warning signs to sell and instead seeking only reasons to hold.
Yoon’s perplexing decision to declare martial law cannot be understood without considering confirmation bias. This is particularly evident in his reliance on election fraud allegations, which he cited as the primary justification for martial law. Once fixated on the conspiracy theories of far-right YouTubers, Yoon ignored all the rational evidence that renders such claims “a practically impossible scenario.” Even after the martial law declaration, he remains trapped in the belief that he is always correct. Instead of offering an apology, he defended his actions by insisting that “martial law was to protect and restore constitutional order and national stability” and that “declaring emergency martial law is an act of governance.”
The second mistake is failing to properly distinguish meaningful information, or signals, from irrelevant information, noise. Misinterpreting a signal as noise and dismissing it — or treating noise as a signal and prioritizing it — inevitably leads to poor decisions. For instance, some investors buy or sell stocks based on rumors or provocative arguments that stir up fear. Similarly, Yoon appears to value noise over signals. He disregards traditional media, such as newspapers and broadcast news, as well as the advice of seasoned advisers, choosing instead to be captivated by sensational conspiracy theories about pro-Pyongyang followers and antistate groups. Decisions made amid such noise are unlikely to yield effective solutions.
Yoon is now paying a significant price for his entrapment in confirmation bias. The impeachment bill has been approved, suspending him from his duties and subjecting him to investigation for instigating a rebellion. While an investor’s mistakes result in personal financial losses, the problem with Yoon’s mistakes is that they carry consequences for the entire nation. Following his martial law declaration, the Korean won’s value plummeted to 1,430 won per U.S. dollar, creating difficulties for companies dependent on imported materials. An already sluggish domestic consumption has further contracted. On top of this, Korea is facing a “diplomatic vacuum” as the world transitions toward Donald Trump’s second presidential term. Notably, Korea was excluded at the press conference held by President-elect Trump on Dec. 16.
Avoiding confirmation bias and distinguishing signals from noise require constant training, introspection and critical questioning. It also demands humility — the ability to recognize that anyone, including oneself, can make mistakes. Investors need these qualities, but state leaders must adhere to an even higher standard of discipline. In the next presidential election, voters must critically assess whether a candidate is prone to confirmation bias and what kind of noise surrounds them. Regrettably, the current political environment remains deeply vulnerable to both bias and noise.
The author is a stock market news reporter of the JoongAng Ilbo.
President Yoon Suk-yeol’s emergency declaration of martial law on Dec. 3 brings to mind the common mistakes investors often make. The first mistake is confirmation bias — the tendency to ignore evidence that contradicts one’s pre-existing beliefs while selectively accepting information that supports them. A classic example is when investors become emotionally attached to the stocks they own, ignoring numerous warning signs to sell and instead seeking only reasons to hold.
Yoon’s perplexing decision to declare martial law cannot be understood without considering confirmation bias. This is particularly evident in his reliance on election fraud allegations, which he cited as the primary justification for martial law. Once fixated on the conspiracy theories of far-right YouTubers, Yoon ignored all the rational evidence that renders such claims “a practically impossible scenario.” Even after the martial law declaration, he remains trapped in the belief that he is always correct. Instead of offering an apology, he defended his actions by insisting that “martial law was to protect and restore constitutional order and national stability” and that “declaring emergency martial law is an act of governance.”
The second mistake is failing to properly distinguish meaningful information, or signals, from irrelevant information, noise. Misinterpreting a signal as noise and dismissing it — or treating noise as a signal and prioritizing it — inevitably leads to poor decisions. For instance, some investors buy or sell stocks based on rumors or provocative arguments that stir up fear. Similarly, Yoon appears to value noise over signals. He disregards traditional media, such as newspapers and broadcast news, as well as the advice of seasoned advisers, choosing instead to be captivated by sensational conspiracy theories about pro-Pyongyang followers and antistate groups. Decisions made amid such noise are unlikely to yield effective solutions.
Yoon is now paying a significant price for his entrapment in confirmation bias. The impeachment bill has been approved, suspending him from his duties and subjecting him to investigation for instigating a rebellion. While an investor’s mistakes result in personal financial losses, the problem with Yoon’s mistakes is that they carry consequences for the entire nation. Following his martial law declaration, the Korean won’s value plummeted to 1,430 won per U.S. dollar, creating difficulties for companies dependent on imported materials. An already sluggish domestic consumption has further contracted. On top of this, Korea is facing a “diplomatic vacuum” as the world transitions toward Donald Trump’s second presidential term. Notably, Korea was excluded at the press conference held by President-elect Trump on Dec. 16.
Avoiding confirmation bias and distinguishing signals from noise require constant training, introspection and critical questioning. It also demands humility — the ability to recognize that anyone, including oneself, can make mistakes. Investors need these qualities, but state leaders must adhere to an even higher standard of discipline. In the next presidential election, voters must critically assess whether a candidate is prone to confirmation bias and what kind of noise surrounds them. Regrettably, the current political environment remains deeply vulnerable to both bias and noise.
with the Korea JoongAng Daily
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