Reflexivity_The What

Reflexivity refers to the circular relationship of an action and the result. For one’s rationality is so limited, the action, which first requires certain flows of thinking and decision making, will too be biased. The bias creates a gap that exists but abstract to recognize of its existence and gets more visible only in the longer term or could be seen in the shorter term by those who have less biases in thinking. This visibility also vastly depends on the degree to which the facts are distorted. Certainly, higher gap and higher distortions of facts enable people to notice it at a shorter term, but does not create an imbalance advantage unless one is more rational than the rest. The lack of imbalance advantage in this case is due to that when visibility is clearer; more people will be able to notice it hence offsetting the advantages one can get.

 A wider gap is subject to a wider correction in the market in days to come, for the distortions and biases will be noticed as it become more visible when time goes by. This will enable a clearer looking at available gap and fact which causes the call of the nature of human to act upon it. Therein, when people started to take action against the existing distortions and bias, the cycle of correction then begins.

The distortions and bias can be perceived as general blind spot when the level of rationality one has is more or less equivalent to the level of rationality another has. This standardized level of rationality is often influenced and caused by widely accepted methodology of herd’s practices or opinions and etc. Hence causing it to be unidentified albeit existing for a certain time period and continue to prevail. The bias also continues to persist with the aid of the unavailability of control and the flaw exists in one’s emotion. All these, help keeping the bias to continue to grow and widen the gap of relationship between bias and fact until the correction phase begins.

On the other hand, a means of correction does not mean that the market is utterly going on the correct path, or more precisely, to what extent or level the market should react until. As there is no doctrine for this question, a whole new bias, after minus out the standardized rationality one holds, will seize the primary positioning factor in the market, often then causing an overreaction in the market in the phase of correction to the extent of over-correction.

The new bias, like it was before, is born, but heading to the opposite direction of where it was. With the existence of new bias, or continuous bias as I perceive it to be, the equilibrium will not be reached and a new gap will exist, of course, in an opposite direction of what it was. To one’s knowledge, the theory of equilibrium is so theoretical that it hardly shows up in the reality or maybe none at all shows up. This associate not only with humans’ flawed and lack-of-control on emotions but also with cognitive biases everyone holds differently on mind, hence giving the distortion a double dose effect and continually skewing the result as it should be.

The bias will be continuous and will never end. Maybe one can state this as one of the biggest flaws in humans’ rationality that fails to evolve from the time of existence of human. However, one must and should also understands that bias has its effect not only because of the lack of existence and the ability to perform better rationality, but also due to one’s powerful emotions.

Next, the flaw in the theory of rational behavior lies at that it generally do not take into account the existence of bias as well as lack of accuracy of information and not to mention the difference in interpretation of given information. As a decision making process factors in many more other variables other that those stated above, such as emotions and environment, one can then understand that a person’s self reckoned best decision might not be the best alternative exist.

The gap in between the bias and fact exist when people do not perceive things the utmost rational way thus skewing the relationship or the outcome that it is suppose to result. The gap also widens when there are more participants, which means having more biases and the produce a more skewed result. And what is more important is there is no solution to prevent bias from assimilating one’s mind. All one could do is to improve the level of rationality one has and one can see things clearer than the others.

Reflexivity_The What