We’ve often heard that our decisions are biased. Our brain, supposedly rational, can easily be tricked by shortcuts: overconfidence, confirmation bias, herd behavior, or loss aversion.
These “biases” are not bugs: they are misguided adaptive mechanisms. Biologically, our primate brains evolved to make fast and effective decisions in an uncertain world. The problem is that when it comes to investing, these same mechanisms can turn against us.
NOVEMBER 11, 2025
BY REMY
Abstract :
This article explores how cognitive biases influence individual investment decisions and how collective intelligence can mitigate these biases to improve outcomes in complex financial environments. Drawing on behavioral finance research, case studies, and empirical experiments, it demonstrates that diverse groups consistently outperform isolated experts by pooling perspectives, balancing errors, and revealing hidden assumptions. By illustrating practical applications in investment committees and group decision-making, the article emphasizes that collaboration, cognitive diversity, and structured debate are essential strategies for navigating uncertain markets. Ultimately, it argues that thinking with others - rather than alone - enhances decision quality, reduces errors, and leverages the “wisdom of crowds” in finance.
📑 Table of Contents
- When Our Brain Distorts Market Reading
- Collective Intelligence: A Framework to Think Differently
- A Concrete Example: Managing a Tech Portfolio
- The figures say it all
- Thinking Together in an Uncertain World
- Leveraging the Collective for Better Decisions
1. When our brain distorts market reading
Take a simple example: you buy a stock at €100. A few weeks later, it drops to €80. You hesitate to sell, thinking, “It will go back up.” This is anchoring bias: you remain mentally fixed on the purchase price, as if it defined the “true” value of the asset.
Another example: after several successful investments, you feel more confident—maybe a little too confident. You increase your positions, convinced you’ve found “the right method.” This is overconfidence bias. According to a famous study by Barber & Odean (2001), individual investors who trade the most are also those who underperform the most: on average, 5% lower returns per year.
The French Financial Markets Authority (AMF) observes the same phenomenon among French retail investors: during periods of volatility, many multiply their trades, often in a panic, which deteriorates their long-term results.
These biases are not logical errors. They simply reflect the way our brains manage uncertainty: they seek reference points, cling to fixed anchors, and prefer to act to regain control rather than wait for the fog to lift.
“All of man’s misfortune comes from one thing, which is not knowing how to stay at rest in a room.” — Blaise Pascal, in Pensées
👉 Good decisions take time; bad ones cannot sit still.
2. Collective intelligence: a framework to think differently
Faced with increasing complexity and an explosion of knowledge, no individual can master everything, making collective intelligence indispensable for solving complex problems.
Collective intelligence can mitigate individual cognitive distortions. Its most striking effects are often seen in empirical applications. For example, numerous experiments estimating quantities - such as the weight of an animal or the number of candies in a jar - have been conducted over the past decades, notably by former Morgan Stanley analyst Michael Mauboussin or economist Jack Treynor. In these experiments, the group’s average estimate consistently outperformed individual estimates.
Collective intelligence doesn’t eliminate biases but allows us to make them visible and balance them by averaging errors and neutralizing extremes.
For example:
- When several investors debate a scenario, each brings their own perspective. One focuses on macroeconomic trends, another on technical signals, and a third on behavioral factors. This cognitive diversity helps cover blind spots.
- In an investment committee, simply presenting your thesis to others forces you to clarify assumptions and justify numbers. This limits confirmation bias, which makes us focus only on information that supports our opinions.
- Open discussion also allows the group to identify collective emotions—fear, euphoria, impatience - and recognize them for what they are: human reactions that need to be cross-checked before informing market signals.
Economist Scott Page (Princeton, 2017) shows that in complex environments, diverse groups outperform isolated experts. The reason? The group fosters what Page calls “cognitive diversity,” meaning the variety of ways of reasoning within a group. This diversity produces better solutions than the sum of individual expertise because it multiplies perspectives and broadens the range of potential solutions.
Scott Page’s “diversity theorem” has direct implications in finance: many examples, including financial markets and collaborative platforms, show that aggregating diverse judgments (the “wisdom of crowds”) often leads to more accurate estimates and better investment decisions.
3. A concrete example : Managing a Tech Portfolio
Imagine you manage a tech stock portfolio alone. You follow the news closely, read quarterly reports, and are convinced that the AI sector will dominate. You increase your positions.
In a group of investors, this conviction would be challenged by other perspectives:
- Someone might point out that current valuations already incorporate a lot of optimism.
- Another might note that tech cycles are often followed by corrections.
- A third might highlight regulatory or energy risks related to AI.
Debating doesn’t eliminate your enthusiasm but balances it. You move from an individual belief to a more nuanced collective assessment.
This is exactly what collective intelligence aims for: not absolute truth, but reducing the group’s average error.
4. The figures say it all
- According to Morningstar (2023), investors’ emotional behavior - buying too late, selling too early - reduces average returns by 1.7% per year compared to the funds’ own performance. Interestingly, this rate is very close to the annual fees charged by a fund. In other words, a finance professional doesn’t earn from the opportunities they offer you but by protecting you from yourself.
- Management teams that practice collective decision reviews (Deloitte, 2022) improve their risk-adjusted performance by +15% over three years, notably through better discipline against biases.
- According to Capital (2025), 80% of French investors are influenced by at least one cognitive bias, such as overconfidence or herd behavior.
5. Thinking together in an uncertain world
Investing is not an exact science. It relies on narratives, forecasts, and judgment. In this context, the strength of the collective does not lie in consensus but in diversity of viewpoints.
Learning to doubt, listen to others’ reasoning, and test your own assumptions is as much a form of mental hygiene as it is a financial strategy.
Our brains are not designed to know everything, but to learn from each other. Alone, we reason; together, we understand. In an uncertain world, the one who thrives is not the person who thinks they are right, but the one who knows how to think with others.
6. Leveraging the Collective for Better Decisions
The lessons from behavioral finance and collective intelligence are clear: the most effective investment decisions are rarely made in isolation. By embracing collaboration, cognitive diversity, and structured debate, investors can mitigate individual biases, detect early signals that would otherwise go unnoticed, and refine their strategies in a way that balances risk and opportunity.
A practical approach to leveraging the collective includes:
- Structured forums for discussion: Investment committees or social networks where participants share reasoning, data, and hypotheses, allowing errors and assumptions to be challenged constructively.
- Anonymized or blind forecasting: Protecting the independence of judgment to prevent herd behavior and overreliance on perceived authority.
- Aggregation mechanisms: Using algorithms, prediction markets, or voting systems to synthesize insights and generate actionable signals from diverse opinions.
- Continuous learning loops: Documenting decisions, outcomes, and reasoning to foster collective memory and improve future decision-making.
The advantage of thinking collectively is not that it guarantees absolute certainty—it doesn’t—but it reduces the average error, increases resilience to market volatility, and creates a shared pool of knowledge that grows over time. In essence, collective intelligence transforms individual limitations into a system-wide strength. Ultimately, leveraging the collective is more than a strategy: it is a mindset. Investors who learn to think with others, rather than just think for themselves, cultivate a sustainable edge, turning the “wisdom of crowds” into a tangible advantage in the pursuit of smarter, more resilient investment decisions.
📚 References
- Barber & Odean, Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment, Journal of Finance, 2001
- Morningstar (2023), Mind the Behavior Gap
- AMF (2024), Retail Investor Behavior
- Scott Page (2017), The Diversity Bonus, Princeton University Press
- Deloitte (2022), Collective Decision-Making in Asset Management
- Capital (2025), Savings: These Cognitive Biases That Undermine Your Returns and Prevent Good Investing
- Risks (MDPI, 2023), Cognitive Biases and Investment Decisions