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Aug 31, 2021

Introducing: Bullshift

by John DeGoey
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John De GoeyThis article introduces John De Goey’s forthcoming book “Bullshift: Optimism Bias in the Financial Advice Business”, which is due to be released in 2022.

We need to get this out of the way immediately: the title of the book is intentionally cheeky. Let’s face it, the added ‘f’ simply gets the people browsing in bookstores to do a double take. I also figured that since Harry Frankfort had already written a book called On Bullshit, I’d need a fresh take on the subject. The thing is this: the title works. People understand the portmanteau intuitively. Shifting people’s perspectives to be more bullish is something the personal finance industry has been doing for our entire investing lifetimes. To explain the word in slightly more technical terms, Bullshift can be neatly defined as “an insidious form of optimism bias in the financial advice business”.

The tendency clearly exists. What is less obvious is what, if anything, should be done about it. This book is an investigation of applied behavioural economics, which is just the psychology of economic decision-making. Why do we act as we do when those actions often run contrary to what would be expected from traditional economics? This book hopes to improve our self-awareness to explain, and hopefully, correct the psychological traps that anyone might otherwise fall into. The book is not written “for investors” or “for advisors”. It is for everyone. That’s because we all fall prey to Bullshift and we all have biases, and that, in turn, leaves us vulnerable to having our predispositions impact our decisions.

Optimism bias is the primary bias in this story, and it often hides in plain sight and goes largely undetected—precisely because it is an unconscious bias—a genuine predisposition, but there are others. It needs to be stressed that with almost all biases, we are often oblivious to their existence, even though they exist and persist and resist our willingness to acknowledge it. Optimism bias is pervasive, yet few seem to notice. It comes pre-installed as nearly everyone’s default attitudinal setting. To put things bluntly, the Bullshift problem remains largely unaddressed because it goes almost totally undetected. Of course, there’s no actual “problem” if markets are mostly going up or if downturns are short lived and tolerable. In that case, the bias is actually helpful and there is nothing to rectify. For generations, this has paid off handsomely for investors—until now, perhaps.

Being optimistic makes us more gullible. No one is deliberately trying to con anyone else. You might say that Bullshift simply makes people more susceptible to manipulation, except that it’s not really manipulation if both parties are unaware of what they are doing, and the advisor is as much a victim as the client. Some words that are near synonyms for Bullshift include: impressionable, neglectful, undiscerning, and indiscriminate. To be emphatically clear, Bullshift occurs everywhere and all the time. It’s in our DNA. There is no plot to alter how people think if everyone shares the same attitudes in the first place.

To make matters worse, the unprecedented policy response to the COVID-19 crisis has exacerbated the problem and made people feel bulletproof. Investors have come to believe that central bankers and national governments have all but eradicated protracted bear markets because of their demonstrable and ongoing commitment to prop up markets and keep the bulls running. The phrase “don’t fight the fed” was never so widely accepted as conventional wisdom as it was by the middle of 2021. The stock market hitting record highs in mid-2021 wasn’t so much a sign that investors were not worried about inflation as it was a sign that investors were not worried that central banks were willing and able to step in and save the day. As a result, investors seemed willing to pay high prices for stocks to hedge unchecked inflation. The twin developments of a pre-existing optimistic mindset combined with modern day public policy assurances brings us to two related questions:

  1. What if markets are less benign in the future?
  2. If they aren’t, what should we do about it?

To be fair, if in the near future capital markets are similarly quick to bounce back as they have been in the past (and especially the recent past), both questions disappear in a puff of logic. Still, they are worth asking. I find it telling that WWI was known as “The Great War” until WWII came around. Possibly similarly, “The Great Depression” could plausibly be re-branded “Great Depression I” someday. I hope it doesn’t happen, but we all need to acknowledge that it could. I don’t meet many people who are prepared to make that acknowledgement.

In the spring of 2021, three esteemed academics released Noise, a ground-breaking book subtitled: a flaw in human judgement. Noise talks about a wide variety of human quirks and inconsistencies that demonstrate how we are all less consistently rational than we might otherwise think. One of the many takeaways is that your mood effects how you think. Specifically, the better the mood you’re in, the more likely it is that you’ll allow biases to creep in.

It logically follows that if an advisor wants a prospective investor to do business with him, it would be advantageous to project an air of confidence and optimism about life in general, and capital markets in particular.

Again, Bullshift is very real—even if it is unconscious and goes almost entirely undetected. An obvious example of this is advisors telling prospective clients that the return they should expect is often implausibly high. Many well-intentioned investors give their business to the person who promises the highest return that they believe is plausibly attainable. Without even acknowledging it, both parties in this agreement are succumbing to Bullshift. Note that there is absolutely nothing overtly inappropriate happening here. Both parties genuinely want markets to rise smartly and both parties genuinely expect markets to rise smartly. Is it wrong to want what you expect and expect what you want? The behavioural economics term for that mindset is motivated reasoning.

Being optimistic also makes people more receptive to Bullshift. It lowers their defenses by making them more gullible. The world saw this play out in American politics in late 2020 and early 2021. In the run-up to the November election, then-President Donald Trump began making repeated, baseless claims that the election was rigged and that the results would not be credible unless he won. Apart from being a clear example of self-serving bias, the misinformation was repeated so often on Fox News and other conservative outlets that it became normalized and accepted by a significant portion of the populace. This, in turn, created a propaganda-like information cascade that Nazi Minister of Propaganda, Joseph Goebbels would be proud of. People began making decisions simply because other people were reaching conclusions that they were pre-disposed to agree with. Going along with your friends and associates is just easier when they say things that align with your world view. Who needs facts when everyone you know says that what you want to be true is, in fact, true?

In short order, very little new information is added to the cascade. Individuals just imitate others based on their oversimplified belief that so many people can’t possibly be wrong. In behavioural economics, this is referred to as herd behaviour. It can lead to cognitive errors on a truly massive scale, including market bubbles. Fear and greed have long been accepted as the two most obvious drivers of investor behaviour. Somewhat obviously (i.e., by definition), herd behaviour is most excessive when markets are at their most extreme levels. Irrational exuberance at the top; irrational despondency at the bottom.

The other behavioural economics term that fits neatly into this storyline is confirmation bias, the tendency to notice, focus on and give greater credence to evidence that fits neatly with our pre-existing beliefs. There’s an old joke that if you want to learn about something, you’ll “google” the term and then click on literally the first link that support and corresponds with what you thought was right before you started. People just don’t try very hard when they are given the task of repudiating a pre-existing belief.

Bullshift is subtle. If you asked most people if they “suffer” from some sort of optimism bias, they would likely deny anything of the sort. Alternatively, they might say something like, “I’m an optimist because life is too short to be anything else.” There’s even an international volunteer organization called Optimist International. The local public service club in my area is dedicated to the following mission: “By providing hope and positive vision, Optimists bring out the best in youth, in our communities and in ourselves”. This is unambiguously laudable, and I support the ethos.

As the person putting the thesis forward, I want to stress that I certainly don’t want to be seen as a curmudgeon for doing so. Throughout my life, I have consistently thought of myself as an optimist. In the large majority of instances throughout our lives, optimism has indeed been the best bias for people in the western world to have in approaching life and decision-making. That may still be the case. Then again, one of the oldest saws in the investment business is, “don’t confuse brains with a bull market”.

You’ve likely heard several people refer to their outlook as “cautiously optimistic” as a general expression of concern backed by the unwavering belief that, whatever may come, things will work out in the end. I recently posted a blog ( where I referred to myself as “cautiously pessimistic”—partially because I’m fond of wordplay, but also because I wanted to get readers to contemplate the subtle but important shift in perspective.

What matters most are the following: Facts. Evidence. Realism. Truth. I am not opposed to optimism in the least, far from it. I simply want readers to suspend whatever biases they may have (and yes, you most certainly have them—we all do). We need to stop and contemplate what behavioural economics teaches us long enough to set aside sanguine attitudes and comfortable assuredness. In the future, things may not look like the world we grew up in. Until then, life will be great, long enough for you to reflect upon what’s motivating you to have your beliefs. Wanting something to “be so” will not “make it so”. The sooner we can accept that our collective and often self-serving, self-deluding narratives are driving market behaviour more than fundamentals and factors are, the sooner we can all get on with the job of making better decisions in a better world. I’m asking you to think differently. Specifically, I’m inviting you to consciously think for yourself more often.

Here’s my ultimate proposal: you won’t refer to me as a pessimist, and I won’t refer to you as Pollyannish. Instead, we can just go on this journey together and think of ourselves as truth seekers. Oversimplification through heuristics (quick rules of thumb) can lead to faulty conclusions. Let’s just see where this takes us.


John J. De Goey, CIM, CFP, FELLOW OF FPSC is a registrant with Wellington-Altus Private Wealth Inc.

(WAPW). WAPW is a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). The opinions expressed herein are those of the author alone and do not necessarily reflect those of WAPW, CIPF or IIROC. His advisory website is: