Herbalife Ltd. (HLF)

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Ackman Is a Great Example
Of a common cognitive bias....being overconfident. The confirmation bias - the tendency to give too much weight to information that is consistent with a prior belief and too little weight to information at odds with the prior belief - was also a likely cause of his failure to change his opinion and his short position.

Though his long-term record of annualized returns of >20% per year is admirable he came to believe too much in his own ability and too little in the role that good luck may have played in his past performance.

Very few people have the ability to avoid the many cognitive flaws that afflict most of us. What this has revealed is that Ackman does not have a sound process at the base of his investment decision making.

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