Recency Bias (or: You’re Running Buggy Software)

Felt a little uneasy with the market wobbles over the last while? Maybe some quiet anguish watching your numbers dip into the red? If so, welcome back to an old friend, recency bias, because that’s almost certainly what you’re experiencing.

Step back and look at your portfolio over the last 12, 24, 36 months and you’re on a solid upward trajectory. That’s genuinely good news. But you’re not thinking about that, are you? Your mind is stuck on whatever percent you lost last month. It’s not logical, but that’s how we slightly too clever apes are wired.

So what actually is recency bias? Simple. It’s the tendency to overweight recent events when making judgements. Sound familiar?

Here’s a useful way to think about it. Your brain is software. Impressive software, admittedly, but old. We’re talking about code that was largely written on the African savanna somewhere between 50,000 and 200,000 years ago, optimised for a world of immediate physical threats and fast moving predators with pointy teeth. It hasn’t had a meaningful update since. What you’re experiencing right now, that low level dread, that urge to “do something”, is a legacy feature running exactly as intended. It’s just running in completely the wrong environment.

The specific bug is this: the system is designed to weight recent events heavily. If something bad happened near the watering hole yesterday, assume it might happen again today. Don’t go back to the watering hole. This was, in its original context, genuinely excellent advice. The problem is that “bad thing happened recently” now triggers the same subroutine whether you’re being stalked by a slightly peckish lion or watching a portfolio dip three percent in a volatile March.

And it gets sneakier. The software doesn’t just amplify the recent past. It extrapolates it forward. A bad week becomes a bad year in your head. A volatile month starts to feel like the new normal. There’s no popup warning you that this is happening. No error message. Just a quiet, confident, completely wrong projection running in the background while you contemplate what’s happening.

The patch, unfortunately, can’t be downloaded. But there is a work around. Zoom out. Literally, open your portfolio app, switch the chart to the maximum time range, and just look at it. You’re essentially forcing your buggy software to load a larger dataset than it instinctively wants to process. History is not a perfect guide to the future, but it is a reliable antidote to the present. Markets have survived worse than whatever is currently filling the headlines. They will probably survive this too.

The other thing worth remembering? Everyone else is running the same buggy software you are. The market is the output of millions of people experiencing the same glitch in real-time. Which means the moment of maximum collective dread, the point where it genuinely feels like something has permanently broken, is historically quite a good time to be invested, not a good time to be heading for the exit.

You’re not broken for feeling this way. You’re just running slightly old fashioned code in a world it wasn’t designed for. The trick isn’t to fix the software. It’s to know when not to trust it.