Why do we hold onto a belief, even when new information suggests it may no longer be correct?

There are moments when a decision no longer aligns with what is unfolding. New information becomes available, or outcomes begin to diverge from expectations. Yet rather than adjusting the view immediately, there can be a tendency to hold onto the original position. The discomfort is not always obvious, but it is present.

This is where cognitive dissonance begins to influence behaviour. It describes the tension that arises when beliefs, decisions, and outcomes are not fully aligned. When that tension appears, there is often a natural inclination to reduce it. Rather than changing the belief, which can be difficult, the mind may adjust how the information is interpreted.

The concept was introduced by Leon Festinger, who explored how individuals respond to conflicting information. His research showed that when faced with inconsistency, people often seek ways to restore coherence, even if that involves reinterpreting evidence or reinforcing an existing view.

One of the central insights of cognitive dissonance is that discomfort can shape perception. Information that supports an existing belief may be given more weight, while conflicting information is discounted or explained away. The goal is not necessarily to find the most accurate interpretation, but to restore a sense of internal consistency.

In markets, this can be seen in the way positions are defended after they have been taken. An investment that begins to underperform may be supported by selective interpretation of new information. Negative signals may be minimised, while positive ones are emphasised. The original decision becomes something to justify, rather than something to reassess.

What makes this difficult to recognise is how subtle it can be. The adjustment in thinking often feels like rational analysis. The discomfort is reduced, and the belief remains intact. Over time, however, this can lead to a growing gap between perception and reality.

You may notice this in yourself when you find reasons to support an existing view despite conflicting evidence, or when changing your mind feels more difficult than defending your position. There can also be a tendency to reinterpret outcomes in a way that maintains consistency with earlier decisions.

Cognitive dissonance does not change what is happening.

But it can change how it is understood.

For Further Reading

Festinger, L. (1957). A Theory of Cognitive Dissonance. Stanford University Press.