The halo effect and the devil effect are two sides of the same coin. These cognitive biases they have their origin in the tendency of our brains towards simplification, drawing conclusions through inertia instead of analyzing each fact separately. In this article we will see what the halo effect and the devil effect consist of, some examples and how to avoid falling into these cognitive prejudices.
What is the halo effect?
The halo effect (“halo effect” in English) is a cognitive prejudice that is caused by the tendency to judge in a favorable way specific characteristics of a subject by the general opinion that one has of him.
What is the devil effect?
The devil effect ("devil effect" in English) or reverse halo effect is identical to the halo effect but in reverse. It happens when specific aspects of a person are judged negatively if the general impression of this is negative. The devil effect is also called an inverted halo effect.
Examples of halo effect and devil effect
There are countless examples of the halo effect and the devil effect. In marketing, the halo effect usually occurs in consumers who have bought a certain product and have been satisfied with the result, causing them to value the rest of the brand's products in a particularly positive way. This is one of the reasons for Apple's customer loyalty to its products.
As for the example of the devil effect, I am going to refer to an article in the English newspaper "the Guardian" that analyzes the devil effect on Hugo Chávez. The devil effect makes very few people value the economic achievements in Venezuela in terms of health and education due to the general bad image that was had in the West of the figure of its president, Hugo Chávez *.
* Warning: With this example I do not intend to defend a corrupt and economically disastrous government like the Venezuelan one. I only mean to offer an extreme example of this cognitive bias.
How to avoid halo and devil effects?
As with all other cognitive biases, halo and devil effects are not easy to avoid. The best way to assess a specific aspect of a person is to ask ourselves the following:
Would we think the same of this particular aspect if it were someone else?
Applied to investment, we can apply this issue to companies:
Would we think the same of this data if it were from another company?
It is true that the data of a company must be made as a whole, so a good piece of information in a bad situation does not say much about a company. However, some good data can be a sign of change for the better in troubled companies. Therefore, do not get carried away by the halo and devil effects and value the data with the maximum possible rigor.