Why Certainty Leads to Overconfidence and How to Fight It

In this episode, Ben, Cameron, and Dan are joined by Ted Cadsby, former executive at CIBC, author of The Power of Index Funds, Closing the Mind Gap, and Hard to Be Human. Ted brings a rare combination of experience in both finance and cognitive psychology, having helped introduce index investing to Canada before turning his attention to how human thinking itself often misleads us. Ted shares inside stories from his time at CIBC—how he tried to make the bank an indexing leader in the late 1990s, the pushback he faced, and why he still believes so deeply in indexing today. Then, the conversation turns to human cognition: why our brains evolved for simplicity, certainty, and emotion, and how those traits can sabotage both our portfolios and our peace of mind. From "greedy reductionism" and "certainty addiction" to emotional overreaction and competing selves, Ted unpacks the five cognitive design flaws that make it hard to be human—and how metacognition and mindfulness can help us overcome them.

Key Points From This Episode:

(0:04) Introduction to the Rational Reminder Podcast and hosts.

(0:18) Cameron's story about rediscovering The Power of Index Funds and reconnecting with Ted Cadsby.

(2:21) How Ted brought index investing to CIBC and tried to make the bank a leader in indexing.

(5:58) Why assessing active managers taught Ted about randomness, noise, and the illusion of skill.

(8:42) The moment Ted "saw the light" on indexing—and why randomness, not market efficiency, is the real obstacle for active managers.

(12:54) How Ted tried to implement index investing at CIBC and the cultural resistance he faced.

(15:05) The goals of The Power of Index Funds (1999) and how he tied indexing to human behavior.

(18:49) How his indexing push created internal conflict at CIBC and ultimately led to his departure.

(23:23) The influence of John Bogle and Vanguard on Ted's mission to bring indexing to Canada.

(26:59) Why he's still passionate about indexing, and what worries him about private equity.

(31:44) How human cognition and philosophy led him from finance to exploring how we think.

(34:46) The "Big Five" cognitive design flaws that shape human decision-making:

1. Greedy reductionism – our urge to oversimplify complex systems.

2. Certainty addiction – craving the feeling of knowing, even when we're wrong.

3. Emotional hostage-taking – overreacting and ruminating.

4. Competing selves – inner conflicts between present and future selves.

5. Misguided search for meaning – overextending our need for purpose.

(44:11) Why modern life amplifies these flaws and how System 1 (automatic) and System 2 (deliberate) thinking play into it.

(48:00) The human superpower: metacognition—our ability to think about thinking.

(49:57) How mindfulness and a "meditative stance" help us use metacognition daily.

(53:57) Why knowing your biases isn't enough—emotional regulation is the real challenge.

(56:27) How to recognize triggers for deeper reflection and System 2 thinking.

(1:00:34) How systems thinking and better questions can combat our reductionist tendencies.

(1:05:57) Why our addiction to certainty fuels overconfidence and poor decisions.

(1:08:43) How humility, probabilistic thinking, and skepticism can make us wiser investors and humans.

(1:11:39) When to listen to emotions—and when to treat them as cognitive red flags.

Links From Today's Episode: Meet with PWL Capital: https://calendly.com/d/3vm-t2j-h3p

Rational Reminder on iTunes — https://itunes.apple.com/ca/podcast/the-rational-reminder-podcast/id1426530582. Rational Reminder Website — https://rationalreminder.ca/

Rational Reminder on Instagram — https://www.instagram.com/rationalreminder/

Rational Reminder on X — https://x.com/RationalRemindRational Reminder on TikTok — www.tiktok.com/@rationalreminder

Rational Reminder on YouTube — https://www.youtube.com/channel/

Rational Reminder Email — info@rationalreminder.caBenjamin Felix — https://pwlcapital.com/our-team/

Benjamin on X — https://x.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/

Dan Bortolotti — https://pwlcapital.com/our-team/

Dan Bortolotti on LinkedIn — https://ca.linkedin.com/in/dan-bortolotti-8a482310

Cameron Passmore — https://pwlcapital.com/our-team/

Cameron on X — https://x.com/CameronPassmore

Cameron on LinkedIn — https://www.linkedin.com/in/cameronpassmore/

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com)