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Posts Tagged ‘Art of thinking clear

Handle Expectations with care

Expectations are intangibles, but their effect is quite real.

There is no such thing as “a bad guess, my mistake” in the financial analysis market.

One lousy cent lower than analysts’ forecast and the shares take a plunge.

Many companies bent over backward to meet financial analysts’ predictions. To escape from this Terror, companies started to publish their own estimate labelled “earning guidance

The companies shot themselves in the foot as the analysts were heeding only these internal forecast, and studying more closely the companies performance and errors to boot.

Closely linked to personal expectation  is the placebo effect.

Placebo are pills, treatments and therapies that are unlikely to improve health, but do so anyway.

Apparently, one third of patients who are given placebo get better because the biochemistry of the brain is altered by motivation.

Obviously, if you have a dead brain or a damaged brain (Alzheimer) then placebo has no effects whatsoever.

Teachers who are told that the next  bunch of students have high IQ levels will do their best in order reach the performance expected from these students. These average students actually improve a lot at the end of the year.

Raise your expectations and those you care for in order to increase motivation in matters that you can control.

Best to anticipate surprises in order to better shield yourself from their nastiness.

Read The Art of Thinking Clear

 

This Endowment effect

Why do we consider what we own to be more valuable as soon as we get possession of?

Though we bargained hard considering the “property” as far less valuable than what it is?

Why do you tend to cling to things that can be sold at good prices, and end up cramming every empty space in your house and feeling terrible that you have no more space for new acquisitions?

We are better at collecting properties than at casting them off

And we want to charge more than we are willing to spend on acquired objects.

It looks like Emotional attachment systematically adds a few zeros to your selling price.

For example, if group A of people are given mugs to take home or to sell, and another group B who are Not given mugs are asked to buy mugs from group A.

We could assume that 50% of group and 50% of group B would be willing to trade.

It turned out that far less than 50% in both groups were willing to trade. Why?

People in group A hiked the market price and people in group B wanted to buy below the market price.

Associated with Endowment tendencies is Winner’s Curse in auctions.

You keep bidding higher than the market value simply because you feel that you are participating in the ownership, even if you don’t get the property.

Warren Buffet warned “Just never go to auctions. Period” Why?

Most often, the winner in the bidding contest game ends up going bankrupt pretty soon.

For example, if you were unlucky and were allowed to go through all the stages of a selection process, the hurt in the final rejection is much bigger than if you were rejected outright in the initial phases.

Endowment is a broader term for inheriting properties. Most the 10% richest people earned their wealth from inheritance and they control 80% of the world wealth

Read: “The Art of Thinking Clear”

 

 

This Ultimatum game and Last Chance offer fallacy

Either the negotiation succeed or you lose everything?

This ultimatum game is the manifestation of the “Theory of Mind“, a set of how others feel and think concepts.

When the other party is an “abstraction”, we cannot see or hear, the share they are offered drops on average from over 30% to below 20% because the feeling of unfairness gets out of the picture.

When the two parties meet face to face the sense of fairness plays a big role in reaching satisfactory end games.

When the parties decide to have a mediator (in order not to meet face to face) the negotiation drags on simply because one party had decided not to reach an agreement.

Statistics don’t stir us, but people do.

The preemptive wars of 2014 by Israel on Gaza has upset people around the world because pictures and videos were disseminated and were covered by social platforms and web sites: The story was given a face.

The Last Chance behavior is linked to our fear of regret: We need to quickly fall in line in order to conform with the community.

We feel more sympathy for the passenger, who by a fluke of an accident or circumstances, decided to board at the last minute the plane that crashed than with the remaining passengers.

People who failed to take action feel more regret than those who acted and were wrong in their decision.

Remember that willpower is like an electric battery: If depleted, your future challenges will falter if you don’t replenish your battery by good sleep and good relaxation techniques.

Read: The Art of Thinking Clear

This Scapegoat tendency of Single Cause fallacy

Tolstoy humored the gravity cause of the fallen apple. He enumerated two dozen possibilities of why an apple does fall “And no thing is the cause”

“People are Not the masters of their own destinies” as Aristotle proclaimed. There exists a complex network of influencing factors.

People are the masters of what Fortune and coincidences made them to take advantage of, making the best of what come to them and what they came to be.

Genetic predisposition, upbringing, education, levels of hormones, brain structure, attractive features, stature, social status… all contributed to what you are and were capable of achieving.

For example, unprofitable companies don’t get corporate loans in order to improve.

Though, the more loans the company is extended the wider the rate of returns, the bigger cash cushion, and the better they can stay afloat and much longer than the companies who are refused loans. And the financial world claim that the profitable and best managed companies are those considered best equipped to receive loans.

The company that went bankrupt do not show up in any study sample group of how these “debt-ridden” companies may fail.

Suppose that due to ill side effects you decide to take an “important” pill irregularly.

This group of  “irregular taking” patient is categorized as “irregular intake” group in evaluation studies of a drug.

The subjects who vanished from the sample (the “irregular intake”) are the ones who should have made the difference in evaluation studies  according to proper procedures and protocols.

The well-intentioned group who carried out the prescription according to procedures and protocols as a minority of all the patients who suffered from side effects. But the evaluation wants to hide the side-effects part of a drug.

Everything in nature and human interactions are intrinsically connected and trying had to discover a single cause is an abnormal behavior.

The Via Negativa concept is “We know things through what it is Not” and yet, we consistently focus on what is only significant.

Warren Buffet said: “I learned to avoid difficult business problems

Read: The Art of Thinking Clear

This “Because”: The magical justification term that does wonders

Nothing is more frustrating than being kept in the dark.

Any lame statesman that uses “because’ is good enough to dissipate our endemic frustrations

For example, “Excuse me. I have 5 pages to copy. May I go before you because I have to make a few copies?”

Apparently, over 90% of people in the front line will let you advance them, especially if you are attractive and have a jovial look.

As if the one in the front line didn’t mean to make copy at the copy machine, and yet the person is gracious enough to advance him for your lame a nd stupid reason.

Actually, someone in the line who has heard you excuse will revolt, unless the first in line is ready to join the end of the line.

Try it “because” it might work after all.

Like to cut the line at the cash register in a supermarket “because’ you are busy and in a terrible hurry.

Or you are in jam on the highway. Simply because you read a sign stating “We’re renovating the highway for you”, that’s good enough reason to dissipate your frustration or lower substantially the level of your uneasiness.

As if you cannot see the repair done, or if this renovation could not be meant for car drivers.

Or this throw-away reason “Flight 5678 is delayed by 3 hours due to operational reasons”. Good enough justification and need not go to the desk to find out what “operational” exactly means.

Even if the fluctuation in the stock market is less than 0.5%, a common white noise occurrence, the financial commentator has to give powerful reasons for it that verges on calamitous central decisions.

“Because” is the grease to most wheels of human interactions. Such as:

Because I haven’t got around to finish the task yet

“Because I prefer to separate black from blue colored clothes to wash”

Read “The Art of Thinking Clear”

 

Fallacies, Biases, Illusions, effects, trendencies, errors… and “The Art of Thinking Clear”

By Rolf Dobelli

This book is a simple guide to “less irrational” behaviors and tendencies, as we get aware of the hundreds of biases that are ingrained in our behaviors.

I have reviewed two dozen of these 99 listed biases and added my comments.

“It isn’t what we know that gets in our way. It is what we believe” Physicist  Harold Puthoff

“We’d rather be roughly right than precisely right” Lord Keynes

“Faced with the choice between changing our mind and proving there is no need to do so, everyone gets busy on the proof” (John Kenneth Galbraith)

1. Survivorship Bias

2. Swimmer’s body illusion

3. Clustering illusion

4. Social proof effect

5. Sunk cost effect

6. Reciprocity

7. Confirmation

8. Authority

9. Contrast effect

10. Availability

11. Getting worse before getting better fallacy

12. Story bias

13. In hindsight illusion

14. Overconfidence bias

15. Chauffeur knowledge

16. Illusion of control

17. Insensitive Super-Response tendency

18. Regression to mean fallacy

19. Outcome bias

20. Paradox of choice

21. Liking bias

22. Endowment effect

23. Coincidence fallacy

24. Group think effect

25. Neglect of Probability

26. Scarcity Error

27. Base-rate neglect

28. Gambler’s fallacy

29. The Anchor

30. Induction

31. Loss aversion

32. Social loafing

33. Exponential growth

34. Winner’s curse

35. Fundamental attribution error

36 False causality

37. Halo effect

38. Alternative path

39. Forecast illusion

40. Conjunction fallacy

41. Framing

42. Action bias

43. Omission bias

44. Self-serving

45. Hedonic treadmill

46. Sel-selection bia

47. Beginner’s luck

48. Cognitive dissonance

49. Hyperbolic discounting

50. Because Justification

51. Decision fatigue

52. Contagion bias

53. Problems with averages

54. Motivation crowding

55. Twaddle tendency

56. Will Roger phenomenon

57. Information bias

58. Effort justification

59. Law of small numbers

60. Expectations

61. Simple logic fallacy

62. Forer effect

63. Volunteer’s folly

64. Affect heuristic

65 Introspection illusion

66. Inability to close doors

67. Neomania

68. Sleeper effect

69. Alternative blindness

70. Social comparison

71. Primacy and recency effects

72. “Not invented here” syndrome

73. The Black Swan

74. Domain Dependence

75. False-Consensus

76. Falsification of History bias

77. In-group, out-group biases

78. Ambiguity aversion

79. Default, standard option effects

80. Fear of regret

81. Salience effect

82. House-Money effect

83. Procrastination

84. Envy vs jealousy

85. Personification

86. Illusion of paying attention

87. Planning fallacy

88. Zeigarnik effect

89. Illusion of skills

90. Feature=positive effect

91. Cherry picking tendency

92. Single cause fallacy

93 Intention to treat errors

94. News illusion

Note 1: As you read these 100 tendencies to commit errors of judgment, try to add other systematic biases to the list

Try to add a title or a short statement that succinctly describe the topic.

Note 2: The exigencies of living lead us to stick to most of our biases and fallacies. We tend to procrastinate acting on our well-intentioned decisions that could correct our ill-conceived methodology to run our life.

Note 3:  To better comprehend these types of behavioral errors or shortcomings, the best way is to try various taxonomies (categorizing) for these biases, fallacies… that lead to errors

1. You may define these terms and delimit how they differ and sort them accordingly

2. You may sort them according to cognitive, social, evolutionary perspectives

3. Sort them according to your field of interest so that you rely on a shorter list when reviewing failed projects and erasing the biases that were taken care of.

4. Group them for correlation or seemingly contradictory behaviors

 

 

 

The Cold rational concept of Irrational behaviors

Why most of our decisions and reactions seem to be pretty much irrational?

A Cold attempt was undertaken to remind ourselves of a few facts and realities to be taken into consideration:

1. Thinking is not a “pure process”.

2. Thinking is prone to error and this realization affects everyone

3. Highly intelligent people fall prey to the same cognitive traps as common people

4. And errors are Not randomly distributed.

5. Mankind systematically err in the same direction

6. Our mistakes are mostly predictable and be repaired and avoided in slight degrees

7. Most of our organs function predictably, but our brain keep experiencing lapse after lapse

8. Thinking is a biological phenomenon: It does not follow an abstract mathematical logic.

9. We are still a hunter-gatherer species, but living in a totally different environment

10. Our new environment is getting increasingly complex, interdependent, and man-made functions and facilities are exacerbating the frequency of faulty behaviors

11. Evolution has stopped optimizing the behavior of this hunter-gatherer species in this new environment.

12. Our brain is designed to reproduce (persuade) rather than search for the “truth”

13. We tend to construct a reason for our compulsive decisions (intuitive reaction). a justification for a predetermined conclusion.

What is to be done?

1. When in your “circle of competence” let your intuition lead your decisions and reactions. You had invested more than 10,000 hours on your talents and skills and you can now rely of your bodily reactions.

2. Otherwise, do your due diligence to apply the hard, slow and high energy consuming process of the rational thinking on your projects and serious decisions.

Think clear and go through the long list of behavioral biases, fallacies, illusions, myths.. and start eliminating one error after another from the list of prone error tendencies.

Rational thinking might not give you a correct resolution, but again, you have been vaunting the superiority of mankind brain over other species who have far better abilities and capabilities than us in many domains.

Repeat the rational thinking process as you invested in acquiring your talents.

Note 1: Read “The Art of Thinking Clear”

Note 2: I have realized that I prefer to extend only one opinion on an issue, the best of my opinions and never give choices. Why?

1. If the opinion is found correct by the reader, the better off he is. And the reader was not disturbed and confused by contradicting alternatives and could assimilate the single opinion.

2. If the opinion is “proved” flawed, it is a marvelous opportunity for the reader to reflect deeper on the topic, reach a proper alternative and incorporate it in his unique worldview model

“Mission Accomplished” effect? And why you fail to tend to the subsequent difficulties in the mission?

Mission Accomplished? And why you refuse to own the subsequent horrors?

We tend to seldom forget uncompleted tasks and they tug at our consciousness until we give them our attention saved in our mental list.

As we decide that the mission is accomplished and this list of tasks are erased from our memory.

The case of a waiter serving flawlessly a large party without a notepad and when dinner is over, the waiter was unable to recall any face in the party.

There are interesting outliers to that trend called the Bluma “Zeigarnik effect”

The condition that relaxes this effect and conserve the list of tasks in memory while focusing on the main goal of another mission is to create a detailed “study plan”.

For example, you are focusing on a upcoming major exam and you need to stay clear and free from anxiety. What can you do?

Outstanding tasks gnaw at us only until we install a clear idea in our mind of “how we will deal with them

A good plan of actions suffices most of the time to relax our mind from the list of uncompleted tasks.

Consider dividing your problem into more than 20 step-by-step  tasks and write them down. Otherwise, it is futile to have your mind rest and be as clear as water.

This process does not exclude the urgent need to look up similar projects and be advised on the multiple pitfalls that surround well-planned projects.

Place a notepad by your bed and jot down outstanding tasks and how you will tackle them.

If these ideas for relaxing the mind in order to achieve a mission are great for individuals, why governments and public institutions don’t apply these techniques?

Why Bush Jr. had to claim “Mission Accomplished” in occupying Iraq on a aircraft carrier, wearing pilot outfit, when the mission had just started for “establishing a democratic state” in Iraq?

Bush Jr. was expressing the true mission of his administration: Occupying Baghdad and controlling the flow of oil.

All the previous statements about installing a democratic system in Iraq and eliminating weapons of mass destruction and… were packs of lies and throwing dust in the eyes of the US citizens and world community.

Why Bush Jr. had to quickly erase the Iraqi problems from his mind and appoint a bunch of nutcases and nitwits to resolve the multiple problems mushrooming with every day of occupation?

And Bush Jr, basked in the  increased approval rating until the bodies started to be flown in, and Bush realized that the mission was far to be accomplished back home.

Or it is because the mission was done outside the US borders that US presidents fail to follow up on problems they cook up and spread around the world?

Mission Accomplished? And why you refuse to own the subsequent horrors? A totally unstable Iraq, millions of babies with birth defects, million of displaced people… and lately the ISIS phenomenon

As Commander in Chief, the president of the US must own the problems he creates around the world.

Note: Read “The Art of Thinking Clear”

 

The plague of “default” and “standard” option effects

New Jersey and Pennsylvania States presented options for two car-insurance policies.

New Jersey advertized the cheaper policy as “standard”

Pennsylvania advertized the expensive policy as standard.

And people in both States selected the advertized “standard” policy as their favorite choice.

Default effect for the “standard” settings in the technology gizmos is a warm and soft pillow.

How many of you take the trouble to customize your gadget (iPhone) for data usage, appl synchronization, phone encryption, loudness of camera shutter…?

Government give citizens standard options and the citizens fall prey to the standard even though there is no restriction to their freedom of choice.

When donating organ after death is the standard option or the default option, decision to donate increased two fold to 80%.

Given the choice between trying something new and the “tried-and tested” option, we opt for the second alternative.

That is why conservative citizens will always be the majority.

And how this “Status-quo” bias work?

1. Sheer convenience

2. Loss aversion tendency. Loss upset us twice as much as similar gains.

3. Renegotiating existing contracts prove very difficult tasks

4. Each concession you make weighs twice as heavily as any you receive.

And how change can come?

1. By changing the “default setting” and standard options so that your behavior is changed over time.

2. Similarly, by selecting for the citizens the standard option that is the fairer of all options.

3. By reforming laws and stating that they are standard options in the highly developed nations.

Note: Read “The Art of Thinking Clear”

 The Will Roger phenomenon? Stage migration of averages, patients, IQ…

Will Roger stated that the migrating people from Oklahoma (during the dust bowl period) to California have raised the IQ in both States. How that?

I am trying to figure out this logic that is not based on any study

I guess Will Roger thought that the thousands of ignorant and the less educated people from Oklahoma who migrated to California have left a pool of the better educated in the State and thus the IQ must have been raised.

But how these same immigrants raised the IQ in the State of California?

I conjecture that Roger was alluding to the preponderant theory that white people have higher IQ than Hispanics and Black people of the same education level.

Consequently, the people in California enjoyed an infusion of higher IQ white people.

Any other interpretations?

 

Other kinds of average stage migration effects.

Cancer patients are classified in 4 stages of seriousness, with class 1 as curable cancers patients.

With increasingly new and advanced diagnostic techniques in medicine, many previously found “healthy” patients are being screened with minuscule tumors.

Consequently, the addition of relatively healthy patients in cancer “stage one” prognosis increases the group’s average life expectancy.

There is no medical success in this case: Just mere stage migration from the most treatable group to the worst rated group 4.

 

It is easy to raise the averages in many cases, but the end result is the same.

For example: suppose you have two branches of a car dealership in the city. Branch A has 3 salespeople selling one, two and three cars respectively per day

Branch B has 3 salespeople selling 4, 5, and 6 cars respectively per week

You hire a consultant to increase the average car sales in the 2 branches.

The consultant transfers salesman #4 to branch A. The average in branch A jumped from  2 cars to 2.5.

The average in branch B jumped from 5 to 5.5.

The overall car sales remained the same. Only the averages changed to give the illusion of performance.

Switcheroo strategies don’t change anything overall: a simple creation of illusory improvement.

Note: Read Rolf Dobelli “The Art of Thinking Clear”


adonis49

adonis49

adonis49

December 2021
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