The Art of Thinking Clearly

Rolf Dobelli wrote The Art of Thinking Clearly without even thinking of it. It started as a list of flaws he noticed in himself and others around him. Recognizing that fixing most of these flaws was a lot easier with awareness, he compiled a list of common flaws in thinking and the biases behind them. At first he shared the list with a few friends who found it super useful. Eventually he decided to publish and monetize the list.

The Art of Thinking Clearly has been a great read so far. I haven’t finished it yet, but I'm eager to share my progress with you. So, I'll complete the review in installations 😊

A couple of weeks ago, I wrote about why we shouldn’t focus on our weaknesses READ HERE, this is different. Rolf's referring to systematic errors in judgment that stop us from thinking clearly and making mistakes such as overestimating instead of underestimating our strengths and the fact that the thought of losing somethings causes stronger emotions than the thought of acquiring similar things.

You might already be a clear thinker or not. Either way you’re in the right place 👍🏽 🙂

There’s so much wisdom in this post, I promise it will be worth your time. 7 mins max

Leave me a comment if you don’t learn at least 5 useful things you can easily implement today or if you do.

--Here are the first 20 cognitive errors he addresses --

Survivorship Bias: people systematically overestimate their chance of success. Guard against doing this by frequently visiting memories of once promising projects, investments and careers, which are now dead. Sounds harsh but it's effective.

Swimmer’s Body Illusion: swimmers appeal to people because of their well-built streamlined bodies. However, it could be the fact that they have certain bodies that makes them good swimmers and not the other way around. According to Rolf “how their bodies is designed is a factor for selection and not the result of their activities". This also applies to the future income projections used to attract new MBA students. The fact is people who pursue MBAs are different from others. The income gap has nothing to do with the MBA itself but with different characteristics of people who pursue MBAs.

Clustering Illusion: we are oversensitive to patterns. Be skeptical when you think you see a pattern. If you think you have discovered a pattern, first consider it pure chance. If it seems too good to be true, find a mathematician and have the data tested statistically. And if the crispy parts of your pancake start to look a lot like Jesus’s face, ask yourself, if he really wants to reveal himself why doesn’t he do it in Times Square or on CNN? (p.s. I don’t really agree with this point because Jesus can do whatever he wants including revealing himself in a puddle if he wants to😏)

Social proof: think about this for a second. How is a product better simply because it sells the most units? The media and advertising industry are a few of the industries that take advantage of the fact that individuals feel they are behaving correctly when they act the same as other people. 🔑-- be and think for yourself.

Sunk Cost Fallacy: one of my favorites! Rational decision making requires one to forget about the costs incurred to date. Regardless of how much you have already invested in a project or relationship (sunk cost and time in either scenario) when considering future investments, your decision should be based on assessment of future costs and benefit. For any finance enthusiast, think of when you’re calculating the net present value of an investment you tend to ignore all past investments. This is the same idea. But it's harder in real life because we're human and emotions get involved.

Reciprocity: “if someone approached you in the supermarket to offer you free anything refuse their offer- unless you want to end up with a refrigerator full of stuff you don’t even like”. Keep in mind Economics 101: there is no such thing as a free lunch. Even if you’re not paying cash for the product, time is money and the time you spend on “free things” is valuable. Rolf also gave an example of going to dinner at his neighbor's even though he did not want to. Then he felt the need to invite them to dinner at his house the next week. The cycle continued even though he did not particularly enjoy their company. This chapter argues that there is not such thing as a free meal because of reciprocity.

Confirmation Bias: the tendency to interpret new information so that it becomes compatible with our existing theories, beliefs and convictions. In other words we filter out any information that contradicts our existing beliefs aka disconfirming beliefs. In order to avoid falling into this trap, consciously and actively look for disconfirming evidence.

Confirmation Bias (2): completely ignoring new information in an attempt to preserve the current story line. Imagine a reporter writing that “Google is successful because they nurture a culture of creativity.” According to Rolf, rarely would the writer seek out information on struggling companies that also nurture a culture of creativity or successful ones that have a rigid culture. The writer would not do this because it does not support their story.

Don’t Bow to Authority: supposedly, authorities pose 2 main problems. Their track records are nothing to write home about. Exhibit A, there are about a million economists in the world, none of which could predict the financial crisis in 2008. Even worse, when it happened they had no idea how it would play out. Honestly, when ever you ask an economist what the effect of something is, the answer is almost always “it depends/it is uncertain” in one variation or another. If you’ve heard of the Milgram experiment, you can skip this part. Basically, a psychologist ran an experiment where he instructed a group of participants to administer volts of electric shocks to other people. The experiment showed that a majority of people caused others extreme pain out of obedience to authority figures. Lesson – before you make a decision think about which authority figure might be exercising an influence on your reasoning. And when you encounter one in the flesh, do your best to challenge him or her.

Contrast Effect: the reason behind this is the fact that we have problems with absolute judgements. Therefore, we see something as beautiful, expensive or large if we have something of the opposite nature readily available to compare it with. This affects our decision making process because in real life an object that was $100 and now costs $70, shouldn’t be more valuable to us than one that costs $70 without a discount. But it is. And this is the basis for the discount store business model.

This clip from the movie 'Hall Pass' is a pretty good example.

According to Rolf people who are looking for romantic partners should never go out in the company of their super attractive friends because people will find them ugly. They should alone or better yet take two ugly friends. LOL sounds a bit shallow and extreme.

Availability Bias: due to the availability bias, we think dramatically, not quantitatively. This means that we overestimate the risk of a terrorist attack and underestimate the possibly of suffering from depression even though the latter is more likely to be the case. In addition we make decisions based on available information as opposed to relevant possibly harder to find information. Good news is you can remedy this by spending time with people who are different from you, who have different experiences, expertise and probably different information.

The It-will-get-worse-before-it-gets-better Fallacy: “Imagine you’re the president of a country and you have no idea how to run it…you predict ‘difficult years' ahead. So you ask your citizens to ‘tighten their belts’ and then promise to improve the situation. LOL. Sounds super familiar. Rolf recommends that instead of looking into thin air waiting for things to get worse before they inadvertently get better, people should have clear and identifiable goals which progress can be measured against.

Even True Stories are Fairy Tales: according to the information theory we should be able to hold on to factual information better than non-factual and elaborate stories. But instead we are more attracted to stories which give those pieces of information ‘meaning’ and make us feel something. For this reason, everything from the news to personal events are shaped into stories instead of a string of factual information. However, stories distort the quality of information. Dobelli, calls for cynicism here. He suggests that we should always question the sender, their intentions and what they are trying to hide when receiving news.

Why you should keep a diary – the hindsight bias is a dangerous one because in “retrospect, everything seems clear and inevitable”. If Alex succeeds at becoming a designer in 5 years, during an interview she’s likely to overestimate what she thought the probability of her success would be in the future. The hindsight bias results in overconfidence and could lead to one taking on more risk than they should. To curb this, we should keep a diary of our predictions, so that in a few years we can look back and see that we didn’t actually know what was going to happen in the future. Unless you're psychic.. but do those even exist?

Why you systematically overestimate your knowledge and abilities: the overconfidence effect measures the the difference between how much people think they know and how much they actually know. Think about how many times a long term project is completed under budget and earlier than expected. The answer is almost never. This happens because people overestimate their abilities. In conclusion, be aware of this bias, be wary of predictions especially from experts and opt for the pessimistic option; it's probably more realistic.

Chauffeur Knowledge: there are two types of knowledge:

a. Real knowledge – the type that people who have dedicated a lot of time and effort to a topic possess e.g. seasoned journalists and researchers

b. Chauffeur knowledge – knowledge from people who have learnt to put on a show e.g. news anchors .

Warren Buffet coined the term ‘circle of competence’. His advice is that you should stick to topics and competing in matters that lie in your circle of competence which are matters that you understand intuitively. This is where you have an edge and have the possibility of winning.

You Control Less than You Think: Gamblers who pick their lottery numbers, other gamblers who throw their dice as soft as possible when they want low numbers, and football fans who passionately gesticulate in front of the TV. What do they all have in common? They control less than they think. Apparently we’ve been sold dreams! The pedestrian crossing button doesn’t actually do anything but give us the illusion that we control when the traffic stops, which makes us more patient. Also the ‘door open’ and ‘door close’ elevator buttons are sometimes not connected? ​

​Anyway, knowing that there is only so much we can control, we should focus on the key things we know with certainty we can influence.

Never Pay Your Lawyer by the Hour: there are 2 key things to note here. Behaviours change rapidly when incentives are involved. Also people respond to the incentives not the intention behind them. In essence we shouldn’t pay for professional services by the hour because it acts as an incentive for them to take longer. Negotiate a fixed price in advance instead.

The Dubious Efficacy of Doctors, Consultants and Psychotherapists: Dobelli questions how effective the services these people offer actually is. He believes that periods of highs and lows eventually even out due to the regression to mean. This mean that a man who is having back pains on and off, can one day visit a chiropractor. The next day there's no pain but the the following day it’s back. He can attribute the pain-free day to the chiropractor’s service but it’s most likely just he way it would have been anyway. Like a manager who sends demotivated employees on a course. The next time he checks motivation levels, the same employees won't be at the bottom. However, this could be the case because they returned to their natural motivation levels and not necessarily due to the course they attended. So, just be aware that there are highs and lows and in the natural course of events there is a regression to mean.

Outcome Bias: Never judge a b̶o̶o̶k̶ decision by its outcome- we tend to assess decisions based on their results instead of the decision process. This is wrong because a bad result does not necessarily mean a bad decision. If your decisions are rational, don't be quick to give up if you fail the first time. Try again using the same decision making process.

That's it guys for the first part of "The Art of Thinking Clearly" review.

Like I said earlier on, leave me a comment if you didn’t learn at least 5 useful things you can easily implement today or if you did.

If you want to read the rest of the book yourself you can buy it on AMAZON for like £8.

#bookreview #career #decisionmaking

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