The Art of Thinking Clearly (Rolf Dobelli, 2013)

1. Survivorship bias means this: people systematically overestimate their chances of success. Guard against it by frequently visiting the graves of once-promising projects, investments and careers. It is a sad walk, but one that should clear your mind.
2. Be wary when you are encouraged to strive for certain things – be it abs of steel, immaculate looks, a higher income, a long life, a particular demeanour or happiness. You might fall prey to the swimmer’s body illusion. Before you decide to take the plunge, look in the mirror – and be honest about what you see.
3. When it comes to pattern recognition, we are oversensitive. Regain your scepticism. 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’ face, ask yourself: if he really wants to reveal himself, why doesn’t he do it in Times Square or on CNN?
4. Be sceptical whenever a company claims its product is better because it is ‘the most popular’. How is a product better simply because it sells the most units? And remember novelist W. Somerset Maugham’s wise words: ‘If 50 million people say something foolish, it is still foolish.’
5. There may be good reasons to continue investing in something to finalise it. But beware of doing so for the wrong reasons, such as to justify non- recoverable investments. Rational decision-making requires you to forget about the costs incurred to date. No matter how much you have already invested, only your assessment of the future costs and benefits counts.
6. If someone approaches you in the supermarket, whether to offer you a taste of wine, a chunk of cheese or a handful of olives, my best advice is to refuse their offer – unless you want to end up with a refrigerator full of stuff you don’t even like.
7. What distinguished the resourceful student from the others? While the majority of students sought merely to confirm their theories, he tried to find fault with his, consciously looking for disconfirming evidence. You might think: ‘Good for him, but not the end of the world for the others.’ However, falling for the confirmation bias is not a petty intellectual offence. How it affects our lives will be revealed in the next chapter.
8. Literary critic Arthur Quiller-Couch had a memorable motto: ‘Murder your darlings.’ This was his advice to writers who struggled with cutting cherished but redundant sentences. Quiller-Couch’s appeal is not just for hesitant hacks, but for all of us who suffer from the deafening silence of assent. To fight against the confirmation bias, try writing down your beliefs – whether in terms of worldview, investments, marriage, healthcare, diet, career strategies – and set out to find disconfirming evidence. Axeing beliefs that feel like old friends is hard work, but imperative.
9. Whenever you are about to make a decision, think about which authority figures might be exerting an influence on your reasoning. And when you encounter one in the flesh, do your best to challenge him or her.
10. Bombarded by advertisements featuring supermodels, we now perceive beautiful people as only moderately attractive. If you are seeking a partner, never go out in the company of your supermodel friends. People will find you less attractive than you really are. Go alone or, better yet, take two ugly friends.
11. What was it that Frank Sinatra sang? ‘Oh, my heart is beating wildly/And it’s all because you’re here/When I’m not near the girl I love/I love the girl I’m near.’ A perfect example of the availability bias. Fend it off by spending time with people who think differently than you think – people whose experiences and expertise are different than yours. We require others’ input to overcome the availability bias.
12. If someone says ‘It’ll get worse before it gets better,’ you should hear alarm bells ringing. But beware: situations do exist where things first dip and then improve. For example, a career change requires time and often incorporates loss of pay. The reorganisation of a business also takes time. But in all these cases, we can see relatively quickly if the measures are working. The milestones are clear and verifiable. Look to these rather than to the heavens.
13. Whenever you hear a story, ask yourself: who is the sender, what are his intentions and what did he hide under the rug? The omitted elements might not be of relevance. But then again, they might be even more relevant than the elements featured in the story, such as when ‘explaining’ a financial crisis or the ‘cause’ of war. The real issue with stories: they give us a false sense of understanding, which inevitably leads us to take bigger risks and urges us to take a stroll on thin ice.
14. Keep a journal. Write down your predictions – for political changes, your career, your weight, the stock market and so on. Then, from time to time, compare your notes with actual developments. You will be amazed at what a poor forecaster you are.
15. Be aware that you tend to overestimate your knowledge. Be sceptical of predictions, especially if they come from so-called experts. And with all plans, favour the pessimistic scenario. This way you have a chance of judging the situation somewhat realistically.
16. Be on the lookout for chauffeur knowledge. Do not confuse the company spokesperson, the ringmaster, the newscaster, the schmoozer, the verbiage vendor or the cliché generator with those who possess true knowledge. How do you recognise the difference? There is a clear indicator: true experts recognise the limits of what they know and what they do not know. If they find themselves outside their circle of competence, they keep quiet or simply say, ‘I don’t know.’ This they utter unapologetically, even with a certain pride. From chauffeurs, we hear every line except this.
17. The illusion of control: Central bankers and government officials employ placebo buttons masterfully. Take, for instance, the federal funds rate, which is an extreme short-term rate, an overnight rate to be precise. While this rate doesn’t affect long-term interest rates (which are a function of supply and demand, and an important factor in investment decisions), the stock market, nevertheless, reacts frenetically to its every change. Nobody understands why overnight interest rates can have such an effect on the market, but everybody thinks they do, and so they do. The same goes for pronouncements made by the Chairman of the Federal Reserve; markets move, even though these statements inject little of tangible value into the real economy. They are merely sound waves. And still we allow economic heads to continue to play with the illusory dials. It would be a real wake-up call if all involved realised the truth – that the world economy is a fundamentally uncontrollable system.
18. Incentive super-response tendency. Never pay a lawyer by the hour. Authority reward for each parchment of the dead sea scroll found, ended up it was deliberately torn. investment advisers endorsing particular financial products. They are not interested in your financial well-being, but in earning a commission on these products. The same goes for entrepreneurs’ and investment bankers’ business plans. These are often worthless because, again, the vendors have their own interests at heart. What is the old adage? ‘Never ask a barber if you need a haircut.’
19. When you hear stories such as: ‘I was sick, went to the doctor, and got better a few days later’ or ‘the company had a bad year, so we got a consultant in and now the results are back to normal’, look out for our old friend, the regression-to-mean error.
20. Never judge a decision purely by its result, especially when randomness or ‘external factors’ play a role. A bad result does not automatically indicate a bad decision and vice versa. So rather than tearing your hair out about a wrong decision, or applauding yourself for one that may have only coincidentally led to success, remember why you chose what you did. Were your reasons rational and understandable? Then you would do well to stick with that method, even if you didn’t strike lucky last time.
21. Paradox of choice. Think carefully about what you want before you inspect existing offers. Write down these criteria and stick to them rigidly. Also, realise that you can never make a perfect decision. Aiming for this, given the flood of possibilities, is a form of irrational perfectionism. Instead, learn to love a ‘good’ choice. Yes, even in terms of life partners. Only the best will do? In this age of unlimited variety, rather the opposite is true: ‘good enough’ is the new optimum (except, of course, for you and me).
22. Liking bias. If you are a salesperson, make buyers think you like them, even if this means outright flattery. And if you are a consumer, always judge a product independent of who is selling it. Banish the salespeople from your mind, or rather, pretend you don’t like them.
23. Endowment effect. Don’t cling to things. Consider your property something that the ‘universe’ (whatever you believe this to be) has bestowed on you temporarily. Keep in mind that it can recoup this (or more) in the blink of an eye.
24. Improbable coincidences are precisely that: rare but very possible events. It’s not surprising when they finally happen. What would be more surprising would be if they never came to be.
25. The calamity of conformity. If you ever find yourself in a tight, unanimous group, you must speak your mind, even if your team does not like it. Question tacit assumptions, even if you risk expulsion from the warm nest. And, if you lead a group, appoint someone as devil’s advocate. She will not be the most popular member of the team, but she might be the most important.
26. Neglect of probability. We have no intuitive grasp of risk and thus distinguish poorly between different threats. The more serious the threat and the more emotional the topic (such as radioactivity), the less reassuring a reduction in risk seems to us. Two researchers at the University of Chicago have shown that people are equally afraid of a 99% chance as they are of a 1% chance of contamination by toxic chemicals. An irrational response, but a common one.
27. The typical response to scarcity error is a lapse in clear thinking. Assess products and services solely on the basis of their price and benefits. It should be of no importance if an item is disappearing fast, nor if any doctors from London take an interest.
28. Base-rate neglect. ‘With a degree from this school, the chance of you landing a spot on the board of a Fortune 500 company is less than 0.1%. No matter how smart and ambitious you are, the most likely scenario is that you will end up in middle management.
29. Gambler's fallacy. In real life, in the financial markets and in business, with the weather and your health, events are often interrelated. What has already happened has an influence on what will happen. As comforting an idea as it is, there is simply no balancing force out there for independent events. ‘What goes around, comes around’ simply does not exist.
30. Students and professional real-estate agents were given a tour of a house and asked to estimate its value. Beforehand, they were informed about a (randomly generated) listed sales price. As might be expected, the anchor influenced the students: the higher this price, the higher they valued the property. And the professionals? Did they value the house objectively? No, they were similarly influenced by the random anchor amount. The more uncertain the value of something – such as real estate, company stock or art – the more susceptible even experts are to anchors.
31. Induction seduces us and leads us to conclusions such as: ‘Mankind has always survived, so we will be able to tackle any future challenges, too.’ Sounds good in theory, but what we fail to realise is that such a statement can only come from a species that has lasted until now. To assume that our existence to date is an indication of our future survival is a serious flaw in reasoning. Probably the most serious of all.
32. Loss aversion. Evil is more powerful and more plentiful than good. We are more sensitive to negative than to positive things. On the street, scary faces stand out more than smiling ones. We remember bad behaviour longer than good – except, of course, when it comes to ourselves.
33. Social loafing has interesting implications. In groups, we tend to hold back not only in terms of participation, but also in terms of accountability. Nobody wants to take the rap for the misdeeds or poor decisions of the whole group. A glaring example is the prosecution of the Nazis at the Nuremberg trials, or less controversially, any board or management team. We hide behind team decisions. The technical term for this is diffusion of responsibility.
34. Exponential growth. Nothing that grows exponentially grows for ever. Most politicians, economists and journalists forget that. Such growth will eventually reach a limit. Guaranteed. For example, the intestinal bacterium, Escherichia coli, divides every twenty minutes. In just a few days it could cover the whole planet, but since it consumes more oxygen and sugar than is available, its growth has a cut-off point.
35. Winner's curse. Accept this piece of wisdom about auctions from Warren Buffett: ‘Don’t go.’ If you happen to work in an industry where they are inevitable, set a maximum price and deduct 20% from this to offset the winner’s curse. Write this number on a piece of paper and don’t go a cent over it.
36. Fundamental attribution error is particularly useful for whittling negative events into neat little packages. For example, the ‘blame’ for wars we lazily push on to individuals: the Yugoslav assassin in Sarajevo has World War I on his conscience, and Hitler singlehandedly caused World War II. Many swallow these simplifications, even though wars are unforeseeable events whose innumerable dynamics we may never fully understand.
37. Correlation is not causality. Take a closer look at linked events: sometimes what is presented as the cause turns out to be the effect, and vice versa. And sometimes there is no link at all – just like with the storks and babies.
38. The halo effect obstructs our view of true characteristics. To counteract this, go beyond face value. Factor out the most striking features. World-class orchestras achieve this by making candidates play behind a screen, so that sex, race, age and appearance play no part in their decision. To business journalists I warmly recommend judging a company by something other than its easily obtainable quarterly figures (the stock market already delivers that). Dig deeper. Invest the time to do serious research. What emerges is not always pretty, but almost always educational.
39. Risk is not directly visible. Therefore, always consider what the alternative paths are. Success that comes about through risky dealings is, to a rational mind, of less worth than success achieved the ‘boring’ way (for example, with laborious work as a lawyer, a dentist, a ski instructor, a pilot, a hairdresser or a consultant).
40. False prophets. ‘There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know,’ wrote Harvard economist John Kenneth Galbraith. With this he made himself a figure of hatred in his own guild. Fund manager Peter Lynch summed it up even more cuttingly: ‘There are 60,000 economists in the U.S., many of them employed full-time trying to forecast recessions and interest rates, and if they could do it successfully twice in a row, they’d all be millionaires by now [?. . .?] As far as I know, most of them are still gainfully employed, which ought to tell us something.’ That was ten years ago. Today, the U.S. could employ three times as many economists – with little or no effect on the quality of their forecasts.
41. Conjunction fallacy. Forget about left brains and right brains. The difference between intuitive and conscious thinking is much more significant. With important decisions, remember that, at the intuitive level, we have a soft spot for plausible stories. Therefore, be on the lookout for convenient details and happy endings. Remember: if an additional condition has to be met, no matter how plausible it sounds, it will become less, not more, likely.
42. Framing. Realise that whatever you communicate contains some element of framing, and that every fact – even if you hear it from a trusted friend or read it in a reputable newspaper – is subject to this effect, too.
43. Action bias. In new or shaky circumstances, we feel compelled to do something, anything. Afterward we feel better, even if we have made things worse by acting too quickly or too often. So, though it might not merit a parade in your honour, if a situation is unclear, hold back until you can assess your options. ‘All of humanity’s problems stem from man’s inability to sit quietly in a room alone,’ wrote Blaise Pascal. At home, in his study.
44. The omission bias lies behind the following delusions: we wait until people shoot themselves in the foot rather than taking aim ourselves. Investors and business journalists are more lenient on companies that develop no new products than they are on those that produce bad ones, even though both roads lead to ruin. Sitting passively on a bunch of miserable shares feels better than actively buying bad ones. Building no emission filter into a coal plant feels superior to removing one for cost reasons. Failing to insulate your house is more acceptable than burning the spared fuel for your own amusement. Neglecting to declare income tax is less immoral than faking tax documents, even though the state loses out either way.
45. Self-serving bias. In SAT tests, students can score between 200 and 800 points. When asked their results a year later, they tend to boost their scores by around 50 points. Interestingly, they are neither lying nor exaggerating; they are simply ‘enhancing’ the result a little – until they start to believe the new score themselves.
46. Hedonic treadmill. Many others fare no better: People who change or progress in their careers are, in terms of happiness, right back where they started after around three months. The same goes for people who buy the latest Porsche. We work hard, advance and are able to afford more and nicer things, and yet this doesn’t make us any happier.
47. Self-selection bias. A company wanted to find out, on average, how many phones (landline and cell) each household owned. When the results were tallied, the firm was amazed that not a single household claimed to have no phone.
48. Association bias. The girl in the jewellery store was so stunning that Kevin couldn’t help buying the $10,000 engagement ring she showed him. Ten thousand bucks was way over his budget (especially for a second marriage), but for some reason he associated the ring with her and imagined his future wife would be just as dazzling.
49. Watch and wait before you draw any conclusions. Beginner’s luck can be devastating, so guard against misconceptions by treating your theories as a scientist would: try to disprove them.
50. Cognitive dissonance. A fox crept up to a vine. He gazed longingly at the fat, purple, overripe grapes. He placed his front paws against the trunk of the vine, stretched his neck and tried to get at the fruit, but it was too high. Irritated, he tried his luck again. He launched himself upward, but his jaw snapped only at fresh air. A third time he leapt with all his might – so powerfully that he landed back down on the ground with a thud. Still not a single leaf had stirred. The fox turned up his nose: ‘These aren’t even ripe yet. Why would I want sour grapes?’ Holding his head high, he strode back into the forest.
51. Hyperbolic discounting, the fact that immediacy magnetises us, is a remnant of our animal past. Animals will never turn down an instant reward in order to attain more in the future. You can train rats as much as you like; they’re never going to give up a piece of cheese today to get two pieces tomorrow. But wait a minute: don’t squirrels manage to gather food and save it for much later? Yes, but that’s pure instinct and – verifiably – has nothing to do with impulse control or learning.
52. When you justify your behaviour, you encounter more tolerance and helpfulness. It seems to matter very little if your excuse is good or not. Using the simple validation ‘because’ is sufficient. A sign proclaiming: ‘We’re renovating the highway for you’ is completely redundant. What else would a maintenance crew be up to on a highway? If you hadn’t noticed before, you realise what is going on once you look out the window. And yet this knowledge reassures and calms you. After all, nothing is more frustrating than being kept in the dark.
53. Decision fatigue is perilous: as a consumer, you become more susceptible to advertising messages and impulse buys. As a decision-maker, you are more prone to erotic seduction. Willpower is like a battery. After a while it runs out and needs to be recharged.
54. If someone uses the word ‘average’, think twice. Try to work out the underlying distribution. If a single anomaly has almost no influence on the set, the concept is still worthwhile. However, when extreme cases dominate (such as the Bill Gates phenomenon), we should discount the term ‘average’. We should all take stock from novelist William Gibson: ‘The future is already here – it’s just not very evenly distributed.’
55. Suppose you run a non-profit organisation. Logically, the wages you pay are quite modest. Nevertheless, your employees are highly motivated because they believe they are making a difference. If you suddenly introduce a bonus system – let’s say a small salary increase for every donation secured – motivation crowding will commence. Your team will begin to snub tasks that bring no extra reward. Creativity, company reputation, knowledge transfer – none of this will matter any more. Soon, all efforts will zoom in on attracting donations.
56. Verbal expression is the mirror of the mind. Clear thoughts become clear statements, whereas ambiguous ideas transform into vacant ramblings. The trouble is that, in many cases, we lack very lucid thoughts. The world is complicated, and it takes a great deal of mental effort to understand even one facet of the whole. Until you experience such an epiphany, it’s better to heed Mark Twain: ‘If you have nothing to say, say nothing.’ Simplicity is the zenith of a long, arduous journey, not the starting point.
57. Will Rogers Phenomenon. Suppose you switch careers, and are now in charge of three hedge funds that invest primarily in privately held companies. Fund A has sensational returns, fund B’s are mediocre and fund C’s are miserable. You want to prove yourself to the world, so what’s your master plan? You know how it works now: you move a few of A’s shares to B and C, picking exactly those investments that have been pulling down A’s average returns, but which are still profitable enough to fortify B and C. In no time, all three funds look much healthier.
58. Information bias. Forget trying to amass all the data. Do your best to get by with the bare facts. It will help you make better decisions. Superfluous knowledge is worthless, whether you know it or not. Daniel J. Boorstin put it right: ‘The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.’ And next time you are confronted by a rival, consider killing him – not with kindness but with reams of data and analysis.
59. A mild form of effort justification is the so-called IKEA effect. Furniture that we assemble ourselves seems more valuable than any expensive designer piece. The same goes for hand-knitted socks. To throw away a hand-crafted pair, even if they are tatty and outdated, is hard to do. Managers who put weeks of hard work into a strategy proposal will be incapable of appraising it objectively. Designers, copywriters, product developers, or any other professionals who brood over their creations are similarly guilty of this.
60. The law of small numbers. Watch out when you hear remarkable statistics about any small entities: businesses, households, cities, data centres, anthills, parishes, schools etc. What is being peddled as an astounding finding is, in fact, a humdrum consequence of random distribution. In his latest book, Nobel Prize winner Daniel Kahneman reveals that even experienced scientists succumb to the law of small numbers. How reassuring.
61. Expectations are intangible, but their effect is quite real. They have the power to change reality. Can we deprogramme them? Is it possible to live a life free from expectations? Unfortunately not. But you can deal with them more cautiously. Raise expectations for yourself and for the people you love. This increases motivation. At the same time, lower expectations for things you cannot control – for example, the stock market. As paradoxical as it sounds, the best way to shield yourself from nasty surprises is to anticipate them.
62. Thinking is more exhausting than sensing: rational consideration requires more willpower than simply giving in to intuition. In other words, intuitive people tend to scrutinise less. This led Harvard psychologist Amitai Shenhav and his research colleagues to investigate whether people’s CRT results correlate with their faith. Americans with a high CRT score (the study was conducted only in the U.S.) are often atheists, and their convictions have been reinforced over the years. Participants with low CRT results, however, tend to believe in God and ‘the immortality of the soul’, and have often had divine experiences. This makes sense: the more intuitively people make decisions, the less rationally they query religious beliefs.
63. First, the majority of statements in Forer’s passage are so general that they relate to everyone: ‘Sometimes you seriously doubt your actions.’ Who doesn’t? Second, we tend to accept flattering statements that don’t apply to us: ‘You are proud of your independent thinking.’ Obviously! Who sees himself or herself as a mindless follower? Third, the so- cal led feature positive effect plays a part: the text contains no negative statements; it states only what we are, even though the absence of characteristics is an equally important part of a person’s make-up. Fourth, the father of all the fallacies, the confirmation bias: we accept whatever corresponds to our self- image and unconsciously filter everything else out. What remains is a coherent portrait.
64. Volunteer's Folly. So now we come to the thorny topic of altruism. Does selflessness exist at all or is it merely a balm to our egos? Although a desire to help the community motivates many volunteers, personal benefits such as gaining skills, experience, and contacts also play a big part. Suddenly we’re not acting quite so selflessly. Indeed, many volunteers engage in what might be deemed ‘personal happiness management’, the benefits of which are sometimes far removed from the real cause. Strictly speaking, anyone who profits or feels even the slightest satisfaction from volunteering is not a pure altruist.
65. Affect heuristic. An affect is a momentary judgement: something you like or dislike. The word ‘gunfire’ triggers a negative effect. The word ‘luxury’ produces a positive one. This automatic, one- dimensional impulse prevents you from considering risks and benefits to be independent variables, which indeed they are. Instead, the affect heuristic puts risks and benefits on the same sensory thread.
66. Nothing is more convincing than your own beliefs. We believe that introspection unearths genuine self-knowledge. Unfortunately, introspection is, in large part, fabrication posing two dangers: first, the introspection illusion creates inaccurate predictions of future mental states. Trust your internal observations too much and too long, and you might be in for a very rude awakening. Second, we believe that our introspections are more reliable than those of others, which creates an illusion of superiority. Remedy: be all the more critical with yourself. Regard your internal observations with the same scepticism as claims from some random person. Become your own toughest critic.
67. We are obsessed with having as many irons as possible in the fire, ruling nothing out and being open to everything. However, this can easily destroy success. We must learn to close doors. A business strategy is primarily a statement on what not to engage in. Adopt a life strategy similar to a corporate strategy: write down what not to pursue in your life. In other words, make calculated decisions to disregard certain possibilities and when an option shows up, test it against your not-to-pursue list. It will not only keep you from trouble but also save you lots of thinking time. Think hard once and then just consult your list instead of having to make up your mind whenever a new door cracks open. Most doors are not worth going through, even when the handle seems to turn so effortlessly.
68. When contemplating the future, we place far too much emphasis on flavour-of- the-month inventions and the latest ‘killer apps’, while underestimating the role of traditional technology. In the 1960s, space travel was all the rage, so we imagined ourselves on school trips to Mars. In the 1970s, plastic was in, so we mulled over how we would furnish our see-through houses. Taleb traces this tendency back to the neomania pitfall: the mania for all things shiny and new.
69. How can you thwart the sleeper effect? First, don’t accept any unsolicited advice, even if it seems well meant. Doing so, you protect yourself to a certain degree from manipulation. Second, avoid ad-contaminated sources like the plague. How fortunate we are that books are (still) ad-free! Third, try to remember the source of every argument you encounter. Whose opinions are these? And why do they think that way? Probe the issue like an investigator would: cui bono? Who benefits? Admittedly, this is a lot of work and will slow down your decision- making. But it will also refine it.
70. Alternative blindness. Here’s an example from the world of finance. Suppose you have a little money in your savings account and you ask your investment broker for advice. He proposes a bond that will earn you 5% interest. ‘That’s much better than the 1% you get with your savings account,’ he points out. Does it make sense to buy the bond? We don’t know. It’s wrong to consider just these two options. To assess your options properly, you would have to compare the bond with all other investment options and then select the best. This is how top investor Warren Buffett does things: ‘Each deal we measure against the second-best deal that is available at any given time – even if it means doing more of what we are already doing.’
71. Social comparison bias. Do you foster individuals more talented than you? Admittedly, in the short term the preponderance of stars can endanger your status, but in the long run, you can only profit from their contributions. Others will overtake you at some stage anyway.
72. Primacy and recency effect. first and last impressions dominate, meaning that the content sandwiched between has only a weak influence. Try to avoid evaluations based on first impressions. They will deceive you, guaranteed, in one way or another. Try to assess all aspects impartially. It’s not easy, but there are ways around it. For example, in interviews, I jot down a score every five minutes and calculate the average afterward. This way, I make sure that the ‘middle’ counts just as much as hello and goodbye.
73. Not-Invented-Here NIH syndrome causes you to fall in love with your own ideas. This is valid not only for fish sauces, but also for all kinds of solutions, business ideas and inventions. Companies tend to rate home-grown ideas as far more important than those from outsiders, even if, objectively, this is not the case.
74. A Black Swan is an unthinkable event that massively affects your life, your career, your company, your country. There are positive and negative Black Swans. The meteorite that flattens you, Sutter’s discovery of gold in California, the collapse of the Soviet Union, the invention of the transistor, the Internet browser, the overthrow of Egyptian dictator Mubarak or another encounter that upturns your life completely – all are Black Swans.
75. Domain dependence. What you master in one area is difficult to transfer to another. Especially daunting is the transfer from academia to real life – from the theoretically sound to the practically possible. Of course, this also counts for this book. It will be difficult to transfer the knowledge from these pages to your daily life. Even for me as the writer that transition proves to be a tough one. Book smarts doesn’t transfer to street smarts easily.
76. The false-consensus effect is fascinating for yet another reason. If people do not share our opinions, we categorise them as ‘abnormal’. Ross’s experiment also corroborated this: the students who wore the sandwich board considered those who refused to be stuck up and humourless, whereas the other camp saw the sign-wearers as idiots and attention seekers.
77. It is safe to assume that half of what you remember is wrong. Our memories are riddled with inaccuracies, including the seemingly flawless flashbulb memories. Our faith in them can be harmless – or lethal. Consider the widespread use of eyewitness testimony and police line-ups to identify criminals. To trust such accounts without additional investigation is reckless, even if the witnesses are adamant that they would easily recognise the perpetrator again.
78. In-group out-group bias. Prejudice and aversion are biological responses to anything foreign. Identifying with a group has been a survival strategy for hundreds of thousands of years. Not any longer; identifying with a group distorts your view of the facts. Should you ever be sent to war, and you don’t agree with its goals, desert.
79. Ambiguity aversion, Elisberg paradox. To avoid hasty judgement, you must learn to tolerate ambiguity. This is a difficult task and one that you cannot influence actively. Your amygdala plays a crucial role. This is a nut-sized area in the middle of the brain responsible for processing memory and emotions. Depending on how it is built, you will tolerate uncertainty with greater ease or difficulty. This is evident not least in your political orientation: the more averse you are to uncertainty, the more conservatively you will vote. Your political views have a partial biological underpinning.
80. Both the default effect and the status-quo bias reveal that we have a strong tendency to cling to the way things are, even if this puts us at a disadvantage. By changing the default setting, you can change human behaviour.
81. The fear of regret becomes really irksome when combined with a ‘last chance’ offer. A safari brochure promises ‘the last chance to see a rhino before the species is extinct’. If you never cared about seeing one before today, why would you fly all the way to Tanzania to do so now? It is irrational.
82. Salient information has an undue influence on how you think and act. We tend to neglect hidden, slow-to-develop, discrete factors. Do not be blinded by irregularities. A book with an unusual, fire-engine red jacket makes it on to the bestseller list. Your first instinct is to attribute the success of the book to the memorable cover. Don’t. Gather enough mental energy to fight against seemingly obvious explanations.
83. Marketing strategists recognise the usefulness of the house-money effect. Online gambling sites ‘reward’ you with $100 credit when you sign up. Credit card companies offer the same when you fill in the application form. Airlines present you with a few thousand miles when you join their frequent flyer clubs. Phone companies give you free call credit to get you accustomed to making lots of calls. A large part of the coupon craze stems from the house-money effect.
84. Procrastination is irrational, but human. To fight it, use a combined approach. This is how my neighbour managed to write her doctoral thesis in three months: she rented a tiny room with neither telephone nor Internet connection. She set three dates, one for each part of the paper. She told anyone who would listen about these deadlines and even printed them on the back of her business cards. This way, she transformed personal deadlines into public commitments. At lunchtime and in the evenings, she refuelled her batteries by reading fashion magazines and sleeping a lot.
85. Envy motivated us to do something about it. Laissez-faire hunter-gatherers disappeared from the gene pool; in extreme cases, they died of starvation, while others feasted. We are the offspring of the envious. But, in today’s world, envy is no longer vital. If my neighbour buys himself a Porsche, it doesn’t mean that he has taken anything from me.
86. Personification. Be careful when you encounter human stories. Ask for the facts and the statistical distribution behind them. You can still be moved by the story, but this way, you can put it into the right context. If, however, you seek to move and motivate people for your own ends, make sure your tale is seasoned with names and faces.
87. Purge yourself of the illusion of attention every now and then. Confront all possible and seemingly impossible scenarios. What unexpected events might happen? What lurks beside and behind the burning issues? What is no one addressing? Pay attention to silences as much as you respond to noises. Check the periphery, not just the centre. Think the unthinkable. Something unusual can be huge; we still may not see it. Being big and distinctive is not enough to be seen. The unusual and huge thing must be expected.
88. In many cases, strategic misrepresentation is harmless. However, for the things that matter, such as your health or future employees, you must be on your guard. So, if you are dealing with a person (a first-rate candidate, an author or an ophthalmologist), don’t go by what they claim; look at their past performance. When it comes to projects, consider the timeline, benefits and costs of similar projects, and grill anyone whose proposals are much more optimistic. Ask an accountant to pick apart the plans mercilessly. Add a clause into the contract that stipulates harsh financial penalties for cost and schedule overruns. And, as an added safety measure, have this money transferred to a secure escrow account.
89. Overthinking. Essentially, if you think too much, you cut off your mind from the wisdom of your feelings. This may sound a little esoteric – and a bit surprising coming from someone like me who strives to rid my thinking of irrationality – but it is not. Emotions form in the brain, just as crystal-clear, rational thoughts do. They are merely a different form of information processing – more primordial, but not necessarily an inferior variant. In fact, sometimes they provide the wiser counsel.
90. The planning fallacy is particularly evident when people work together – in business, science and politics. Groups overestimate duration and benefits and systematically underestimate costs and risks. The conch-shaped Sydney Opera House was planned in 1957: completion was due in 1963 at a cost of $7 million. It finally opened its doors in 1973 after $102 million had been pumped in – 14 times the original estimate!
91. ‘If your only tool is a hammer, all your problems will be nails,’ said Mark Twain – a quote that sums up the déformation professionnelle. Charlie Munger, Warren Buffett’s business partner, named the effect the man with the hammer tendency after Twain: ‘But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you’ve got to have multiple models. And the models have to come from multiple disciplines – because all the wisdom of the world is not to be found in one little academic department.’
92. ertain people make a living from their abilities, such as pilots, plumbers and lawyers. In other areas, skill is necessary but not critical, as with entrepreneurs and leaders. Finally, chance is the deciding factor in a number of fields, such as in financial markets. Here, the illusion of skill pervades. So: give plumbers due respect and chuckle at successful financial jesters.
93. We have problems perceiving non-events. We are blind to what does not exist. We realise if there is a war, but we do not appreciate the absence of war during peacetime. If we are healthy, we rarely think about being sick. Or, if we get off the plane in Cancun, we do not stop to notice that we did not crash. If we thought more frequently about absence, we might well be happier. But it is tough mental work. The greatest philosophical question is why does something and not nothing exist? Don’t expect a quick answer; rather, the question itself represents a useful instrument for combating the feature-positive effect.
94. The more elevated or elite a field is, the more we fall for cherry-picking. In Antifragile, Taleb describes how all areas of research – from philosophy to medicine to economics – brag about their results: ‘Like politicians, academia is well equipped to tell us what it did for us, not what it did not – hence it shows how indispensable her methods are.’ Pure cherry-picking. But our respect for academics is far too great for us to notice this.
95. The fallacy of the single cause is as ancient as it is dangerous. We have learned to see people as the ‘masters of their own destinies’. Aristotle proclaimed this 2,500 years ago. Today we know that it is wrong. The notion of free will is up for debate. Our actions are brought about by the interaction of thousands of factors – from genetic predisposition to upbringing, from education to the concentration of hormones between individual brain cells. Still we hold firmly to the old image of self-governance. This is not only wrong but also morally questionable. As long as we believe in singular reasons, we will always be able to trace triumphs or disasters back to individuals and stamp them ‘responsible’. The idiotic hunt for a scapegoat goes hand-in-hand with the exercise of power – a game that people have been playing for thousands of years.
96. The intention-to-treat error is not easy to recognise. A fictional example from medicine: a pharmaceutical company has developed a new drug to fight heart disease. A study ‘proves’ that it significantly reduces patients’ mortality rates. The data speaks for itself: among patients who have taken the drug regularly, the five-year mortality rate is 15%. For those who have swallowed placebo pills, it is about the same, indicating that the pill doesn’t work. However – and this is crucial – the mortality rate of patients who have taken the drug at irregular intervals is 30% – twice as high! A big difference between regular and irregular intake. So, the pill is a complete success. Or is it?
97. News is a waste of time. An average human being squanders half a day each week on reading about current affairs. In global terms, this is an immense loss of productivity. Take the 2008 terror attacks in Mumbai. Out of sheer thirst for recognition, terrorists murdered 200 people. Let’s say a billion people devoted an hour of their time to following the aftermath: they viewed the minute-by-minute updates and listened to the inane chatter of a few ‘experts’ and ‘commentators’. This is a very realistic ‘guesstimate’ since India has more than a billion inhabitants. Thus our conservative calculation: one billion people multiplied by an hour’s distraction equals one billion hours of work stoppage. If we convert this, we learn that news consumption wasted around 2,000 lives – ten times more than the attack. A sarcastic but accurate observation.