Dobelli, Rolf. The Art of Thinking Clearly: Better Thinking, Better Decisions

Posted on January 1, 2013

01 Survivorship Bias

Rick starts a band. Will he make it big? The probability lies a fraction above zero. Like so many others, he will most likely end up in the graveyard of failed musicians. This burial ground houses 10,000 times more musicians than the stage does, but no journalist is interested in failures – with the exception of fallen superstars. This makes the cemetery invisible to outsiders.

(Dobelli, 2013, Chapter 1)

Behind every popular author you can find 100 other writers whose books will never sell. Behind them are another 100 who haven’t found publishers. Behind them are yet another 100 whose unfinished manuscripts gather dust in drawers.

(Dobelli, 2013, Chapter 1)

The vast number of books and coaches dealing with success should also make you sceptical: the unsuccessful don’t write books or give lectures on their failures.

(Dobelli, 2013, Chapter 1)

Survivorship bias can become especially pernicious when you become a member of the ‘winning’ team. Even if your success stems from pure coincidence, you’ll discover similarities with other winners and be tempted to mark these as ‘success factors’. However, if you ever visit the graveyard of failed individuals and companies, you will realise that its tenants possessed many of the same traits that characterise your success.

(Dobelli, 2013, Chapter 1)

If enough scientists examine a particular phenomenon, a few of these studies will deliver statistically significant results through pure coincidence – for example the relationship between red wine consumption and high life expectancy. Such (false) studies immediately attain a high degree of popularity and attention. As a result, you will not read about the studies with the ‘boring’, but correct results.

(Dobelli, 2013, Chapter 1)

02 Swimmer’s Body Illusion

Professional swimmers don’t have perfect bodies because they train extensively. Rather, they are good swimmers because of their physiques. How their bodies are designed is a factor for selection and not the result of their activities.

(Dobelli, 2013, Chapter 2)

Harvard has the reputation of being a top university. Many highly successful people have studied there. Does this mean that Harvard is a good school? We don’t know. Perhaps the school is terrible, and it simply recruits the brightest students around.

(Dobelli, 2013, Chapter 2)

… it’s important to give a wide berth to tips and advice from self-help authors. For billions of people, these pieces of advice are unlikely to help. But because the unhappy don’t write self-help books about their failures, this fact remains hidden.

(Dobelli, 2013, Chapter 2)

03 Clustering Illusion

The human brain seeks patterns and rules. In fact, it takes it one step further: if it finds no familiar patterns, it simply invents some.

(Dobelli, 2013, Chapter 3)

During WWII, the Germans bombed London. Among other ammunition, they used V1 rockets, a kind of self-navigating drone. With each attack, the impact sites were carefully plotted on a map, terrifying Londoners: they thought they had discovered a pattern, and developed theories about which parts of the city were the safest. However, after the war, statistical analysis confirmed that the distribution was totally random. Today it’s clear why: the V1’s navigation system was extremely inaccurate.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 3)

04 Social Proof

Social proof, sometimes roughly termed the herd instinct, dictates that individuals feel they are behaving correctly when they act the same as other people. In other words, the more people who follow a certain idea, the better (truer) we deem the idea to be. And the more people who display a certain behaviour the more appropriate this behaviour is judged to be by others. This is, of course, absurd.

(Dobelli, 2013, Chapter 4)

Comedy and talk shows make use of social proof by inserting canned laughter at strategic spots, inciting the audience to laugh along.

(Dobelli, 2013, Chapter 4)

One of the most impressive, though troubling, cases of this phenomenon is the famous speech by Nazi propaganda minister Joseph Goebbels, delivered to a large audience in 1943. As the war went from bad to worse for Germany, he demanded to know: ‘Do you want total war? If necessary, do you want a war more total and radical than anything that we can even imagine today?’ The crowd roared. If the attendees had been asked individually and anonymously, it is likely that nobody would have consented to this crazy proposal.

(Dobelli, 2013, Chapter 4)

05 Sunk Cost Fallacy

The film was dire. After an hour, I whispered to my wife: ‘Come on, let’s go home.’ She replied: ‘No way. We’re not throwing away $ 30.’ ‘That’s no reason to stay,’ I protested. ‘The money’s already gone. This is the sunk cost fallacy at work – a thinking error!’

(Dobelli, 2013, Chapter 5)

The sunk cost fallacy is most dangerous when we have invested a lot of time, money, energy or love in something. This investment becomes a reason to carry on, even if we are dealing with a lost cause. The more we invest, the greater the sunk costs are, and the greater the urge to continue becomes.

(Dobelli, 2013, Chapter 5)

This irrational behaviour [the sunk cost fallacy] is driven by a need for consistency. After all, consistency signifies credibility. We find contradictions abominable. If we decide to cancel a project halfway through, we create a contradiction: we admit that we once thought differently. Carrying on with a meaningless project delays this painful realisation and keeps up appearances.

(Dobelli, 2013, Chapter 5)

Concorde is a prime example of a government deficit project. Even though both parties, Britain and France, had long known that the supersonic aircraft business would never work, they continued to invest enormous sums of money in it – if only to save face. Abandoning the project would have been tantamount to admitting defeat. The sunk cost fallacy is therefore often referred to as the Concorde effect.

(Dobelli, 2013, Chapter 5)

Rational decision-making requires you to forget about the costs incurred to date.

(Dobelli, 2013, Chapter 5)

No matter how much you have already invested, only your assessment of the future costs and benefits counts.

(Dobelli, 2013, Chapter 5)

06 Reciprocity

Not so long ago, you may have come across disciples of the Hare Krishna sect floating around in saffron-coloured robes as you hurried to catch a flight or a train to your destination. A member of the sect presented you with a small flower and a smile. If you’re like most people, you took the flower, if only not to be rude. If you tried to refuse, you would have heard a gentle ‘Take it, this is our gift to you.’ If you wanted to dispose of the flower in the next trashcan, you found that there were already a few there. But that was not the end. Just as your bad conscience started to tug at you, another disciple of Krishna approached you, this time asking for a donation. In many cases, this plea was successful – and so pervasive that many airports banned the sect from the premises.

(Dobelli, 2013, Chapter 6)

Many NGOs and philanthropic organisations use exactly the same techniques [based around the concept of reciprocity]: first give, then take.

(Dobelli, 2013, Chapter 6)

We find reciprocity in all species whose food supplies are subject to high fluctuations. Suppose you are a hunter-gatherer. One day you are lucky and kill a deer. You can’t possibly eat all of it in a day, and refrigerators are still a few centuries away. You decide to share the deer with the group, which ensures that you will benefit from others’ spoils when your haul is less impressive. The bellies of your buddies serve as your refrigerator.

(Dobelli, 2013, Chapter 6)

Reciprocity is a very useful survival strategy, a form of risk management. Without it, humanity – and countless species of animal – would be long extinct.

(Dobelli, 2013, Chapter 6)

07 Confirmation Bias (Part 1)

The confirmation bias is the mother of all misconceptions. It is the tendency to interpret new information so that it becomes compatible with our existing theories, beliefs and convictions.

(Dobelli, 2013, Chapter 7)

It pays to listen to Charles Darwin: from his youth, he set out systematically to fight the confirmation bias. Whenever observations contradicted his theory, he took them very seriously and noted them down immediately. He knew that the brain actively ‘forgets’ discomforting evidence after a short time. The more correct he judged his theory to be, the more actively he looked for contradictions.

(Dobelli, 2013, Chapter 7)

08 Confirmation Bias (Part 2)

To fight against the confirmation bias, try writing down your beliefs – whether in terms of worldview, investments, marriage, health care, diet, career strategies – and set out to find discomforting evidence. Axing beliefs that feel like old friends is hard work, but imperative.

(Dobelli, 2013, Chapter 8)

09 Authority Bias

Psychologist Stanley Milgram demonstrated the authority bias most clearly in an experiment in 1961. His subjects were instructed to administer ever-increasing electrical shocks to a person sitting on the other side of a pane of glass. They were told to start with 15 volts, then 30V, 45V and so on, until they reached the maximum – a lethal dose of 450V. In reality, no electrical current was actually flowing; Milgram used an actor to play the role of victim, but those charged with administering the shocks didn’t know that. The results were, well, shocking: as the person in the other room wailed and writhed in pain, and the subject administering the shock wanted to stop, the professor would say, ‘Keep going, the experiment depends on it.’ The majority of people continued with the electrocution. More than half of the participants went all the way up to maximum voltage – out of sheer obedience to authority.

(Dobelli, 2013, Chapter 9)

In conclusion: 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.

(Dobelli, 2013, Chapter 9)

10 Contrast Effect

the contrast effect: we judge something to be beautiful, expensive or large if we have something ugly, cheap or small in front of us. We have difficulty with absolute judgements.

(Dobelli, 2013, Chapter 10)

The contrast effect is a common misconception. You order leather seats for your new car because compared to the $ 60,000 price tag on the car, $ 3,000 seems a pittance. All industries that offer upgrade options exploit this illusion.

(Dobelli, 2013, Chapter 10)

Experiments show that people are willing to walk an extra ten minutes to save $ 10 on food. But those same people wouldn’t dream of walking ten minutes to save $ 10 on a thousand-dollar suit. An irrational move because ten minutes is ten minutes, and $ 10 is $ 10. Logically, you should walk back in both cases or not at all.

(Dobelli, 2013, Chapter 10)

11 Availability Bias

The availability bias says this: we create a picture of the world using the examples that most easily come to mind. This is absurd, of course, because in reality things don’t happen more frequently just because we can conceive of them more easily.

(Dobelli, 2013, Chapter 11)

We attach too much likelihood to spectacular, flashy or loud outcomes. Anything silent or invisible we downgrade in our minds. Our brains imagine show-stopping outcomes more readily than mundane ones. We think dramatically, not quantitatively.

(Dobelli, 2013, Chapter 11)

We prefer wrong information to no information. Thus, the availability bias has presented the banks with billions in losses.

(Dobelli, 2013, Chapter 11)

12 The “It’ll Get Worse Before It Gets Better” Fallacy

if someone says ‘It’ll get worse before it gets better,’ you should hear alarm bells ringing.

(Dobelli, 2013, Chapter 12)

13 Story Bias

Stories attract us; abstract details repel us. Consequently, entertaining side issues and backstories are prioritised over relevant facts.

(Dobelli, 2013, Chapter 13)

‘The king died, and the queen died of grief.’ Most people will retain the second story more easily. Here, the two deaths don’t just take place successively; they are emotionally linked. Story A is a factual report, but story B has ‘meaning’. According to information theory, we should be able to hold on to A better: it is shorter. But our brains don’t work that way.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 13)

14 Hindsight Bias

I came across the diaries of my great-uncle recently. In 1932, he emigrated from a tiny Swiss village to Paris to seek his fortune in the movie industry. In August 1940, two months after Paris was occupied, he noted: ‘Everyone is certain that the Germans will leave by the end of the year. Their officers also confirmed this to me. England will fall as fast as France did, and then we will finally have our Parisian lives back – albeit as part of Germany.’ The occupation lasted four years. In today’s history books, the German occupation of France seems to form part of a clear military strategy. In retrospect, the actual course of the war appears the most likely of all scenarios. Why? Because we have fallen victim to the hindsight bias.

(Dobelli, 2013, Chapter 14)

So why is the hindsight bias so perilous? Well, it makes us believe we are better predictors than we actually are, causing us to be arrogant about our knowledge and consequently to take too much risk.

(Dobelli, 2013, Chapter 14)

I have one final tip, this time from personal rather than professional experience: 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.

(Dobelli, 2013, Chapter 14)

Hindsight may provide temporary comfort to those overwhelmed by complexity, but as for providing deeper revelations about how the world works, you’ll benefit by looking elsewhere.

(Dobelli, 2013, Chapter 14)

15 Overconfidence Effect

… entrepreneurial activity would be a lot lower if overconfidence did not exist. For example, every restaurateur hopes to establish the next Michelin-starred restaurant, even though statistics show that most close their doors after just three years. The return on investment in the restaurant business lies chronically below zero.

(Dobelli, 2013, Chapter 15)

Hardly any major projects exist that are completed in less time and at a lower cost than forecasted. Some delays and cost overruns are even legendary, such as the Airbus A400M, the Sydney Opera House and Boston’s Big Dig. The list can be added to at will.

(Dobelli, 2013, Chapter 15)

What makes overconfidence so prevalent and its effect so confounding is that it is not driven by incentives; it is raw and innate. And it’s not counterbalanced by the opposite effect, ‘underconfidence’, which doesn’t exist.

(Dobelli, 2013, Chapter 15)

16 Chauffeur Knowledge

After receiving the Nobel Prize for Physics in 1918, Max Planck went on tour across Germany. Wherever he was invited, he delivered the same lecture on new quantum mechanics. Over time, his chauffeur grew to know it by heart: ‘It has to be boring giving the same speech each time, Professor Planck. How about I do it for you in Munich? You can sit in the front row and wear my chauffeur’s cap. That’d give us both a bit of variety.’ Planck liked the idea, so that evening the driver held a long lecture on quantum mechanics in front of a distinguished audience. Later, a physics professor stood up with a question. The driver recoiled: ‘Never would I have thought that someone from such an advanced city as Munich would ask such a simple question! My chauffeur will answer it.’

(Dobelli, 2013, Chapter 16)

… there are two types of knowledge. First, we have real knowledge. We see it in people who have committed a large amount of time and effort to understanding a topic. The second type is chauffeur knowledge – knowledge from people who have learned to put on a show.

(Dobelli, 2013, Chapter 16)

To guard against the chauffeur effect, Warren Buffett, Munger’s business partner, has coined a wonderful phrase, ‘circle of competence’. What lies inside this circle you understand intuitively; what lies outside, you may only partially comprehend. One of Munger’s best pieces of advice is: ‘You have to stick within what I call your circle of competence. You have to know what you understand and what you don’t understand. It’s not terribly important how big the circle is. But it is terribly important that you know where the perimeter is.’ Munger underscores this: ‘So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose.

(Dobelli, 2013, Chapter 16)

17 Illusion of Control

… an American researcher has been investigating acoustic sensitivity to pain. For this, he placed people in sound booths and increased the volume until the subjects signalled him to stop. The two rooms, A and B, were identical, save one thing: room B had a red panic button on the wall. The button was purely for show, but it gave participants the feeling that they were in control of the situation, leading them to withstand significantly more noise.

(Dobelli, 2013, Chapter 17)

Clever technicians create the illusion of control by installing fake temperature dials. This reduces energy bills – and complaints. Such ploys are called ‘placebo buttons’

(Dobelli, 2013, Chapter 17)

The same [illusion of control] 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.

(Dobelli, 2013, Chapter 17)

18 Incentive Super-Response Tendency

To control a rat infestation, French colonial rulers in Hanoi in the nineteenth century passed a law: for every dead rat handed in to the authorities, the catcher would receive a reward. Yes, many rats were destroyed, but many were also bred specially for this purpose.

(Dobelli, 2013, Chapter 18)

People respond to incentives by doing what is in their best interests.

(Dobelli, 2013, Chapter 18)

Good incentive systems comprise both intent and reward. An example: in Ancient Rome, engineers were made to stand underneath the construction at their bridges’ opening ceremonies. Poor incentive systems, on the other hand, overlook and sometimes even pervert the underlying aim. For example, censoring a book makes its contents more famous and rewarding bank employees for each loan sold leads to a miserable credit portfolio.

(Dobelli, 2013, Chapter 18)

For a long time I tried to understand what made well-educated nobles from the Middle Ages bid adieu to their comfortable lives, swing themselves up on to horses and take part in the Crusades. They were well aware that the arduous ride to Jerusalem lasted at least six months and passed directly through enemy territory, yet they took the risk. And then it came to me: the answer lies in incentive systems. If they came back alive, they could keep the spoils of war and live out their days as rich men. If they died, they automatically passed on to the afterlife as martyrs – with all the benefits that came with it. It was win-win.

(Dobelli, 2013, Chapter 18)

19 Regression to the Mean

Ignoring regression to mean can have destructive consequences, such as teachers (or managers) concluding that the stick is better than the carrot. For example, following a test the highest performing students are praised, and the lowest are castigated. In the next exam, other students will probably – purely coincidentally – achieve the highest and lowest scores. Thus, the teacher concludes that reproach helps and praise hinders. A fallacy that keeps on giving.

(Dobelli, 2013, Chapter 19)

20 Outcome Bias

…say one million monkeys speculate on the stock market. They buy and sell stocks like crazy and, of course, completely at random. What happens? After one week, about half of the monkeys will have made a profit and the other half a loss. The ones that made a profit can stay; the ones that made a loss you send home. In the second week, one half of the monkeys will still be riding high, while the other half will have made a loss and are sent home. And so on. After ten weeks, about 1,000 monkeys will be left – those who have always invested their money well. After twenty weeks, just one monkey will remain – this one always, without fail, chose the right stocks and is now a billionaire. Let’s call him the success monkey. How does the media react? They will pounce on this animal to understand its ‘success principles’. And they will find some: perhaps the monkey eats more bananas than the others. Perhaps he sits in another corner of the cage. Or, maybe he swings headlong through the branches, or he takes long, reflective pauses while grooming. He must have some recipe for success, right? How else could he perform so brilliantly? Spot-on for twenty weeks – and that from a simple monkey? Impossible! The monkey story illustrates the outcome bias: we tend to evaluate decisions based on the result rather than on the decision process.

(Dobelli, 2013, Chapter 20)

A classic example [of outcome bias] is the Japanese attack on Pearl Harbor. Should the military base have been evacuated or not? From today’s perspective: obviously, for there was plenty of evidence that an attack was imminent. However, only in retrospect do the signals appear so clear. At the time, in 1941, there was a plethora of contradictory signals. Some pointed to an attack; others did not. To assess the quality of the decision, we must use the information available at the time, filtering out everything we know about it post-attack (particularly that it did indeed take place).

(Dobelli, 2013, Chapter 20)

21 The 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.

(Dobelli, 2013, Chapter 21)

22 Liking Bias

So, 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.

(Dobelli, 2013, Chapter 22)

23 Endowment Effect

We consider things to be more valuable the moment we own them. In other words, if we are selling something, we charge more for it than what we ourselves would be willing to spend.

(Dobelli, 2013, Chapter 23)

If you are applying for a job and don’t get a call back, you have every reason to be disappointed. However, if you make it to the final stages of the selection process and then receive the rejection, the disappointment can be much bigger – irrationally. Either you get the job or you don’t; nothing else should matter.

(Dobelli, 2013, Chapter 23)

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.

(Dobelli, 2013, Chapter 23)

24 Coincidence

On 5 October 1990, the San Francisco Examiner reported that Intel would take its rival, AMD, to court. Intel found out that the company was planning to launch a computer chip named AM386, a term which clearly referred to Intel’s 386 chip. How Intel came upon the information is remarkable: by pure coincidence, both companies had hired someone named Mike Webb. Both men were staying in the same hotel in California, and checked out on the same day. After they had left, the hotel accepted a package for Mike Webb at reception. It contained confidential documents about the AM386 chip, and the hotel mistakenly sent it to Mike Webb of Intel, who promptly forwarded the contents to the legal department.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 24)

25 Groupthink

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.

(Dobelli, 2013, Chapter 25)

26 Neglect of Probability

In a classic experiment from 1972, participants were divided into two groups. The members of the first group were told that they would receive a small electric shock. In the second group, subjects were told that the risk of this happening was only 50%. The researchers measured physical anxiety (heart rate, nervousness, sweating, etc.) shortly before commencing. The result were, well, shocking: there was absolutely no difference. Participants in both groups were equally stressed. Next, the researchers announced a series of reductions in the probability of a shock for the second group: from 50% to 20%, then 10%, then 5%. The result: still no difference! However, when they declared they would increase the strength of the expected current, both groups’ anxiety levels rose – again, by the same degree. This illustrates that we respond to the expected magnitude of an event (the size of the jackpot or the amount of electricity), but not to its likelihood. In other words: we lack an intuitive grasp of probability.

(Dobelli, 2013, Chapter 26)

We invest in start-ups because the potential profit makes dollar signs flash before our eyes, but we forget (or are too lazy) to investigate the slim chances of new businesses actually achieving such growth.

(Dobelli, 2013, Chapter 26)

…following extensive media coverage of a plane crash, we cancel flights without really considering the minuscule probability of crashing (which, of course, remains the same before and after such a disaster).

(Dobelli, 2013, Chapter 26)

… let’s examine two methods of treating drinking water. Suppose a river has two equally large tributaries. One is treated using method A, which reduces the risk of dying from contaminated water from 5% to 2%. The other is treated using method B, which reduces the risk from 1% to 0%, i.e. the threat is completely eliminated. So, method A or B? If you think like most people, you will opt for method B – which is silly because with measure A, 3% fewer people die, and with B, just 1% fewer. Method A is three times as good! This fallacy is called the zero-risk bias.

(Dobelli, 2013, Chapter 26)

… 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.

(Dobelli, 2013, Chapter 26)

27 Scarcity Error

Rara sunt cara, said the Romans. Rare is valuable.

(Dobelli, 2013, Chapter 27)

To assess the quality of cookies, Professor Stephen Worchel split participants into two groups. The first group received an entire box of cookies, and the second group just two. In the end, the subjects with just two cookies rated the quality much higher than the first group did. The experiment was repeated several times and always showed the same result.

(Dobelli, 2013, Chapter 27)

reactance: when we are deprived of an option, we suddenly deem it more attractive.

(Dobelli, 2013, Chapter 27)

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.

(Dobelli, 2013, Chapter 27)

28 Base-Rate Neglect

Mark is a thin man from Germany with glasses who likes to listen to Mozart. Which is more likely? That Mark is A) a truck driver or B) a professor of literature in Frankfurt. Most will bet on B, which is wrong. Germany has 10,000 times more truck drivers than Frankfurt has literature professors. Therefore, it is more likely that Mark is a truck driver. So what just happened? The detailed description enticed us to overlook the statistical reality. Scientists call this fallacy base-rate neglect: a disregard of fundamental distribution levels.

(Dobelli, 2013, Chapter 28)

… investigate the most likely ailments before you start diagnosing exotic diseases, even if you are a specialist in that.

(Dobelli, 2013, Chapter 28)

No matter how smart and ambitious you are, the most likely scenario is that you will end up in middle management. [in reference to aspirations of business graduates]

(Dobelli, 2013, Chapter 28)

29 Gambler’s Fallacy

In the summer of 1913, something incredible happened in Monte Carlo. Crowds gathered around a roulette table and could not believe their eyes. The ball had landed on black twenty times in a row. Many players took advantage of the opportunity and immediately put their money on red. But the ball continued to come to rest on black. Even more people flocked to the table to bet on red. It had to change eventually! But it was black yet again – and again and again. It was not until the twenty-seventh spin that the ball eventually landed on red. By that time, the players had bet millions on the table. In a few spins of the wheel, they were bankrupt.

(Dobelli, 2013, Chapter 29)

The gambler’s fallacy leads us to believe that something must change. [if it hasn’t changed for a while]

(Dobelli, 2013, Chapter 29)

‘What goes around, comes around’ simply does not exist.

(Dobelli, 2013, Chapter 29)

30 The Anchor

Anchors abound, and we all clutch at them. The ‘recommended retail price’ printed on many products is nothing more than an anchor.

(Dobelli, 2013, Chapter 30)

In my early years, I had a quick stint at a consulting firm. My boss was a pro when it came to using anchors. In his first conversation with any client, he made sure to fix an opening price, which, by the way, almost criminally exceeded our internal costs: ‘I’ll tell you this now so you’re not surprised when you receive the quote, Mr. So-and-So: we’ve just completed a similar project for one of your competitors and it was in the range of five million dollars.’ The anchor was dropped: the price negotiations started at exactly five million.

(Dobelli, 2013, Chapter 30)

31 Induction

A farmer feeds a goose. At first, the shy animal is hesitant, wondering ‘What’s going on here? Why is he feeding me?’ This continues for a few more weeks until, eventually, the goose’s scepticism gives way. After a few months, the goose is sure that ‘The farmer has my best interests at heart.’ Each additional day’s feeding confirms this. Fully convinced of the man’s benevolence, the goose is amazed when he takes it out of its enclosure on Christmas Day – and slaughters it. The Christmas goose fell victim to inductive thinking, the inclination to draw universal certainties from individual observations.

(Dobelli, 2013, Chapter 31)

Here’s how [to exploit inductive thinking]: put together two stock market forecasts – one predicting that prices will rise next month and one warning of a drop. Send the first email to 50,000 people, and the second email to a different set of 50,000. Suppose that after one month, the indices have fallen. Now you can send another email, but this time only to the 50,000 people who received a correct prediction. These 50,000 you divide into two groups: the first half learns that prices will increase next month, the second half discovers they will fall. Continue doing this. After 10 months, around 100 people will remain, all of whom you have advised impeccably. From their perspective, you are a genius. You have proven that you are truly in possession of prophetic powers. Some of these people will trust you with their money. Take it and start a new life in Brazil.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 31)

32 Loss Aversion

It has been proven that, emotionally, a loss ‘weighs’ about twice that of a similar gain. Social scientists call this loss aversion.

(Dobelli, 2013, Chapter 32)

…if you want to convince someone about something, don’t focus on the advantages; instead highlight how it helps them dodge the disadvantages.

(Dobelli, 2013, Chapter 32)

The fear of losing something motivates people more than the prospect of gaining something of equal value.

(Dobelli, 2013, Chapter 32)

Suppose your business is home insulation. The most effective way of encouraging customers to purchase your product is to tell them how much money they are losing without insulation – as opposed to how much money they would save with it, even though the amount is exactly the same.

(Dobelli, 2013, Chapter 32)

We can’t fight it: 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.

(Dobelli, 2013, Chapter 32)

33 Social Loafing

When people work together, individual performances decrease.

(Dobelli, 2013, Chapter 33)

Social loafing does not occur solely in physical performance. We slack off mentally, too. For example, in meetings, the larger the team the weaker our individual participation. However, once a certain number of participants is involved, our performance plateaus.

(Dobelli, 2013, Chapter 33)

One question remains: who came up with the much-vaunted idea that teams achieve more than individual workers? Maybe the Japanese. Thirty years ago, they flooded global markets with their products. Business economists looked more closely at the industrial miracle and saw that Japanese factories were organised into teams. This model was copied – with mixed success. What worked very well in Japan could not be replicated with the Americans and Europeans – perhaps because social loafing rarely happens there. In the West, teams function better if and only if they are small and consist of diverse, specialised people. This makes sense, because within such groups, individual performances can be traced back to each specialist.

(Dobelli, 2013, Chapter 33)

34 Exponential Growth

… if we assume that a sheet of copy paper is approximately 0.004 inches thick, then its thickness after 50 folds is a little over 60 million miles. This equals the distance between the earth and the sun.

(Dobelli, 2013, Chapter 34)

The ancient Persians were well aware that people struggled with percentage growth. Here is a local tale: there was once a wise courtier, who presented the king with a chessboard. Moved by the gift, the king said to him: ‘Tell me how I can thank you.’ The courtier replied: ‘Your Highness, I want nothing more than for you to cover the chessboard with rice, putting one grain of rice on the first square, and then on every subsequent square, twice the previous number of grains.’ The king was astonished: ‘It is an honour to you, dear courtier, that you present such a modest request.’ But how much rice is that? The king guessed about a sack. Only when his servants began the task – placing a grain on the first square, two grains of rice on the second square, four grains of rice on the third, and so on – did he realise that he would need more rice than was growing on earth.

(Dobelli, 2013, Chapter 34)

When it comes to growth rates, do not trust your intuition. You don’t have any. Accept it. What really helps is a calculator, or, with low growth rates, the magic number of 70.

(Dobelli, 2013, Chapter 34)

35 Winner’s Curse

Texas in the 1950s. A piece of land is being auctioned. Ten oil companies are vying for it. Each has made an estimate of how much the site is worth. The lowest assessment is $ 10 million, and the highest is $ 100 million. The higher the price climbs during the auction, the more firms exit the bidding. Finally, one company submits the highest bid and wins. Champagne corks pop. The winner’s curse suggests that the winner of an auction often turns out to be the loser. Industry analysts have noted that companies that regularly emerged as winning bidders from these oilfield auctions systematically paid too much, and years later went under. This is understandable. If the estimates vary between $ 10 million and $ 100 million, the actual value most likely lies somewhere in the middle. The highest bid at an auction is often much too high – unless these bidders have critical information others are not privy to. This was not the case in Texas. The oil managers actually celebrated a Pyrrhic victory.

(Dobelli, 2013, Chapter 35)

Astoundingly, more than half of all acquisitions destroy value, according to a McKinsey study.

(Dobelli, 2013, Chapter 35)

A friend owns a micro-antenna factory and told me about the cut-throat bidding war that Apple instigated during the development of the iPhone. Everyone wants to be the official supplier to Apple even though whoever gets the contract is likely to lose money.

(Dobelli, 2013, Chapter 35)

36 Fundamental Attribution Error

The 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.

(Dobelli, 2013, Chapter 36)

we spend about 90% of our time thinking about other people, and dedicate just 10% to assessing other factors and contexts.

(Dobelli, 2013, Chapter 36)

Pay close attention to the dance of influences to which the actors are subjected.

(Dobelli, 2013, Chapter 36)

37 False Causality

Recently I read that students get better grades at school if their homes contain a lot of books. This study was surely a shot in the arm for booksellers, but it is another fine example of false causality. The simple truth is that educated parents tend to value their children’s education more than uneducated ones do. Plus, educated parents often have more books at home. In short, a dust-covered copy of War and Peace alone isn’t going to influence anyone’s grades; what counts is parents’ education levels, as well as their genes.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 37)

38 Halo Effect

The psychologist Edward Lee Thorndike discovered the halo effect nearly 100 years ago. His conclusion was that a single quality (e.g., beauty, social status, age) produces a positive or negative impression that outshines everything else, and the overall effect is disproportionate. Beauty is the best-studied example. Dozens of studies have shown that we automatically regard good-looking people as more pleasant, honest and intelligent. Attractive people also have it easier in their professional lives – and that has nothing to do with the myth of women ‘sleeping their way to the top’. The effect can even be detected in schools, where teachers unconsciously give good-looking students better grades.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 38)

39 Alternative Paths

Alternative paths are all the outcomes that could have happened, but did not.

(Dobelli, 2013, Chapter 39)

Alternative paths are invisible, so we contemplate them very rarely. Those who speculate on junk bonds, options and credit default swaps, thus making millions, should never forget that they flirt with many alternative paths that lead straight to ruin. To a rational mind, ten million dollars that comes about through a huge risk is worth less than the same sum earned by years of drudgery.

(Dobelli, 2013, Chapter 39)

40 False Prophets

Until a few years ago, no one bothered to check. Then along came Philip Tetlock. Over a period of ten years, he evaluated 28,361 predictions from 284 self-appointed professionals. The result: in terms of accuracy, the experts fared only marginally better than a random forecast generator. Ironically, the media darlings were among the poorest performers; and of those the worst were the prophets of doom and disintegration. Examples of their far-fetched forecasts included the collapse of Canada, Nigeria, China, India, Indonesia, South Africa, Belgium and the E.U. None of these countries has imploded.

(Dobelli, 2013, Chapter 40)

‘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.

(Dobelli, 2013, Chapter 40)

41 Conjunction Fallacy

We are easy prey for the conjunction fallacy because we have an innate attraction to ‘harmonious’ or ‘plausible’ stories. The more convincingly, impressively or vividly Chris the aid worker is portrayed, the greater the risk of false reasoning. If I had put it a different way, you would have recognised the extra details as overly specific: for example ‘Chris is 35. What is more likely? A) Chris works for a bank or B) Chris works for a bank in New York, where his office is on the twenty-fourth floor, overlooking Central Park.’

(Dobelli, 2013, Chapter 41)

What is more likely? A) ‘Seattle airport is closed. Flights are cancelled.’ B) ‘Seattle airport is closed due to bad weather. Flights are cancelled.’ A or B? This time, you have it: A is more likely since B implies that an additional condition has been met, namely bad weather.

(Dobelli, 2013, Chapter 41)

Remember: if an additional condition has to be met, no matter how plausible it sounds, it will become less, not more, likely.

(Dobelli, 2013, Chapter 41)

42 Framing

We react differently to identical situations, depending on how they are presented. Kahneman and Tversky conducted a survey in the 1980s in which they put forward two options for an epidemic-control strategy. The lives of 600 people were at stake, they told participants. ‘Option A saves 200 lives.’ ‘Option B offers a 33% chance that all 600 people will survive, and a 66% chance that no one will survive.’ Although options A and B were comparable (with 200 survivors expected), the majority of respondents chose A – remembering the adage: a bird in the hand is worth two in the bush. It became really interesting when the same options were reframed. ‘Option A kills 400 people’, ‘Option B offers a 33% chance that no one will die, and a 66% chance that all 600 will die.’ This time, only a fraction of respondents chose A and the majority picked B.

(Dobelli, 2013, Chapter 42)

…researchers presented a group of people with two kinds of meat, ‘99% fat free’ and ‘1% fat’, and asked them to choose which was healthier. Can you guess which they picked? Bingo: respondents ranked the first type of meat as healthier, even though both were identical. Next came the choice between ‘98% fat free’ and ‘1% fat’. Again, most respondents chose the first option – despite its higher fat content. Glossing is a popular type of framing.

(Dobelli, 2013, Chapter 42)

Under its rules, a tumbling share price becomes ‘correction’. An overpaid acquisition price is branded ‘goodwill’. In every management course, a problem magically transforms into an ‘opportunity’ or a ‘challenge’. A person who is fired is ‘reassessing his career’. A fallen soldier – regardless of how much bad luck or stupidity led to his death – turns into a ‘war hero’. Genocide translates to ‘ethnic cleansing’. A successful emergency landing, for example on the Hudson River, is celebrated as a ‘triumph of aviation’. (Shouldn’t a textbook landing on a runway count as an even bigger triumph of aviation?)

(Dobelli, 2013, Chapter 42)

Framing is used to good effect in commerce, too. Consider used cars. You are led to focus on just a few factors, whether the message is delivered through a salesman, a sign touting certain features, or even your own criteria. For example, if the car has low mileage and good tyres, you home in on this and overlook the state of the engine, the brakes or the interior. Thus, the mileage and tyres become the main selling points and frame our decision to buy. Such oversight is only natural, though, since it is difficult to take in all possible pros and cons. Interestingly, had other frames been used to tout the car we might have decided very differently.

(Dobelli, 2013, Chapter 42)

43 Action Bias

action bias: look active, even if it achieves nothing.

(Dobelli, 2013, Chapter 43)

Society at large still prefers rash action to a sensible wait-and-see strategy.

(Dobelli, 2013, Chapter 43)

… 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.

(Dobelli, 2013, Chapter 43)

‘All of humanity’s problems stem from man’s inability to sit quietly in a room alone,’ wrote Blaise Pascal.

44 Omission Bias

You are on a glacier with two climbers. The first slips and falls into a crevasse. He might survive if you call for help, but you don’t, and he perishes. The second climber you actively push into the ravine, and he dies shortly afterwards. Which weighs more heavily on your conscience? Considering the options rationally, it’s obvious that both are equally reprehensible, resulting as they do in death for your companions. And yet something makes us rate the first option, the passive option, as less horrible. This feeling is called the omission bias. It crops up where both action and inaction lead to cruel consequences. In such cases, we tend to prefer inaction; its results seem more anodyne.

(Dobelli, 2013, Chapter 44)

45 Self-Serving Bias

… we attribute success to ourselves and failures to external factors. This is the self-serving bias.

(Dobelli, 2013, Chapter 45)

Even if you have never heard the expression, you definitely know the self-serving bias from high school. If you got an A, you were solely responsible; the top grade reflected your intelligence, hard work and skill. And if you flunked? The test was clearly unfair.

(Dobelli, 2013, Chapter 45)

So, how can we dodge the self-serving bias? Do you have friends who tell you the truth – no holds barred? If so, consider yourself lucky. If not, do you have at least one enemy? Good. Invite him or her over for coffee and ask for an honest opinion about your strengths and weaknesses. You will be forever grateful you did.

(Dobelli, 2013, Chapter 45)

46 Hedonic Treadmill

‘affective forecasting’ … [is] our inability to correctly predict our own emotions.

(Dobelli, 2013, Chapter 46)

A friend, a banking executive, whose enormous income was beginning to burn a hole in his pocket, decided to build himself a new home away from the city. His dream materialised into a villa with ten rooms, a swimming pool and an enviable view of the lake and mountains. For the first few weeks, he beamed with delight. But soon the cheerfulness disappeared, and six months later he was unhappier than ever. What happened? As we now know, the happiness effect evaporates after a few months. The villa was no longer his dream. ‘I come home from work, open the door and?. . .? nothing. I feel as indifferent about the villa as I did about my one-room student apartment.’ To make things worse, the poor guy now faced a one-hour commute twice a day. This may sound tolerable, but studies show that commuting by car represents a major source of discontent and stress, and people hardly ever get used to it. In other words, whoever has no innate affinity for commuting will suffer every day – twice a day. Anyhow, the moral of the story is that the dream villa had an overall negative effect on my friend’s happiness.

(Dobelli, 2013, Chapter 46)

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.

(Dobelli, 2013, Chapter 46)

Avoid negative things that you cannot grow accustomed to, such as commuting, noise or chronic stress.

(Dobelli, 2013, Chapter 46)

Expect only short-term happiness from material things, such as cars, houses, lottery winnings, bonuses and prizes.

(Dobelli, 2013, Chapter 46)

Aim for as much free time and autonomy as possible, since long-lasting positive effects generally come from what you actively do. Follow your passions even if you must forfeit a portion of your income for them. Invest in friendships. For most people, professional status achieves long-lasting happiness, as long as they don’t change peer groups at the same time. In other words, if you ascend to a CEO role and fraternise only with other executives, the effect fizzles out.

(Dobelli, 2013, Chapter 46)

47 Self-Selection Bias

Whenever we complain about bad luck, we must be wary of the so-called self-selection bias. My male friends often gripe about there being too few women in their companies, and my female friends groan that theirs have too few men. This has nothing to do with bad luck: the grumblers form part of the sample. The probability is high that a man will work in a mostly male industry. Ditto for women. On a grander scale, if you live in a country with a large proportion of men or women (such as China or Russia, respectively), you are likely to form part of the bigger group and accordingly feel hard done by.

(Dobelli, 2013, Chapter 47)

Particularly amusing is this recent telephone survey: 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. What a masterpiece.

(Dobelli, 2013, Chapter 47)

48 Association Bias

Advertising creates a link between products and emotions. For this reason, you will never see Coke alongside a frowning face or a wrinkly body. Coke people are young, beautiful and oh so fun, and they appear in clusters not seen in the real world. These false connections are the work of the association bias, which also influences the quality of our decisions.

(Dobelli, 2013, Chapter 48)

For example, we often condemn bearers of bad news, since we automatically associate them with the message’s content (otherwise known as shoot-the-messenger syndrome).

(Dobelli, 2013, Chapter 48)

In the days before email and telemarketing, travelling salesmen went door to door peddling their wares. One day, a particular salesman, George Foster, stood at a front door. The house turned out to be vacant, and unbeknownst to him, a tiny leak had been filling it with gas for weeks. The bell was also damaged, so when he pressed it, it created a spark and the house exploded. Poor George ended up in hospital, but fortunately he was soon back on his feet. Unfortunately, his fear of ringing doorbells had become so strong that for many years he couldn’t go back to his job. He knew how unlikely a repeat of the incident was, but for all he tried, he just couldn’t manage to reverse the (false) emotional connection. The take-home message from all this is phrased most aptly by Mark Twain: ‘We should be careful to get out of an experience only the wisdom that is in it – and stop there; lest we be like the cat that sits down on a hot stove-lid. She will never sit down on a hot stove-lid again – and that is well; but also she will never sit down on a cold one anymore.’

(Dobelli, 2013, Chapter 48)

49 Beginner’s Luck

Beginner’s luck plays an important role in the economy. Say company A buys smaller companies B, C and D one after the other. The acquisitions prove a success, and the directors believe they have a real skill for acquisitions. Buoyed by this confidence, they now buy a much larger company, E. The integration is a disaster. The merger proves too difficult to handle, the estimated synergies impossible to realise. Objectively speaking, this was foreseeable because in the previous acquisitions everything fell perfectly into place as if guided by a magical hand, so beginner’s luck blinded them.

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 49)

As soon as my first novel, Thirty-five, was ready to go, I sent it to a single publisher, where it was promptly accepted. For a moment I felt like a genius, a literary sensation. (The chance that this publisher will take on a manuscript is one in 15,000.) To test my theory, I then sent the manuscript to ten other big publishers. And I got ten rejection letters. My notion was thus disproven, bringing me swiftly back down to earth.

(Dobelli, 2013, Chapter 49)

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. The Greek poet, Aesop, created this fable to illustrate one of the most common errors in reasoning. An inconsistency arose when the fox set out to do something and failed to accomplish it. He can resolve this conflict in one of three ways: A) by somehow getting at the grapes, B) by admitting that his skills are insufficient, or C) by retrospectively reinterpreting what happened. The last option is an example of cognitive dissonance, or rather, its resolution.

(Dobelli, 2013, Chapter 50)

51 Hyperbolic Discounting

You know the saying: ‘Live each day as if it were your last.’ It features at least three times in every lifestyle magazine, and has a slot in every self-help manual’s standard repertoire, too. For such a clever line, it makes you none the wiser. Just imagine what would happen if you followed it to the letter: you would no longer brush your teeth, wash your hair, clean the apartment, turn up for work, pay the bills?. . .? In no time, you would be broke, sick and perhaps even behind bars. And yet, its meaning is inherently noble. It expresses a deep longing, a desire for immediacy. We place huge value on immediacy – much more than is justifiable. ‘Enjoy each day to the fullest and don’t worry about tomorrow’ is simply not a smart way to live.

(Dobelli, 2013, Chapter 51)

In the 60s, Walter Mischel conducted a famous experiment on delayed gratification. You can find a wonderful video of this on YouTube by typing in ‘marshmallow experiment’. In it, a group of four-year-olds were each given a marshmallow. They could either eat it straight away or wait a couple of minutes and receive a second. Amazingly, very few children could wait. Even more amazingly, Mischel found that the capacity for delayed gratification is a reliable indicator of future career success. Patience is indeed a virtue.

(Dobelli, 2013, Chapter 51)

The more power we gain over our impulses, the better we can avoid this trap. The less power we have over our impulses – for example when we are under the influence of alcohol – the more susceptible we are. Viewed from the other side, if you sell consumer products, give customers the option of getting their hands on the items straight away. Some people will be willing to pay extra just so they don’t have to wait. Amazon makes a bundle from this: a healthy chunk of the next-day delivery surcharge goes directly into its coffers.

(Dobelli, 2013, Chapter 51)

52 ‘Because’ Justification

Ellen Langer in the 1970s. For this, she went into a library and waited at a photocopier until a line had formed. Then she approached the first in line and said: ‘Excuse me, I have five pages. May I use the Xerox machine?’ Her success rate was 60 per cent. She repeated the experiment, this time giving a reason: ‘Excuse me. I have five pages. May I use the Xerox machine, because I’m in a rush?’ In almost all cases (94 per cent), she was allowed to go ahead. This is understandable: if people are in a hurry, you often let them cut in to the front of the line. She tried yet another approach, this time saying: ‘Excuse me. I have five pages. May I go before you, because I have to make some copies?’ The result was amazing. Even though the pretext was (ahem) paper-thin – after all, everyone was standing in line to make copies – she was allowed to pass to the front of the line in almost all cases (93 per cent).

(Dobelli, 2013, Chapter 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.

(Dobelli, 2013, Chapter 52)

53 Decision Fatigue

Willpower is like a battery. After a while it runs out and needs to be recharged. How do you do this? By taking a break, relaxing and eating something. Willpower plummets to zero if your blood sugar falls too low. IKEA knows this only too well. On the trek through its maze-like display areas and towering warehouse shelves, decision fatigue sets in. For this reason, its restaurants are located right in the middle of the stores. The company is willing to sacrifice some of its profit margin so that you can top up your blood sugar on Swedish treats before resuming your hunt for the perfect candlesticks.

(Dobelli, 2013, Chapter 53)

54 Contagion Bias

The contagion bias describes how we are incapable of ignoring the connection we feel to certain items – be they from long ago or only indirectly related (as with the photos).

(Dobelli, 2013, Chapter 54)

55 The Problem with Averages

Suppose each of fifty randomly selected individuals has assets of $ 54,000. This is the statistical middle value, the median. Then Bill Gates is added to the mix, with his fortune of around $ 59 billion. The average wealth has just shot up to $ 1.15 billion, an increase of more than two million per cent. A single outlier has radically altered the picture, rendering the term ‘average’ completely meaningless.

(Dobelli, 2013, Chapter 55)

56 Motivation Crowding

The point is: small – surprisingly small – monetary incentives crowd out other types of incentives.

(Dobelli, 2013, Chapter 56)

When people do something for well-meaning, non-monetary reasons – out of the goodness of their hearts, so to speak – payments throw a wrench into the works. Financial reward erodes any other motivations.

(Dobelli, 2013, Chapter 56)

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.

(Dobelli, 2013, Chapter 56)

One final tip for those of you who have children: experience shows that young people are not for sale. If you want your kids to do their homework, practise musical instruments, or even mow the lawn once in a while, do not reach for your wallet. Instead, give them a fixed amount of pocket money each week. Otherwise, they will exploit the system and soon refuse to go to bed without recompense.

(Dobelli, 2013, Chapter 56)

57 Twaddle Tendency

The twaddle tendency is especially rife in sport. Breathless interviewers push equally breathless football players to break down the components of the game, when all they want to say is: ‘We lost the game – it’s really that simple.’

(Dobelli, 2013, Chapter 57)

… 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.

(Dobelli, 2013, Chapter 57)

58 Will Rogers Phenomenon

One good example is an auto franchise: let’s say you take charge of two small branches in the same town with a total of six salesmen: numbers 1, 2 and 3 in branch A, and numbers 4, 5 and 6 in branch B. On average, salesman number 1 sells one car per week, salesman number 2 sells two cars per week and so on up to top salesman number 6, who shifts six cars each week. With a little calculation, you know that branch A sells two cars per salesman, whereas branch B is far ahead with an average of five cars per salesman per week. You decide to transfer salesman number 4 to branch A. What happens? Its average sales increase to 2.5 units per person. And branch B? It now consists of only two salesmen, numbers 5 and 6. Its average sales increase to 5.5 per person. Such switcheroo strategies don’t change anything overall, but they create an impressive illusion. For this reason, journalists, investors and board members should be on special alert when they hear of rising averages in countries, companies, departments, cost centres or product lines.

(Dobelli, 2013, Chapter 58)

A particularly deceitful case of the Will Rogers phenomenon is found in medicine. Tumours are usually broken down into four stages: the smallest and most treatable ones are classified as stage one; the worst are rated stage four. Their progression gives us the term stage migration. The survival rate is highest for stage-one patients and lowest for stage-four patients. Now, every year new procedures are released on to the market and allow for more accurate diagnosis. These new screening techniques reveal minuscule tumours that no doctor had ever noticed before. The result: patients who were erroneously diagnosed as healthy before are now counted as stage-one patients. The addition of relatively healthy people into the stage-one group increases the group’s average life expectancy. A great medical success? Unfortunately not: mere stage migration.

(Dobelli, 2013, Chapter 58)

59 Information Bias

Jonathan Baron from the University of Pennsylvania asked physicians the following question: a patient presents symptoms that indicate with a probability of 80% that he is suffering from disease A. If this is not the case, the patient has either disease X or Y. Each of these diseases is equally bad, and each treatment results in similar side effects. As a doctor, what treatment would you suggest? Logically, you would opt for the relevant therapy. Now suppose there is a diagnostic test that flashes ‘positive’ when disease X is present and ‘negative’ when disease Y is detected. However, if the patient really does have disease A, the results will be positive in 50% of the cases, and negative in the other 50%. Would you recommend conducting the test? Most doctors said yes—even though the results would be irrelevant. Assuming that the test result is positive, the probability of disease A is still much greater than that of disease X. The additional information contributes nothing of value to the decision.

(Dobelli, 2013, Chapter 59)

Additional information not only wastes time and money, it can also put you at a disadvantage. Consider this question: which city has more inhabitants — San Diego or San Antonio? Gerd Gigerenzer of the Max Planck Institute in Germany put this question to students in the Universities of Chicago and Munich. Sixty-two per cent of Chicago students guessed right: San Diego has more. But, astonishingly, every single Germany student answered correctly. The reason: all of them had heard of San Diego, but not necessarily of San Antonio, so they opted for the more familiar city. For the Chicacoans, however, both cities were household names. They had more information and it misled them.

(Dobelli, 2013, Chapter 59)

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.

(Dobelli, 2013, Chapter 59)

‘The greatest obstacle to discovery is not ignorance—it is the illusion of knowledge.’

(Dobelli, 2013, Chapter 59)

60 Effort Justification

When you put a lot of energy into a task, you tend to overvalue the result.

(Dobelli, 2013, Chapter 60)

Effort justification is a special case of cognitive dissonance. 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.

(Dobelli, 2013, Chapter 60)

In the 1950s, instant cake mixes were introduced to the market. A surefire hit, thought the manufacturers. Far from it: housewives took an instant dislike to them—because they made things too easy. The firms reacted and made the preparation slightly more difficult (beating in an egg yourself). The added effort raised the women’s sense of achievement and, with it, their appreciation for convenience food.

(Dobelli, 2013, Chapter 60)

… whenever you have invested a lot of time and effort into something, stand back and examine the result—only the result.

(Dobelli, 2013, Chapter 60)

61 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.

(Dobelli, 2013, Chapter 61)

62 Expectations

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.

(Dobelli, 2013, Chapter 62)

63 Simple Logic

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.

(Dobelli, 2013, Chapter 63)

64 Forer Effect

People tend to identify many of their own traits in universal descriptions [such as those provided by horoscopes]. Science labels this tendency the Forer effect (or the Barnum effect). The Forer effect explains why the pseudo-sciences work so well—astrology, astrotherapy, the study of handwriting, biorhythm analysis, palmistry, tarot-card readings and seances with the dead. What’s behind the Forer effect? First, the majority of statements in Forer’s passage are so general that they relate to everyone…. Second, we tend to accept flattering statements that don’t apply to us.

(Dobelli, 2013, Chapter 64)

65 Volunteer’s Folly

Not actual citation:

Volunteer’s Folly is given away man hours as voluntary work to do a job whose rate is much lower of the volunteer’s regular rate. For example, a lawyer who cooks on a Friday for a homeless people’s charity. If the lawyer’s hourly rate is $500, and that of a cook, $50, it is best for the lawyer to stay working and simply pay the cook which will not only help the homeless people but also the cook themselves.

(Dobelli, 2013, Chapter 65)

66 Affect Heuristic

If you like something, you believe that the risks are smaller and the benefits greater than they actually are. If you don’t like something, the opposite is true. Risks and benefits appear to be dependent. Of course, in reality, they are not.

(Dobelli, 2013, Chapter 66)

…suppose you own a Harley-Davidson. If you come across a study that states that driving one is riskier than previously thought, you will subconsciously tweak how you rate the benefits, deeming the experience ‘an even greater sense of freedom’.

(Dobelli, 2013, Chapter 66)

Whether we like it or not, we are puppets of our emotions. We make complex decisions by consulting our feelings, not our thoughts. Against our best intentions, we substitute the question, ‘What do I think about this?’ with ‘How do I feel about this?’ So, smile! Your future depends on it.

(Dobelli, 2013, Chapter 66)

67 Introspection Illusion

The belief that reflection leads to truth or accuracy is called the introspection illusion. This is more than sophistry. Because we are so confident of our beliefs, we experience three reactions when someone fails to share our views. Response 1: Assumption of ignorance. The other party clearly lacks the necessary information. If he knew what you know, he would be of the same opinion … Reaction 2: Assumption of idiocy. The other person has the necessary information, but his mind is underdeveloped. He cannot draw the obvious conclusions. In other words, he’s a moron … Response 3: Assumption of malice. Your counterpart has the necessary information—he even understands the debate—but he is deliberately confrontational. He has evil intentions. This is how many religious leaders and followers treat disbelieivers: if they don’t agree, they must be servants of the devil!

(Dobelli, 2013, Chapter 67)

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. Regards your internal observations with the same scepticism as claims from some random person. Become your own toughest critic.

(Dobelli, 2013, Chapter 67)

68 Inability to Close Doors

… the price tag [of leaving doors open] is often hidden and intangible: each decision costs mental energy and eats up precious time for thinking and living. CEOs who examine every possible expansion option often choose none in the end. Companies that aim to address all customer segments end up addressing no one. Salespeople who chase every single lead close no deals.

(Dobelli, 2013, Chapter 68)

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.

(Dobelli, 2013, Chapter 68)

69 Neomania

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.

(Dobelli, 2013, Chapter 69)

70 Sleeper Effect

…in our memories, the source of the argument fades faster than the argument. In other words, your brain quickly forgets where the information came from (e.g. from the department of propaganda). Meanwhile, the message itself (i.e. war is necessary and noble) fades only slowly or even endures. Therefore, any knowledge that stems from an untrustworthy source gains credibility over time. The discrediting force melts away faster than the message does.

(Dobelli, 2013, Chapter 70)

71 Alternative Blindness

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.

(Dobelli, 2013, Chapter 71)

If you have trouble making a decision, remember that the choices are broader than ‘no surgery’ and ‘highly risky surgery’. Forget about the rock and hard place, and open your eyes to the other, superior alternatives.

(Dobelli, 2013, Chapter 71)

72 Social Comparison Bias

While his school was closed due to an outbreak of plague in 1666-7, 25-year old Isaac Newton showed his professor, Isaac Barrow, what research he was conducting in his spare time. Barrow immediately gave up his job as a professor and became a student of Newton. What a noble gesture. What ethical behaviour. When was the last time you heard of a professor vacating his post in favour of a better candidate? And when was the last time you read about a CEO clearing out his desk when he realised that one of his 20,000 employees could do a better job?

(Dobelli, 2013, Chapter 72)

73 Primacy and Recency Effects

Allow me to introduce you to two men, Alan and Ben. Without thinking about it too long, decide who you prefer. Alan is smart, hard-working, impulsive, critical, stubborn and jealous. Ben, however, is jealous, stubborn, critical, impulsive, hard-working and smart. Who would you prefer to get stuck in an elevator with? Most people choose Alan, even though the descriptions are exactly the same. Your brain pays more attention to the first adjectives in the lists, causing you to identify two different personalities. Alan is smart and hard-working. Bean is jealous and stubborn. The first traits outshine the rest. This is called the primacy effect.

(Dobelli, 2013, Chapter 73)

… 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.

(Dobelli, 2013, Chapter 73)

74 Not-Invented-Here Syndrome

[The Not-Invented-Here] (NIH) syndrome causes you to fall in love with your own ideas.

(Dobelli, 2013, Chapter 74)

…we are drunk on our own ideas. To sober up, take a step back every now and then to examine their quality in hindsight. Which of your ideas from the past ten years were truly outstanding? Exactly.

(Dobelli, 2013, Chapter 74)

75 The Black Swan

U.S. secretary of defence, Donald Rumsfeld … at a press conference in 2002, expressed a philosophical thought with exceptional clarity when he offered this observation: there are things we know (‘known facts’), there are things we do not know (‘known unknowns’) and there are things that we do not know that we do not know (‘unknown unknowns’).

(Dobelli, 2013, Chapter 75)

Put yourself in situations where you can catch a ride on a positive Black Swan (as unlikely as that is). Become an artist, inventor or entrepreneur with a scaleable product. If you sell your time (e.g. as an employee, dentist or journalist), you are waiting in vain for such a break. But even if you feel compelled to continue as such, avoid surroundings where negative Black Swans thrive. This means: stay out of debt, invest your savings as conservatively as possible and get used to a modest standard of living—no matter whether your big breakthrough comes or not.

(Dobelli, 2013, Chapter 75)

76 Domain Dependence

…when I speak with investors … If I illustrate fallacies using financial examples, most catch on immediately. However, if I take instances from biology, many are lost. The conclusion: insights do not pass well from one field to another. This effect is called domain dependence.

(Dobelli, 2013, Chapter 76)

77 False-Consensus Effect

We frequently overestimate unanimity with others, believing that everyone else thinks and feels exactly like we do. This fallacy is called the false-consensus effect.

(Dobelli, 2013, Chapter 77)

…assume that your worldview is not borne by the public. More than that: do not assume that those who think differently are idiots. Before you distrust them, question your own assumptions.

(Dobelli, 2013, Chapter 77)

78 Falsification of History

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.

(Dobelli, 2013, Chapter 78)

79 In-Group Out-Group Bias

You perceive people outside your own group to be more similar than they actually are. This is called the out-group homogeneity bias. Stereotypes and prejudices stem from it.

(Dobelli, 2013, Chapter 79)

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.

(Dobelli, 2013, Chapter 79)

80 Ambiguity Aversion

If you hear phrases such as ‘the risk of hyperinflation is x per cent’ or ‘the risk to our equity position is y’, start worrying. To avoid hast 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 … Depending on how it is built, you will tolerate uncertainty with a 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.

(Dobelli, 2013, Chapter 80)

…whoever hopes to think clearly must understand the difference between risk and uncertainty. Only in very few areas can we count on clear probabilities: casinos, coin tosses and probability textbooks. Often we are left with troublesome ambiguity. Learn to take it in stride.

(Dobelli, 2013, Chapter 80)

81 Default Effect

…. there is a shortage of organ donors. Only about 40% of people opt for it. Scientists Eric Johnson and Dan Goldstein asked people whether, in the event of death, they wanted to actively opt out of organ donation. Making donation the default option increased take-up from 40% to more than 80% participants, a huge difference between an opt-in and an opt-out default.

(Dobelli, 2013, Chapter 81)

The default effect is at work even when no standard option is mentioned. In such cases we make our past the default setting, thereby prolonging and sanctifying the status quo. People crave what they know. Given the choice of trying something new or sticking to the tried and tested option, we tend to be highly conservative even if a change would be beneficial.

(Dobelli, 2013, Chapter 81)

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.

(Dobelli, 2013, Chapter 81)

Examples: Insurance Policies in New Jersey and Pennsylvania

82 Fear of Regret

Regret is the feeling of having made the wrong decision. You wish someone would give you a second chance.

(Dobelli, 2013, Chapter 82)

The fear of regret can make us behave irrationally… [it] prevents you from throwing away things you no longer require.

(Dobelli, 2013, Chapter 82)

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.

(Dobelli, 2013, Chapter 82)

‘Last chances’ make us panic-stricken, and the fear of regret can overwhelm even the most hard-headed dealmakers.

(Dobelli, 2013, Chapter 82)

83 Salience Effect

Kurt is a local journalist. One evening, he happens to drive past the scene of an accident. A car is wrapped around a tree trunk. Since Kurt has a very good relationship with the local police, he learns that they found marijuana in the back seat of the car. He hurries back to the newsroom and writes this headline: ‘Marijuana Kills Yet Another Motorist’…. we are assuming that the statistical relationship between marijuana and car accidents is zero. Thus, Kurt’s headline is unfounded. He has fallen victim to the salience effect. Since marijuana is the salient feature of this accident, Kurt believes that it is responsible for the crash.

(Dobelli, 2013, Chapter 83)

We tend to neglect hidden, slow-to-develop, discrete factors. Do not be blinded by irregularities.

(Dobelli, 2013, Chapter 83)

84 House-Money Effect

Money is money after all. But we don’t see it that way. Depending on how we get it, we treat it differently. Money is not naked; it is wrapped in an emotional shroud…We treat money that we win, discover or inherit much more frivolously than hard-earned cash.

(Dobelli, 2013, Chapter 84)

Two questions. You’ve worked hard for a year. At the end of the twelve months, you have $20,000 more in your account that you had at the beginning. What do you do? A) Leave it sitting in the bank. B) Invest it. C) Use it to make necessary improvements, such as renovating your mouldy kitchen or replacing old tyres. D) Treat yourself to a luxury cruise. If you think like most people, you’ll opt for A, B, or C. Second question. You win $20,0000 in the lottery. What do you do with it? Choose from A, B, C, or D [again] … Most people now take C or D. And of course, by doing so they exhibit flawed thinking. You can count it any way you like; $20,000 is still $20,000.

(Dobelli, 2013, Chapter 84)

85 Procrastination

Procrastination is idiotic because no project completes itself. We know that these tasks are beneficial, so why do we keep pushing them on the back burner? Because of the time lapse between sowing and reaping. To bridge it requires a high degree of mental energy…

(Dobelli, 2013, Chapter 85)

Willpower is like a battery, at least in the short term. If it is depleted, future challenges will falter.

(Dobelli, 2013, Chapter 85)

The most effective trick … [to prevent procrastination] … is to set deadlines. Psychologist Dan Ariely found that dates stipulated by external authorities—for example, a teacher or the IRS—work best. Self-imposed deadlines will work only if the task is broken down step by step, with each part assigned its own due date. For this reason, nebulous New Year’s resolutions are doomed to fail.

(Dobelli, 2013, Chapter 85)

86 Envy

‘Envy is the most stupid of vices, for there is no single advantage to be gained from it,’ writes Balzac.

(Dobelli, 2013, Chapter 86)

Paradoxically, with envy we direct resentments toward those who are most similar to us in age, career and residence. We don’t envy business people from the century before last. We don’t begrudge plants or animals. We don’t envy millionaires on the other side of the globe—just those on the other side of the city.

(Dobelli, 2013, Chapter 86)

87 Personification

[in an experiment] … psychologist Paul Slovic asked people for donations. One group was shown a photo of Rokia from Malawi, an emaciated child with pleading eyes. Afterward, people donated an average of $2.83 to the charity (out of $5 they were given to fill out a short survey). The second group was shown statistics about the famine in Malawi, including the fact that more than three million malnourished children were affected. The average donation dropped by 50%. This is illogical: you would think that people’s generosity would grow if they knew the extent of the disaster. But we do not function like that. Statistics don’t stir us; people do.

(Dobelli, 2013, Chapter 87)

… be careful when you encounter human stories. Ask for the facts and the statistical distribution behind them. If, however, you seek to move and motivate people for your own ends, make sure your tale is seasoned with names and faces.

(Dobelli, 2013, Chapter 87)

If … you seek to move and motivate people for your own ends, make sure your tale is seasoned with names and faces.

(Dobelli, 2013, Chapter 87)

88 Illusion of Attention

The Monkey Business Test is considered one of the most famous experiments in psychology and demonstrates the so-called illusion of attention: we are confident that we notice everything that takes place in front of us. But in reality, we often see only what we are focusing on.

(Dobelli, 2013, Chapter 88)

The illusion of attention can be precarious, for example, when making a phone call while driving.

(Dobelli, 2013, Chapter 88)

Purge yourself of the illusion of attention every now and then. Confront all possible and seemingly impossible scenarios.

(Dobelli, 2013, Chapter 88)

89 Strategic Misrepresentation

… the more at stake, the more exaggerated your assertions become.

(Dobelli, 2013, Chapter 89)

No one knows more about large-scale projects than Oxford professor Bent Flyvbjerg. Why are cost and schedule overruns so frequent? Because it is not the best offer overall that wins; it is whichever one looks best on paper. Flyvbjerg calls this ‘reverse Darwinism’: whoever produces the most hot air will be rewarded the project.

(Dobelli, 2013, Chapter 89)

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.

(Dobelli, 2013, Chapter 89)

90 Overthinking

Essentially, if you think too much, you cut off your mind from the wisdom of your feelings.

(Dobelli, 2013, Chapter 90)

91 Planning Fallacy

… you systematically take on too much. More than that: your plans are absurdly ambitious.

(Dobelli, 2013, Chapter 91)

Even though you realise that most of your previous endeavours were overly optimistic, you believe in all seriousness that, today, the same workload—or more—is eminently doable.

(Dobelli, 2013, Chapter 91)

The conch-shaped Sydney Opera House was planned in 1957: completion was due in 1963 at a cost of $7 million. It finally open its doors in 1973 after $102 million had been dumped in—14 times the original estimate!

(Dobelli, 2013, Chapter 91)

… why are we not natural-born planners? The first reason: wishful thinking. We want to be successful and achieve everything we take on. Second, we focus too much on the project and overlook outside influences. Unexpected events too often scupper our plans. This is true for daily schedules, too … Your car battery gives up the ghost.

(Dobelli, 2013, Chapter 91)

Step-by-step preparation amplifies the planning fallacy.

(Dobelli, 2013, Chapter 91)

Shift your focus from internal things, such as your own project, to external factors, like similar projects. Look at the base rate and consult the past… And, most importantly, shortly before decisions are made, perform a so-called ‘premortem’ session (literally, ‘before death’)… ‘Imagine it is year from today. We have followed the plan to the letter. The result is a disaster. Take five or ten minutes to write about this disaster.’ The stories will show you how things might turn out.

(Dobelli, 2013, Chapter 91)

92 Déformation Professionnelle

‘If your only tool is a hammer, all your problems will be nails,’ said Mark Twain.

(Dobelli, 2013, Chapter 92)

Armies think of military solutions first. Engineers, structural. Trend gurus see trends in everything (incidentally, this is one of the most idiotic ways to view the world). In short: if you ask someone the crux of a particular problem, they usually link it to their own area of expertise.

(Dobelli, 2013, Chapter 92)

Déformation Professionnelle becomes hazardous when people apply their specialised processes in areas where they don’t belong. Surely you’ve come across some of these: teachers who scold their friends like students. New mothers who begin to treat their husbands like children.

(Dobelli, 2013, Chapter 92)

if you take your problem to an expert, don’t expect the overall best solution. Expect an approach that can be solved with the expert’s toolkit. The brain is not a central computer. Rather, it is a Swiss Army knife with many specialised tools. Unfortunately, our ‘pocketknives’ are incomplete. Given our life experiences and our professional expertise, we already possess a few blades.

(Dobelli, 2013, Chapter 92)

93 Zeigarnik Effect

… once we’ve completed a task and checked it off our mental list, it is erased from memory.

(Dobelli, 2013, Chapter 93)

Outstanding tasks gnaw at us only until we have a clear idea of how we will deal with them. Zeigarnik mistakenly believed that it was necessary to complete tasks to erase them from memory. But it’s not; a good plan of action suffices.

(Dobelli, 2013, Chapter 93)

… next time you cannot get to sleep, jot down outstanding tasks and how you will tackle them.

(Dobelli, 2013, Chapter 93)

94 Illusion of Skill

… luck plays a bigger role than skill does. No businessperson likes to hear this. When I first heard about the illusion of skill, my reaction was: ‘What, my success was a fluke?’ At first, it sounds a little offensive, especially if you worked hard to get there.

(Dobelli, 2013, Chapter 94)

… certain 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: we give plumbers due respect and chuckle at successful financial jesters.

(Dobelli, 2013, Chapter 94)

95 Feature-Positive Effect

Absence is much harder to detect than presence. In other words, we place greater emphasis on what is present than on what is absent.

(Dobelli, 2013, Chapter 95)

…. what exists means a lot more than what is missing.

(Dobelli, 2013, Chapter 95)

Prevention campaigns utilise [the feature-positive effect] well. ‘Smoking causes lung cancer’ is much more powerful than ‘Not smoking leads to a life free of lung cancer.’.

(Dobelli, 2013, Chapter 95)

Suppose you manufacture a dubious product, such as a salad dressing with a high level of cholesterol. What do you do? On the label, you promote the twenty different vitamins in the dressing and omit the cholesterol level. Consumers won’t notice its absence. And the positive, present features will make sure that they feel safe and informed.

(Dobelli, 2013, Chapter 95)

… 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.

(Dobelli, 2013, Chapter 95)

96 Cherry-Picking

On their websites, hotels present themselves in the very best light. They carefully select each photo, and only beautiful, majestic images make the cut. Unflattering angles, dripping pipes and drab breakfast rooms are swept under the tattered carpet. Of course, you know this is true. When you are confronted by the shabby lobby for the first time, you simply shrug your shoulders and head to the registration desk. What the hotel did is called cherry-picking. selecting and showcasing the most attractive features and hiding the rest.

(Dobelli, 2013, Chapter 96)

Administrative departments in large companies glorify themselves like hoteliers do. they are masters at showcasing all they have done, but they never communicate what they haven’t achieved for the company…You will be amazed to find that, over time, the original goals have faded. These have been replaced, quietly and secretly, with self-set goals that are always attainable.

(Dobelli, 2013, Chapter 96)

97 Fallacy of the Single Cause

‘When an apple ripens and falls—what makes it fall? Is it that it is attracted to the ground, is it that the stem withers, is it that the sun has dried it up, that it has grown heavier, that the wind shakes it, that the boy standing underneath it wants to eat it? No one thing is the cause.’. In this passage from War and Peace, Tolstoy hit the nail on the head.

(Dobelli, 2013, Chapter 97)

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.

(Dobelli, 2013, Chapter 97)

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.

(Dobelli, 2013, Chapter 97)

As long as we believe in singular reasons, we will always be able to trace triumphs and 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.

(Dobelli, 2013, Chapter 97)

98 Intention-to-Treat Error

In reputable studies, medical researchers evaluate the data of all patients whom they originally intend to treat (hence the title); it doesn’t matter if they take part in the trial or drop out. Unfortunately, many studies flout this rule. Whether this is intentional or accidental remains to be seen. Therefore, be on your guards: always check whether test subjects—-drivers who end up in accidents, bankrupt companies, critically ill patients—have, for whatever reason, vanished from the sample. If so, you should file the study where it belongs: in the trashcan.

(Dobelli, 2013, Chapter 98)

99 News Illusion

A dozen reasons exist to give news a wide berth. Here are the top three…our brains react disproportionately to different types of information. Scandalous, shocking, people-based, loud, fast-changing details all stimulate us, whereas abstract, complex and unprocessed information sedates us. News producers capitalise on this.

(Dobelli, 2013, Chapter 99)

Gripping stories, garish images and sensational ‘facts’ capture our attention. Recall for a moment [news producers’] business models: advertisers buy space and thus finance the news circus on the condition that their ads will be seen. The result: everything subtle, complex, abstract and profound must be systematically filtered out, even though such stories are much more relevant to our lives and to our understanding of the world. As a result of news consumption, we walk around with a distorted mental map of the risks and threats we actually face.

(Dobelli, 2013, Chapter 99)

… news is irrelevant. In the past twelve months, you have probably consumed 10,000 news snippets—perhaps as many as thirty per day. Be very honest: name one of the them, just one, that helped you make a better decision—for your life, your career or your business—compared with not having this piece of news. No one I have asked has been able to name more than two useful news stories—out of 10,000. A miserable result.

(Dobelli, 2013, Chapter 99)

News organisations assert that their information gives you a competitive advantage. Too many fall for this. In reality, news consumption represents a competitive disadvantage. If news really helped people advance, journalists would be at the top of the income pyramid. They aren’t—quite the opposite.

(Dobelli, 2013, Chapter 99)

…. 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 updated 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. This 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 20,000 lives—then times more than the attack. A sarcastic but accurate observation.

(Dobelli, 2013, Chapter 99)

…read long background articles and books. Yes, nothing beats books for understanding the world.

(Dobelli, 2013, Chapter 99)

Misc

The poke asked Michelangelo: ‘Tell me the secret of your genius. How have you created the statue of David, the masterpiece of all masterpieces?’ Michelangelo’s answer: ‘It’s simple. I removed everything that is not David.’

(Dobelli, 2013)

To believe that we can completely control our emotions through thinking is illusory—as illusory as trying to make your hair grow by willing it to.

(Dobelli, 2013)

In hour hunter-gatherer past, [abrupt] activity paid off [such as ‘herding’] more often than reflection did…But in the modern world, this intuitive behaviour is disadvantageous. Today’s world rewards single-minded contemplation and independent action.

(Dobelli, 2013)

BibTeX

@book{dobelli2013,
  Author = {Rolf Dobelli},
  Title = {{The Art of Thinking Clearly: Better Thinking, Better Decisions}},
  Publisher = {Hodder Stoughton},
  Year = {2013},
  ISBN = {144475954X}
}

Dobelli, R., 2013. The Art of Thinking Clearly: Better Thinking, Better Decisions. Hodder Stoughton.