The Art of Thinking Clearly – Rolf Dobelli
A book on the many biases in our minds.
1. Hard Work
Never underestimate the difficulty and low likelihood of success simply because we see more successful people than many more actual failures.
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It does not mean, in any way, that you should not dream big. It just says that you shouldn’t get overawed by the number of success stories you read and assume that success will be easy. No one prints the failure stories.
2. Confirmation bias is the mother of all misconceptions.
It is a tendency to interpret new information so that it becomes compatible with our existing theories.
Warren Buffet has seen people losing money with this because they ignore facts that contradict the theory in the mind of the investor.
Disconfirming evidence must be sought out to beat this theory.
3. Speak your mind
If you ever find yourself in a tight unanimous group, you must speak your mind, even if your team does not like it, and even if it means risking expulsion from the warm nest.
And if you lead a group, appoint someone as devil’s advocate.
He or she will not be the most popular member of the team, but definitely the most important.
4. Induction
Send an email to 10,000 people with the stock market predictions by dividing them into 2 groups – telling reverse prediction to each group. Prediction for one of the groups will come true.
Send a new prediction to the 5,000 whom you predicted correctly earlier – again after dividing them into 2 groups…carry on like this, and the last 100 would consider you as a genius. People get inducted into a decision based on history without thinking logically.
Loss Aversion and Compounding
5. Loss Aversion
The fear of losing something motivates people more than the prospect of gaining something of equal value.
6. Compounding
When it comes to compounding, don’t trust your intuition – you have no idea how powerful it is.
Other Key Takeaways
7. It is not what you say, but how you say, that’s important.
A 99% fat-free product seems healthier than one with 1% fat.
8. If you are not a part of the solution, you are definitely a part of the problem.
There is no third category of passive onlookers.
9. Passion
Follow your passion even if you have to do away with part of your income for that
10. Averages
Whenever you are dealing with averages, be careful of the distribution behind them.
A Bill Gates monthly income in a group of 50 ordinary citizens can give an extremely misleading average.
