The Art of Thinking Clearly
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The Art of Thinking Clearly
Rolf Dobelli
Translated by Nicky Griffin
Dedication
For Sabine
Contents
Dedication
Introduction
1: Why You Should Visit Cemeteries: Survivorship Bias
2: Does Harvard Make You Smarter?: Swimmer’s Body Illusion
3: Why You See Shapes in the Clouds: Clustering Illusion
4: If Fifty Million People Say Something Foolish, It Is Still Foolish: Social Proof
5: Why You Should Forget the Past: Sunk Cost Fallacy
6: Don’t Accept Free Drinks: Reciprocity
7: Beware the “Special Case”: Confirmation Bias (Part 1)
8: Murder Your Darlings: Confirmation Bias (Part 2)
9: Don’t Bow to Authority: Authority Bias
10: Leave Your Supermodel Friends at Home: Contrast Effect
11: Why We Prefer a Wrong Map to None at All: Availability Bias
12: Why “No Pain, No Gain” Should Set Alarm Bells Ringing: The It’ll-Get-Worse-Before-It-Gets-Better Fallacy
13: Even True Stories Are Fairy Tales: Story Bias
14: Why You Should Keep a Diary: Hindsight Bias
15: Why You Systematically Overestimate Your Knowledge and Abilities: Overconfidence Effect
16: Don’t Take News Anchors Seriously: Chauffeur Knowledge
17: You Control Less Than You Think: Illusion of Control
18: Never Pay Your Lawyer by the Hour: Incentive Super-Response Tendency
19: The Dubious Efficacy of Doctors, Consultants, and Psychotherapists: Regression to Mean
20: Never Judge a Decision by Its Outcome: Outcome Bias
21: Less Is More: Paradox of Choice
22: You Like Me, You Really, Really Like Me: Liking Bias
23: Don’t Cling to Things: Endowment Effect
24: The Inevitability of Unlikely Events: Coincidence
25: The Calamity of Conformity: Groupthink
26: Why You’ll Soon Be Playing Mega Trillions: Neglect of Probability
27: Why the Last Cookie in the Jar Makes Your Mouth Water: Scarcity Error
28: When You Hear Hoofbeats, Don’t Expect a Zebra: Base-Rate Neglect
29: Why the “Balancing Force of the Universe” Is Baloney: Gambler’s Fallacy
30: Why the Wheel of Fortune Makes Our Heads Spin: The Anchor
31: How to Relieve People of Their Millions: Induction
32: Why Evil Is More Striking Than Good: Loss Aversion
33: Why Teams Are Lazy: Social Loafing
34: Stumped by a Sheet of Paper: Exponential Growth
35: Curb Your Enthusiasm: Winner’s Curse
36: Never Ask a Writer If the Novel Is Autobiographical: Fundamental Attribution Error
37: Why You Shouldn’t Believe in the Stork: False Causality
38: Why Attractive People Climb the Career Ladder More Quickly: Halo Effect
39: Congratulations! You’ve Won Russian Roulette: Alternative Paths
40: False Prophets: Forecast Illusion
41: The Deception of Specific Cases: Conjunction Fallacy
42: It’s Not What You Say, but How You Say It: Framing
43: Why Watching and Waiting Is Torture: Action Bias
44: Why You Are Either the Solution—or the Problem: Omission Bias
45: Don’t Blame Me: Self-Serving Bias
46: Be Careful What You Wish For: Hedonic Treadmill
47: Do Not Marvel at Your Existence: Self-Selection Bias
48: Why Experience Can Damage Your Judgment: Association Bias
49: Be Wary When Things Get Off to a Great Start: Beginner’s Luck
50: Sweet Little Lies: Cognitive Dissonance
51: Live Each Day as If It Were Your Last—but Only on Sundays: Hyperbolic Discounting
52: Any Lame Excuse: “Because” Justification
53: Decide Better—Decide Less: Decision Fatigue
54: Would You Wear Hitler’s Sweater?: Contagion Bias
55: Why There Is No Such Thing as an Average War: The Problem with Averages
56: How Bonuses Destroy Motivation: Motivation Crowding
57: If You Have Nothing to Say, Say Nothing: Twaddle Tendency
58: How to Increase the Average IQ of Two States: Will Rogers Phenomenon
59: If You Have an Enemy, Give Him Information: Information Bias
60: Hurts So Good: Effort Justification
61: Why Small Things Loom Large: The Law of Small Numbers
62: Handle with Care: Expectations
63: Speed Traps Ahead!: Simple Logic
64: How to Expose a Charlatan: Forer Effect
65: Volunteer Work Is for the Birds: Volunteer’s Folly
66: Why You Are a Slave to Your Emotions: Affect Heuristic
67: Be Your Own Heretic: Introspection Illusion
68: Why You Should Set Fire to Your Ships: Inability to Close Doors
69: Disregard the Brand New: Neomania
70: Why Propaganda Works: Sleeper Effect
71: Why It’s Never Just a Two-Horse Race: Alternative Blindness
72: Why We Take Aim at Young Guns: Social Comparison Bias
73: Why First Impressions Are Deceiving: Primacy and Recency Effects
74: Why You Can’t Beat Homemade: Not-Invented-Here Syndrome
75: How to Profit from the Implausible: The Black Swan
76: Knowledge Is Nontransferable: Domain Dependence
77: The Myth of Like-Mindedness: False-Consensus Effect
78: You Were Right All Along: Falsification of History
79: Why You Identify with Your Football Team: In-Group Out-Group Bias
80: The Difference between Risk and Uncertainty: Ambiguity Aversion
81: Why You Go with the Status Quo: Default Effect
82: Why “Last Chances” Make Us Panic: Fear of Regret
83: How Eye-Catching Details Render Us Blind: Salience Effect
84: Why Money Is Not Naked: House-Money Effect
85: Why New Year’s Resolutions Don’t Work: Procrastination
86: Build Your Own Castle: Envy
87: Why You Prefer Novels to Statistics: Personification
88: You Have No Idea What You Are Overlooking: Illusion of Attention
89: Hot Air: Strategic Misrepresentation
90: Where’s the Off Switch?: Overthinking
91: Why You Take On Too Much: Planning Fallacy
92: Those Wielding Hammers See Only Nails: Déformation Professionnelle
93: Mission Accomplished: Zeigarnik Effect
94: The Boat Matters More Than the Rowing: Illusion of Skill
95: Why Checklists Deceive You: Feature-Positive Effect
96: Drawing the Bull’s-Eye around the Arrow: Cherry Picking
97: The Stone Age Hunt for Scapegoats: Fallacy of the Single Cause
98: Why Speed Demons Appear to Be Safer Drivers: Intention-to-Treat Error
99: Why You Shouldn’t Read the News: News Illusion
Epilogue
Acknowledgments
A Note on Sources
About the Author
Credits
Copyright
About the Publisher
Introduction
In the fall of 2004, a European media mogul invited me to Munich to partake in what was described as an “informal exchange of intellectuals.” I had never considered myself an “intellectual”—I had studied business, which made me quite the opposite, really—but I had also written two literary novels and that, I guessed, must have qualified me for such an invitation.
Nassim Nicholas Taleb was sitting at the table. At that time, he was an obscure Wall Street trader with a penchant for philosophy. I was introduced to him as an authority on the English and Scottish Enlightenment, particularly the philosophy of David Hume. Obviously I had been mixed up with someone else. Stunned, I nevertheless flashed a hesitant smile around the room and let the resulting silence act as proof of my philosophical prowess. Right away, Taleb pulled over a free chair and patted the seat. I sat down. After a cursory exchange about Hume, the conversation mercifully shifted to Wall Street. We marveled at the systematic errors in decision making CEOs and business leaders make—ourselves included. We chatted about the fact that unexpected events seem much more likely in retrospect. We chuckled about why it is that investors cannot part with their shares when they drop below acquisition price.
Following the event, Taleb sent me pages from his manuscript, a gem of a book, which I commented on and partly criticized. These went on to form part of his international best seller, The Black Swan. The book catapulted Taleb into the intellectual all-star league. Meanwhile, my appetite whetted, I began to devour books and articles written by cognitive and social scientists on topics such as “heuristics and biases,” and I also increased my e-mail conversations with a large number researchers and started to visit their labs. By 2009, I realized that, alongside my job as a novelist, I had become a student of social and cognitive psychology.
The failure to think clearly, or what experts call a “cognitive error,” is a systematic deviation from logic—from optimal, rational, reasonable thought and behavior. By “systematic,” I mean that these are not just occasional errors in judgment but rather routine mistakes, barriers to logic we stumble over time and again, repeating patterns through generations and through the centuries. For example, it is much more common that we overestimate our knowledge than we underestimate it. Similarly, the danger of losing something stimulates us much more than the prospect of making a similar gain. In the presence of other people we tend to adjust our behavior to theirs, not the opposite. Anecdotes make us overlook the statistical distribution (base rate) behind it, not the other way round. The errors we make follow the same pattern over and over again, piling up in one specific, predictable corner like dirty laundry, while the other corner remains relatively clean (i.e., they pile up in the “overconfidence corner,” not the “underconfidence corner”).
To avoid frivolous gambles with the wealth I had accumulated over the course of my literary career, I began to put together a list of these systematic cognitive errors, complete with notes and personal anecdotes—with no intention of ever publishing them. The list was originally designed to be used by me alone. Some of these thinking errors have been known for centuries; others have been discovered in the last few years. Some come with two or three names attached to them. I chose the terms most widely used. Soon I realized that such a compilation of pitfalls was not only useful for making investing decisions but also for business and personal matters. Once I had prepared the list, I felt calmer and more levelheaded. I began to recognize my own errors sooner and was able to change course before any lasting damage was done. And, for the first time in my life, I was able to recognize when others might be in the thrall of these very same systematic errors. Armed with my list, I could now resist their pull—and perhaps even gain an upper hand in my dealings. I now had categories, terms, and explanations with which to ward off the specter of irrationality. Since Benjamin Franklin’s kite-flying days, thunder and lightning have not grown less frequent, powerful, or loud—but they have become less worrisome. This is exactly how I feel about my own irrationality now.
Friends soon learned of my compendium and showed interest. This led to a weekly newspaper column in Germany, Holland, and Switzerland, countless presentations (mostly to medical doctors, investors, board members, CEOs, and government officials), and eventually to this book.
Please keep in mind three things as you peruse these pages: First, the list of fallacies in this book is not complete. Undoubtedly new ones will be discovered. Second, the majority of these errors are related to one another. This should come as no surprise. After all, all brain regions are linked. Neural projections travel from region to region in the brain; no area functions independently. Third, I am primarily a novelist and an entrepreneur, not a social scientist; I don’t have my own lab where I can conduct experiments on cognitive errors, nor do I have a staff of researchers I can dispatch to scout for behavioral errors. In writing this book, I think of myself as a translator whose job is to interpret and synthesize what I’ve read and learned—to put it in terms others can understand. My great respect goes to the researchers who, in recent decades, have uncovered these behavioral and cognitive errors. The success of this book is fundamentally a tribute to their research. I am enormously indebted to them.
This is not a how-to book. You won’t find “seven steps to an error-free life” here. Cognitive errors are far too engrained to rid ourselves of them completely. Silencing them would require superhuman willpower, but that isn’t even a worthy goal. Not all cognitive errors are toxic, and some are even necessary for leading a good life. Although this book may not hold the key to happiness, at the very least it acts as insurance against too much self-induced unhappiness.
Indeed, my wish is quite simple: If we could learn to recognize and evade the biggest errors in thinking—in our private lives, at work, or in government—we might experience a leap in prosperity. We need no extra cunning, no new ideas, no unnecessary gadgets, no frantic hyperactivity—all we need is less irrationality.
1
Why You Should Visit Cemeteries
Survivorship Bias
No matter where Rick looks, he sees rock stars. They appear on television, on the front pages of magazines, in concert programs, and at online fan sites. Their songs are unavoidable—in the mall, on his playlist, in the gym. The rock stars are everywhere. There are lots of them. And they are successful. Motivated by the stories of countless guitar heroes, 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 ten thousand 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.
In daily life, because triumph is made more visible than failure, you systematically overestimate your chances of succeeding. As an outsider, you (like Rick) succumb to an illusion, and you mistake how minuscule the probability of success really is. Rick, like so many others, is a victim of survivorship bias.
Behind every popular author you can find a hundred other writers whose books will never sell. Behind them are another hundred who haven’t found publishers. Behind them are yet another hundred whose unfinished manuscripts gather dust in drawers. And behind each one of these are a hundred people who dream of—one day—writing a book. You, however, hear of only the successful authors (these days, many of them self-published) and fail to recognize how unlikely literary success is. The same goes for photographers, entrepreneurs, artists, athletes, architects, Nobel Prize winners, television presenters, and beauty queens. The media is not interested in digging aroun
d in the graveyards of the unsuccessful. Nor is this its job. To elude the survivorship bias, you must do the digging yourself.
You will also come across survivorship bias when dealing with money and risk: Imagine that a friend founds a start-up. You belong to the circle of potential investors and you sense a real opportunity: This could be the next Google. Maybe you’ll be lucky. But what is the reality? The most likely scenario is that the company will not even make it off the starting line. The second most likely outcome is that it will go bankrupt within three years. Of the companies that survive these first three years, most never grow to more than ten employees. So, should you never put your hard-earned money at risk? Not necessarily. But you should recognize that the survivorship bias is at work, distorting the probability of success like cut glass.