The Art of Thinking Clearly - by Rolf Dobelli

 

The Art of Thinking Clearly - Rolf Dobelli

Summary:

Chapter 1: Why You Should Visit Cemeteries (Survivorship Bias)

We are more likely to hear about success stories than stories of failures. This can lead to us overestimating our chances of success. One must always look into their true chance of success before jumping into something.

Chapter 2: Does Harvard Make You Smarter (Swimmer’s Body Illusion)

We often confuse the end goal with a barrier of selection. For example, many people believe swimming will help them get their desired physique, but in reality, great swimmers have achieved success because they were born with a body meant for swimming. Similarly, the reason many successful people have graduated from Harvard may not necessarily be because Harvard has extraordinary teachers, but because only the brightest minds are able to enter Harvard.

Chapter 3: Why You See Shapes in Clouds (Clustering Illusion)

We are oversensitive when it comes to pattern recognition and are prone to find them where there aren’t any.

Chapter 4: If 50 Million People Say Something Foolish (Social Proof)

Individuals feel they behave correctly when they act the same as others, even when the action is wrong. “If 50 million people say something foolish, it is still foolish”

Chapter 5:  Why You Should Forget the Past (sunk cost fallacy)

The time, money, energy, or love invested in something often becomes a factor in our decision-making. This should not be the case; only our assessment of future gains must count when deciding.

Chapter 6: Don’t Accept Free Drinks (Reciprocity)

Reciprocity makes us feel like we owe someone something in return for a free item that they gave us.

Chapter 7: Beware the Special Case (Confirmation Bias - part 1)

We tend to interpret new information so that it becomes compatible with our existing beliefs and filter out new information that contradicts our beliefs.

Chapter 8: Murder Your Darlings (Confirmation Bias - part 2)

To counter the confirmation bias, we must set out to find disconfirming evidence. Write down all your beliefs and start finding evidence against them. If you cannot find any, then your belief is correct.

Chapter 9: Don’t Bow to Authority (Authority Bias)

Don’t let a person with more authority than you exert an influence on your decision. For example, flight safety has improved considerably over the past 20 years because of a conscious effort to minimize the authority bias. In earlier times, the co-pilot, when he suspected an oversight on behalf of the captain, wouldn’t question the pilot out of respect/fear.

Chapter 10: Leave Your Supermodel Friends at Home (Contrast Effect)

We tend to determine the value of things by comparing it to something else. For example, an item that has been marked down from $100 to $70 would have more buyers than an item that has always been priced at $70.

Chapter 11: Why We Prefer a Wrong Map to No Map at All (Availability Bias)

We create a picture of the world using examples that most easily come to mind. Fend it off by spending time with people who think differently than you. We require others’ input to overcome the availability bias.

Chapter 12: Why No Pain, No Gain' Should Set Alarm Bells Ringing (It'll-Get-Worse-Before-it-Gets Better Fallacy)

If the problem continues to worsen, the prediction is confirmed. If the situation improves suddenly, the customer is happy, and the advisor can attribute it to his expertise. If someone says “It’ll get worse before it gets better”, you should hear alarm bells ringing.

Chapter 13: Even True Stories are Fairytales (Story Bias)

We try to shape the information that we gather into stories. This gives us a false sense of understanding and leads us to take bigger risks.

Chapter 14: Why You Should Keep a Diary (Hindsight Bias)

In retrospect, everything seems clear and inevitable. For example, a CEO who became successful due to fortunate circumstances, on looking back, will rate his chances of success a lot higher than it actually was.

Chapter 15: Why You Systematically Overestimate Your Knowledge and Abilities (Overconfidence Effect)

People tend to overestimate their knowledge and abilities.

Chapter 16: Don't Take News Anchors Seriously (Chauffeur Knowledge)

There are two types of knowledge: Real knowledge and chauffeur knowledge. Chauffeur knowledge is knowledge from those who have learnt to put on a show.

Chapter 17: You Control Less Than You Think (Illusion of Control)

We think we influence far more than we actually do.

Chapter 18: Never Pay Your Lawyer by the Hour (Incentive Super-Response Tendency)

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

Chapter 19: The Dubious Efficacy of Doctors, Consultants, and Psychotherapists (Regression to Mean)

Average values will naturally fluctuate around a mean value. Decreases or increased performance around this mean may not have an identifiable cause.

Chapter 20: Never Judge a Decision by its Outcome (Outcome Bias)

We evaluate a decision based on the outcome rather than the decision process. Randomness and other external factors can play a part in the outcome. Thus, a good outcome doesn’t indicate a good decision, and vice-versa.

Chapter 21: Less is More (the Paradox of Choice)

A broader selection leads to poorer decisions. When inspecting offers, write down your criteria and stick to them rigidly before making your selection.

Chapter 22: You Like Me, You Really, Really Like Me (Liking Bias)

If we like someone, we are more likely to help them or buy from them. Judge a product independent of who is selling it.

Chapter 23: Don't Cling to Things (Endowment Effect)

We tend to put more value on things that we own.

Chapter 24: The Inevitability of Unlikely Events (Coincidence)

Improbable coincidences are rare but possible events. It shouldn’t be too surprising when they finally happen

Chapter 25: The Calamity of Conformity (Groupthink)

A group of people makes reckless decisions because everyone aligns their opinions with the supposed consensus. Decisions are made that would have been rejected by each individual group member had peer pressure not been involved.  

Chapter 26: Why You'll Soon Be Playing Megatrillions (Neglect of Probability)

We lack an intuitive sense of probability. We tend to respond to the magnitude of an event, rather than its likelihood.

Chapter 27: Why the Last Cookie in the Jar Makes Your Mouth Water (Scarcity Error)

The scarcity of an option can make it more desirable. Assess products and services solely based on their price and benefits.

Chapter 28: When You Hear Hoofbeats, Don't Expect a Zebra (Base-Rate Neglect)

We often disregard fundamental statistical reality.

Chapter 29: Why the “Balancing Force of the Universe” is Baloney (Gambler's Fallacy)

There is no balancing force for independent events. Purely independent events exist only in theory and casinos, in life most events are interrelated.

Chapter 30: Why the Wheel of Fortune Makes Our Heads Spin (the Anchor)

We rely too heavily on ‘anchors’ (our first guess or the first piece of information available to us) to help make our subsequent guesses.

Chapter 31: How to Relieve People of Their Millions (Induction)

Induction is the tendency to draw universal certainties from individual observations. We must keep in mind that certainties are only provisional.

Chapter 32: Why Evil Strikes Harder Than Good (Loss Aversion)

We are more sensitive to negative than to positive things. People are more motivated by the fear of losing something they have than by the desire to gain something of equal value.

Chapter 33: Why Teams Are Lazy (Social Loafing)

When people work together, their individual performance decreases. The disadvantages of groups can be mitigated by making individual performances as visible as possible.

Chapter 34: Stumped by a Sheet of Paper (Exponential Growth)

Intuitively, we have no sense of exponential growth. Accept it and just use a calculator.

Chapter 35: Curb Your Enthusiasm (Winner's Curse)

The winner of an auction often turns out to be the loser. If possible, don’t go to auctions. If you work in an industry where they are inevitable, set a maximum price and deduct it by 20% to offset the winner’s curse.

Chapter 36: Never Ask a Writer if The Novel is Autobiographical (Fundamental Attribution Error)

We tend to overestimate the influence of an individual and underestimate external, situational factors. For example, even though a company’s economic success depends more on the overall economic climate and the industry’s attractiveness than on leadership, when a company reports a bad result, all eyes shift to the CEO.

Chapter 37: Why You Shouldn't Believe in the Stork (False Causality)

We often mix up correlation with causation. Take a closer look at linked events: sometimes what is presented as the cause could actually be the effect and vice–versa.

Chapter 38: Everyone is Beautiful at the Top (Halo Effect)

When a single aspect of something dazzles us, we fail to see the big picture. The halo effect clouds our judgment.

Chapter 39: Congratulations! You've Won Russian Roulette (Alternative Paths)

Risk is not always directly visible. Therefore, always find out what the alternate paths are.

Chapter 40: False Prophets (Forecast Illusion)

Most forecasts are wrong. Forecasters have free reins when it comes to their predictions. If they go wrong there are no consequences. If they go right, they enjoy publicity.

Chapter 41: The Deception of Specific Cases (Conjunction Fallacy)

When making important decisions, at an intuitive level, we have a soft spot for plausible stories.

Chapter 42: It's Not What You Say, But How You Say It (Framing)

It's not what you say, but how you say it. If a message is communicated in different ways, it will also be received in different ways.

Chapter 43: Why Watching and Waiting Is Torture (Action Bias)

In new, shaky circumstances we feel compelled to do something. Often feeling better, even if our actions worsened the situation. If a situation is unclear, hold back until you can assess your options.

Chapter 44: Why You Are Either the Solution - or the Problem (Omission Bias)

When action and inaction both lead to cruel consequences, we prefer inaction.

Chapter 45: Don't Blame Me (Self-Serving Bias)

We attribute successes to ourselves and failures to external factors.

Chapter 46: Be Careful What You Wish For (Hedonic Treadmill)

We work hard, advance, and are able to afford more and nicer things, and yet this doesn’t make us any happier. Expect only short-term happiness from materialistic things and aim for as much free time and autonomy as possible.

Chapter 47: Do Not Marvel at Your Existence (Self-Selection Bias)

We get a false perspective of a survey by poorly selecting our sample.

Chapter 48: Why Experience Can Damage Our Judgement (Association Bias)

We make false connections between things based on our own experience which leads us to make poor decisions.

Chapter 49: Be Wary When Things Get Off to a Great Start (Beginner's Luck)

Early, fortunate results can blind us. Wait and watch before you come to a conclusion.