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11. Alternative Blindness

11. Alternative Blindness

Humans don’t think about all their alternatives when they contemplate an offer. Say that a city planning commission proposes building a sports arena on an empty lot. Supporters make the case that the arena would create jobs and generate revenue. They ask voters to decide between a vacant lot and an arena, but they don’t mention other options, like building a school. Making informed decisions means letting go of either-or choices. Ironically, modern people suffer from too many options. That’s the “paradox of choice.”

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1. Survivorship Bias

1. Survivorship Bias

Tales of authors self-publishing bestsellers or college athletes signing with the major leagues for millions are so inspiring that people tend to overestimate their own chances of duplicating such career trajectories. This bias makes most folks focus on the few stars who soar, not the millions of...

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Introduction

Introduction

Nobody is immune to cognitive errors, unconscious thinking habits that lead to false conclusions or poor decisions. Mere mortals are prone to an array of common thinking errors and will consistently overestimate their chances of success, prefer stories to facts, confuse the message with the messe...

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9. Outcome Bias

9. Outcome Bias

Outcome bias, or “historian error,” is the tendency to evaluate decisions based on results, not processes. For example, in retrospect, it’s clear that the US should have evacuated Pearl Harbor before the Japan attacked. Decision to stay seems deplorable in light of today’s knowledge. Yet military...

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5. Story Bias

5. Story Bias

People find information easier to understand in story form. Facts are dry and difficult to remember; tales are engaging. People more easily find meaning in historical events, economic policy and scientific breakthroughs through stories. Relying on narratives to explain the world leads to story bi...

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774 reads

10. Loss Aversion

10. Loss Aversion

Finding $100 would make you happy, but that happiness wouldn’t equal the distress you’d feel if you lost $100. The negative hit from a loss is stronger than the positive hit of a comparable gain; loss aversion explains why investors ignore paper losses and hold falling stocks. Marketers exploit l...

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ROLF DOBELLI

“Nature doesn’t seem to mind if our decisions are perfect or not, as long as we can maneuver ourselves through life – and as long as we are ready to be rational when it comes to the crunch.”

ROLF DOBELLI

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It’s Normal as a Human to Have Errors

It’s Normal as a Human to Have Errors

Human beings are prone to cognitive errors, or barriers to clear, logical thinking. Everyone experiences flawed patterns in the process of reasoning. In fact, many of these common mistakes have a history that goes back centuries. Even experts fall prey to such glitches, which might explain why su...

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2. Swimmer’s Body Illusion

2. Swimmer’s Body Illusion

You admire the slim physique of a professional swimmer, so you head for the local pool, hoping that you, too, can attain such a sleek body. You’ve fallen prey to the swimmer’s body illusion that causes you to confuse “selection factors” with results. Does Michael Phelps have a perfect swimmer’s b...

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4. Confirmation Bias

4. Confirmation Bias

People tend to discount information that conflicts with their beliefs. Executives emphasize evidence that their strategies work and rationalize away contrary indicators. Yet exceptions aren’t just outliers; they often disprove fixed ideas. If you’re an optimist, you’ll corroborate your positive v...

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903 reads

5. Story Bias (contd)

5. Story Bias (contd)

Say that a car was driving across a bridge when the structure collapsed. A journalist covers the story by finding out about the driver, detailing his backstory and interviewing him about the experience. This puts a face on the incident, something readers want and need. But it ignores other pertin...

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6. Overconfidence Effect

6. Overconfidence Effect

Most folks believe that they are intelligent and can make accurate predictions based on their knowledge. In most cases, they can’t. People, especially specialists and experts, overestimate how much they know. Economists are notoriously bad at predicting long-term stock market performance, for exa...

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7. Chauffeur Knowledge

7. Chauffeur Knowledge

Nobel physicist Max Planck gave speech so often that his driver could recite it. He did one day, while Planck, wearing a driver's hat, sit with audience. Came a question the driver couldn’t answer, he pointed at Planck, “Such a simple question! My chauffeur will answer it!” People run under this ...

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8. Illusion of Control

8. Illusion of Control

A man wearing a red hat arrives at the city center every day at 9:00 a.m. and wildly waves his hat for five minutes. One day, a police officer asks what he’s doing. “I’m keeping the giraffes away,” he replies. “There aren’t any giraffes here,” the officer states. “Then I must be doing a good job,...

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12. Déformation Professionnelle

12. Déformation Professionnelle

Mark Twain famously quipped, “If your only tool is a hammer, all your problems will be nails.” This statement beautifully encapsulates this false reasoning habit. People want to solve problems with the  skills they have. A surgeon will recommend surgery not acupuncture. Generals opt for military ...

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640 reads

3. Sunk Cost Fallacy

3. Sunk Cost Fallacy

The old saying about ‘throwing good money after bad’ expresses the heart of this fallacy: the tendency to persevere with a project once you’ve invested “time, money, energy or love” in it, even after the thrill or profit potential is gone. This is why marketers stick with campaigns that fail ...

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8. Illusion of Control (contd)

8. Illusion of Control (contd)

The illusion of control makes humans feel better. This is why “placebo buttons” work. People push a button at an intersection and wait patiently for a “walk” sign, even if the button is not connected to the signal. Ditch your red hat by differentiating between the things you can control and those...

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Dobelli shared some common thinking mistakes. Knowing these errors won’t help you avoid them completely, but it will help you make better decisions – or at least teach you where you slipped.

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