The Art of Thinking Clearly: The Secrets of Perfect Decision-Making

by Rolf Dobelli

In conclusion: 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. If it seems too good to be true, find a mathematician and have the data tested statistically.

So, be sceptical whenever a company claims its product is better because it is ‘the most popular’. How is a product better simply because it sells the most units? And remember novelist W. Somerset Maugham’s wise words: ‘If 50 million people say something foolish, it is still foolish.’

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.

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.

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

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.’

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.

Scientists call this fallacy base-rate neglect: a disregard of fundamental distribution levels.