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

by Rolf Dobelli

I’m a power user of the self-serving bias: if my new novel rockets up the bestseller list, I clap myself on the shoulder. Surely this is my best book yet! But, if it disappears

in the flood of new releases, it is because the readers simply don’t recognise good literature when they see it. And if critics slay it, it is clearly a case of jealousy.

So why do we attribute success to our own skill and ascribe failure to other factors? There are many theories.

bias? Do you have friends who tell you the truth – no holds barred? If so, consider yourself lucky. If not, do you have at least one enemy? Good. Invite him or her over for coffee and ask for an honest opinion about your strengths and weaknesses. You will be forever grateful you did.

He calls this ‘affective forecasting’; our inability to correctly predict our own emotions.

To make things worse, the poor guy now faced a one-hour commute twice a day. This may sound tolerable, but studies show that commuting by car represents a major source of discontent and stress, and people hardly ever get used to it. In other words, whoever has no innate affinity for commuting will suffer every day – twice a day. Anyhow, the moral of the story is that the dream villa had an overall negative effect on my friend’s happiness.

hedonic treadmill:

we work hard, advance and are able to afford more and nicer things, and yet this doesn’t make us any happier.

Wouldn’t it be nice if we knew exactly how happy a new car, career or relationship would make us? Well, this is doable in part. Use these scientifically rubber-stamped pointers to make better, brighter decisions:

Aim for as much free time and autonomy as possible, since long-lasting positive effects generally come from what you actively do. Follow your passions even if you must forfeit a portion of your income for them. Invest in friendships. For most people, professional status achieves long-lasting happiness, as long as they don’t change peer groups at the same time. In other words, if you ascend to a CEO role and fraternise only with other executives, the effect fizzles out.

self-selection bias.

If you lead a group of people, and don’t want to fall prey to false connections, direct your staff to tell you only the bad news – and fast. With this, you overcompensate for the shoot-the-messenger syndrome and, believe me, you will still hear enough positive news.

‘We should be careful to get out of an experience only the wisdom that is in it – and stop there; lest we be like the cat that sits down on a hot stove-lid. She will never sit down on a hot stove-lid again – and that is well; but also she will never sit down on a cold one anymore.’

association bias – the tendency to see connections where none exist. For example, regardless of how many big presentations he has nailed while wearing them, Kevin’s green polka-dot underpants are no guarantee of success.

However, these investors overlooked one tiny detail: their amazing profits at the time had nothing to do with their stock-picking abilities. The market was simply on an upward spiral. Even the most clueless investors won big. When the market finally turned downward, many were left facing mountains of dot-com debt.

Science calls this phenomenon hyperbolic discounting. Put plainly, the closer a reward is, the higher our ‘emotional interest rate’ rises and the more we are willing to give up in exchange for it. The majority of economists have not yet grasped that we respond so subjectively and inconsistently to interest rates. Their models still depend on constant interest rates and are correspondingly questionable.

Case in point: the exorbitant interest rates banks charge on credit-card debt and other short-term personal loans, both of which exploit our must-have-now instincts.

When you justify your behaviour, you encounter more tolerance and helpfulness. It seems to matter very

little if your excuse is good or not. Using the simple validation ‘because’ is sufficient. A sign proclaiming: ‘We’re renovating the highway for you’ is completely redundant. What else would a maintenance crew be up to on a highway? If you hadn’t noticed before, you realise what is going on once you look out the window. And yet this knowledge reassures and calms you. After all, nothing is more frustrating than being kept in the dark.

‘Because I prefer to wash them separately.’

Never leave home without ‘because’. This unassuming little word greases the wheels of human interaction. Use it unrestrainedly.

A single outlier has radically altered the picture, rendering the term ‘average’ completely meaningless.

‘Don’t cross a river if it is (on average) four feet deep,’ warns Nassim Taleb, from whom I have the above examples. The river can be very shallow – mere inches – for long stretches, but it might transform into a raging torrent that is twenty feet deep in the middle, in which case you could easily drown.

Dealing in averages is a risky undertaking because they often mask the underlying distribution – ...

Here’s the update: in a complex world, distribution is becoming more and more irregular. In other words, we will observe the Bill Gates phenomenon in ever more domains. How many visits does an average website

That’s a power law. A few extremes dominate the distribution, and the concept of average is rendered worthless.

To use just the final example: a handful of actors take home more than $10 million per year, while thousands and thousands live on the breadline. Would you advise your son or daughter to get into acting since the average wage is pretty decent? Hopefully not – wrong reason.

We should all take stock from novelist William Gibson: ‘The future is already here – it’s just not very evenly distributed.’

money does not always motivate.

motivation crowding. When people do something for well-meaning, non-monetary reasons – out of the goodness of their hearts, so to speak – payments throw a wrench into the works. Financial reward erodes any other motivations.

Financial incentives and performance bonuses work well in industries with generally uninspiring jobs – industries where employees aren’t proud of the products or the companies and do the work simply because they get a pay cheque. On the other hand, if you create a start-up, you would be wise to enlist employee enthusiasm to promote the company’s endeavour rather than try to entice employees with juicy bonuses, which you couldn’t pay anyway.

One final tip for those of you who have children: experience shows that young people are not for sale. If you want your kids to do their homework, practise musical instruments, or even mow the lawn once in a while, do not reach for your wallet. Instead, give them a fixed amount of pocket money each week. Otherwise, they will exploit the system and soon refuse to go to bed without recompense.

‘You would not believe how difficult it is to be simple and clear. People are

afraid that they may be seen as a simpleton. In reality, just the opposite is true.’

In conclusion: verbal expression is the mirror of the mind. Clear thoughts become clear statements, whereas ambiguous ideas transform into vacant ramblings. The trouble is that, in many cases, we lack very lucid thoughts. The world is complicated, and it takes a great deal of mental effort to understand even one facet of the whole. Until you experience such an epiphany, it’s better to heed Mark Twain: ‘If you hav...

Forget trying to amass all the data. Do your best to get by with the bare facts. It will help you make better decisions.

‘The greatest obstacle to discovery is not ignorance – it is the illusion of knowledge.’

This effect became known as the Rosenthal effect (or Pygmalion effect).

Raise expectations for yourself and for the people you love. This increases motivation. At the same time, lower expectations for things you cannot control – for example, the stock market. As paradoxical as it sounds, the best way to shield yourself from nasty surprises is to anticipate them.

The Forer effect explains why the pseudo-sciences work so well – astrology, astrotherapy, the study of handwriting, biorhythm analysis, palmistry, tarot-card readings and séances with the dead.

we accept whatever corresponds to our self-image and unconsciously filter everything else out. What remains is a coherent portrait.

Strictly speaking, anyone who profits or feels even the slightest satisfaction from volunteering is not a pure altruist.

if people don’t double-take when they pass you on the street, the best way to contribute is with greenbacks rather than greenhorn labor.

heuristics.

If you like something, you believe that the

risks are smaller and the benefits greater than they actually are. If you don’t like something, the opposite is true. Risks and benefits appear to be dependent. Of course, in reality, they are not.

Whether we like it or not, we are puppets of our emotions. We make complex decisions by consulting our feelings, not our thoughts. Against our best intentions, we substitute the question, ‘What do I think about this?’ with ‘How do I feel about this?’ So, smile! Your future depends on it.

The belief that reflection leads to truth or accuracy is called the introspection illusion.

Remedy: be all the more critical with yourself. Regard your internal observations with the same scepticism as claims from some random person. Become your own toughest critic.

Xiang Yu and Cortés are exceptions. We mere mortals do everything we can to keep open the maximum number of options.