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Survivorship bias means this: People systematically overestimate their chances of success. Guard against it by frequently visiting the graves of once-promising projects, investments, and careers. It is a sad walk but one that should clear your mind.
When it comes to pattern recognition, we are oversensitive. Regain your skepticism. 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.
Social proof, sometimes roughly termed the “herd instinct,” dictates that individuals feel they are behaving correctly when they act the same as other people.
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.
This irrational behavior is driven by a need for consistency. After all, consistency signifies credibility. We find contradictions abominable. If we decide to cancel a project halfway through, we create a contradiction: We admit that we once thought differently. Carrying on with a meaningless project delays this painful realization and keeps up appearances.
there may be good reasons to continue investing in something to finalize it. But beware of doing so for the wrong reasons, such as to justify non-recoverable investments. Rational decision making requires you to forget about the costs incurred to date. No matter how much you have already invested, only your assessment of the future costs and benefits counts.
the phenomenon of reciprocity and has established that people have extreme difficulty being in another person’s debt.
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. In other words, we filter out any new information that contradicts our existing views (“disconfirming evidence”).
To fight against the confirmation bias, try writing down your beliefs—whether in terms of worldview, investments, marriage, health care, diet, career strategies—and set out to find disconfirming evidence. Axing beliefs that feel like old friends is hard work but imperative.
Whenever you are about to make a decision, think about which authority figures might be exerting an influence on your reasoning. And when you encounter one in the flesh, do your best to challenge him or her.
We judge something to be beautiful, expensive, or large if we have something ugly, cheap, or small in front of us. We have difficulty with absolute judgments. The contrast effect is a common misconception. You order leather seats for your new car because, compared to the $60,000 price tag on the car, $3,000 seems a pittance. All industries that offer upgrade options exploit this illusion.
The availability bias says this: We create a picture of the world using the examples that most easily come to mind. This is idiotic, of course, because in reality, things don’t happen more frequently just because we can conceive of them more easily.
Doctors often fall victim to the availability bias. They have their favorite treatments, which they use for all possible cases. More appropriate treatments may exist, but these are in the recesses of the doctors’ minds. Consequently, they practice what they know. Consultants are no better. If they come across an entirely new case, they do not throw up their hands and sigh: “I really don’t know what to tell you.” Instead, they turn to one of their more familiar methods, whether or not it is ideal.
We simply build the meaning into them afterward. Stories are dubious entities. They simplify and distort reality and filter things that don’t fit. But apparently we cannot do without them. Why remains unclear. What is clear is that people first used stories to explain the world, before they began to think scientifically, making mythology older than philosophy. This has led to the story bias.
The hindsight bias is one of the most prevailing fallacies of all. We can aptly describe it as the “I told you so” phenomenon: In retrospect, everything seems clear and inevitable.
Be on the lookout for chauffeur knowledge. Do not confuse the company spokesperson, the ringmaster, the newscaster, the schmoozer, the verbiage vendor, or the cliché generator with those who possess true knowledge. How do you recognize the difference? There is a clear indicator: True experts recognize the limits of what they know and what they do not know. If they find themselves outside their circle of competence, they keep quiet or simply say, “I don’t know.” This they utter unapologetically, even with a certain pride. From chauffeurs, we hear every line except this.
