The Art of Thinking Clearly

by Rolf Dobelli

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: (a) Avoid negative things that you cannot grow accustomed to, such as commuting, noise, or chronic stress. (b) Expect only short-term happiness from material things, such as cars, houses, lottery winnings, bonuses, and prizes. (c) 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 fraternize only with other executives, the effect fizzles out.

false connections are the work of the association bias, which also influences the quality of our decisions. For example: We often condemn bearers of bad news, since we automatically associate them with the message’s content (otherwise known as “shoot-the-messenger syndrome”). Sometimes, CEOs and investors (unconsciously) steer clear of these harbingers, meaning the only news that reaches the upper echelons is positive, thus creating a distorted view of the real situation. 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.”

But how do you tell the difference between beginner’s luck and the first signs of real talent? There is no clear rule, but these two tips may help: First, if you are much better than others over a long period of time, you can be fairly sure that talent plays a part. (Unfortunately, you can never be 100 percent, though.) Second, the more people competing, the greater the chances are that one of them will repeatedly strike lucky. Perhaps even you. If, among ten competitors, you establish yourself as a market leader over many years, you can clap yourself on the back. That’s a sure indication of talent. But if you are top dog among ten million players (i.e., in the financial markets), you shouldn’t start visualizing a Buffettesque financial empire just yet; it’s extremely likely that you have simply been very fortunate.

Beginner’s luck can be devastating, so guard against misconceptions by treating your theories as a scientist would: Try to disprove them. As soon as my first novel, Thirty-five, was ready to go, I sent it to a single publisher, where it was promptly accepted. For a moment I felt like a genius, a literary sensation. (The chance that this publisher will take on a manuscript is one in fifteen thousand.) To test my theory, I then sent the manuscript to ten other big publishers. And I got ten rejection letters. My notion was thus disproved, bringing me swiftly back down to earth.

Suppose you apply for a job and discover you have lost out to another candidate. Instead of admitting that the other person was better suited, you convince yourself that you didn’t want the job in the first place; you simply wanted to test your “market value” and see if you could get invited for interview.

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.

capacity for delayed gratification is a reliable indicator of future career success. Patience is indeed a virtue.

Though instantaneous reward is incredibly tempting, hyperbolic discounting is still a flaw. The more power we gain over our impulses, the better we can avoid this trap. The less power we have over our impulses—for example, when we are under the influence of alcohol—the more susceptible we are. Viewed from the other side: If you sell consumer products, give customers the option of getting their hands on the items right away. Some people will be willing to pay extra just so they don’t have to wait. Amazon makes a bundle from this: A healthy chunk of the next-day delivery surcharge goes directly into its coffers. “Live each day as if it were your last” is a good idea—once a week.

When you justify your behavior, 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.

Making decisions is exhausting. Anyone who has ever configured a laptop online or researched a long trip—flight, hotels, activities, restaurants, weather—knows this well: After all the comparing, considering, and choosing, you are exhausted. Science calls this decision fatigue.

A study of hundreds of verdicts shows that within a session, the percentage of “courageous” judicial decisions gradually drops from 65 percent to almost zero, and after a recess, returns to 65 percent. So much for the careful deliberations of Lady Justice. But, as long as you have no upcoming trials, all is not lost: You now know when to present your project to the CEO.

As an enlightened person, you can only laugh at this silly superstition. But wait: What if I put it to you this way? Would you put on a freshly laundered sweater that Hitler had once worn? Probably not, right? So, it seems that you haven’t lost all respect for intangible forces, either. Essentially, this sweater has nothing to do with Hitler anymore. There isn’t a single molecule of Hitler’s sweat on it. However, the prospect of putting it on still puts you off. It’s more than just a matter of respect. Yes, we want to project a “correct” image to our fellow humans and to ourselves, but the thought puts us off even when we are alone and when we convince ourselves that touching this sweater does not endorse Hitler in any way. This emotional reaction is difficult to override. Even those who consider themselves quite rational have a hard time completely banishing the belief in mysterious forces (me included).

The contagion bias describes how we are incapable of ignoring the connection we feel to certain items—be they from long ago or only indirectly related (as with the photos).

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. In conclusion: If someone uses the word “average,” think twice. Try to work out the underlying distribution. If a single anomaly has almost no influence on the set, the concept is still worthwhile. However, when extreme cases dominate (such as the Bill Gates phenomenon), we should discount the term “average.” We should all take stock from novelist William Gibson: “The future is already here—it’s just not very evenly distributed.”

Small—surprisingly small—monetary incentives crowd out other types of incentives.

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

So who is safe from motivation crowding? This tip should help: Do you know any private bankers, insurance agents, or financial auditors who do their jobs out of passion or who believe in a higher mission? I don’t. 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 paycheck. On the other hand, if you create a start-up, you would be wise to enlist employee enthusiasm to promote the company’s endeavor 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, practice 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.

coaches to join in. Jabber disguises ignorance.

“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.”

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 have nothing to say, say nothing.” Simplicity is the zenith of a long, arduous journey, not the starting point.

This effect is called “stage migration” or the Will Rogers phenomenon, named after an American comedian from Oklahoma. He is said to have joked that Oklahomans who pack up and move to California raise both states’ average IQ. Since we rarely recognize such scenarios, let’s drill the Will Rogers phenomenon to anchor it in your memory.

A particularly deceitful case of the Will Rogers phenomenon is found in medicine. Tumors are usually broken down into four stages: The smallest and most treatable ones are classified as stage one; the worst are rated stage four. Their progression gives us the term “stage migration.” The survival rate is highest for stage one patients and lowest for stage four patients. Now, every year new procedures are released onto the market and allow for more accurate diagnosis. These new screening techniques reveal minuscule tumors that no doctor had ever noticed before. The result: Patients who were erroneously diagnosed as healthy before are now counted as stage one patients. The addition of relatively healthy people into the stage one group increases the group’s average life expectancy. A great medical success? Unfortunately not: mere stage migration.

information bias, the delusion that more information guarantees better decisions. Searching for a hotel in Miami a little while ago, I drew up a short list of five good offers. Right away, one jumped out at me, but I wanted to make sure I had found the best deal and decided to keep researching. I plowed my way through dozens of customer reviews and blog posts and clicked through countless photos and videos. Two hours later, I could say for sure which the best hotel was: the one I had liked at the start. The mountain of additional information did not lead to a better decision. On the contrary, if time is money, then I might as well have taken up residence at the Four Seasons.

Forget trying to amass all the data. Do your best to get by with the bare facts. It will help you make better decisions. Superfluous knowledge is worthless, whether you know it or not. The historian Daniel J. Boorstin put it right: “The greatest obstacle to discovery is not ignorance—it is the illusion of knowledge.” And next time you are confronted by a rival, consider killing him—not with kindness but with reams of data and analysis.

effort justification. When you put a lot of energy into a task, you tend to overvalue the result.

Now that you know about effort justification, you can rate your projects more objectively. Try it out: Whenever you have invested a lot of time and effort into something, stand back and examine the result—only the result. The novel you’ve been tinkering with for five years and that no publisher wants: Perhaps it’s not Nobel-worthy after all. The MBA you felt compelled to do: Would you really recommend it? And the woman you’ve been chasing for years: Is she really better than bachelorette number two who would say yes right away?

Suppose you read the following story in the newspaper: “Start-ups employ smarter people. A study commissioned by the National Institute of Unnecessary Research has calculated the average IQ in American companies. The result: Start-ups hire MENSA material.” What is your first reaction? Hopefully a raised eyebrow. This is a perfect example of the law of small numbers. Start-ups tend to employ fewer people. Therefore the average IQs will fluctuate much more than those of large corporations, giving small (and new) businesses the highest and lowest scores. The National Institute’s study has zero significance. It simply confirms the laws of chance. So, watch out when you hear remarkable statistics about any small entities: businesses, households, cities, data centers, anthills, parishes, schools, and so on. What is being peddled as an astounding finding is, in fact, a humdrum consequence of random distribution. In his latest book, Nobel Prize winner Daniel Kahneman reveals that even experienced scientists succumb to the law of small numbers. How reassuring.

But how do we react to personal expectations? This brings us to the “placebo effect”—pills and therapies that are unlikely to improve health, but do so anyway. The “placebo effect” has been registered in one-third of all patients. But how it works is not well understood. All we know is that expectations alter the biochemistry of the brain and thus the whole body. Accordingly Alzheimer’s patients cannot benefit from it: Their condition impairs the area of the brain that deals with expectations.

Thinking is more exhausting than sensing: Rational consideration requires more willpower than simply giving in to intuition. In other words, intuitive people tend to scrutinize less. This led Harvard psychologist Amitai Shenhav and his research colleagues to investigate whether people’s CRT results correlate with their faith. Americans with a high CRT score (the study was conducted only in the United States) are often atheists, and their convictions have been reinforced over the years. Participants with low CRT results, however, tend to believe in God and “the immortality of the soul,” and often have had divine experiences. This makes sense: The more intuitively people make decisions, the less rationally they query religious beliefs.

Science labels this tendency the Forer effect (or the “Barnum effect”). The Forer effect explains why the pseudosciences work so well—astrology, astrotherapy, the study of handwriting, biorhythm analysis, palmistry, tarot card readings, and séances with the dead. What’s behind the Forer effect? First, the majority of statements in Forer’s passage are so general that they relate to everyone: “Sometimes you seriously doubt your actions.” Who doesn’t? Second, we tend to accept flattering statements that don’t apply to us: “You are proud of your independent thinking.” Obviously! Who sees himself or herself as a mindless follower? Third, the so-called feature-positive effect plays a part: The text contains no negative statements; it states only what we are, even though the absence of characteristics is an equally important part of a person’s makeup. Fourth, the father of all the fallacies, the confirmation bias: We accept whatever corresponds to our self-image and unconsciously filter everything else out. What remains is a coherent portrait.

Whatever tricks astrologers and palm readers can turn, consultants and analysts can, too:

So now we come to the thorny topic of altruism. Does selflessness exist at all or is it merely a balm to our egos? Although a desire to help the community motivates many volunteers, personal benefits play a big part, such as gaining skills, experience, and contacts. Suddenly we’re not acting quite so selflessly. Indeed, many volunteers engage in what might be deemed “personal happiness management,” the benefits of which are sometimes far removed from the real cause. Strictly speaking, anyone who profits or feels even the slightest satisfaction from volunteering is not a pure altruist.

There is one group exempt from volunteer’s folly: celebrities. If Bono, Kate Winslet, and Mark Zuckerberg pose for photos while making birdhouses, cleaning oil-stained beaches, or digging for earthquake victims, they lend something priceless to the situation: publicity.

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. This is more than sophistry. Because we are so confident of our beliefs, we experience three reactions when someone fails to share our views. Response 1: Assumption of ignorance. The other party clearly lacks the necessary information. If he knew what you know, he would be of the same opinion. Political activists think this way: They believe they can win others over through enlightenment. Reaction 2: Assumption of idiocy. The other person has the necessary information, but his mind is underdeveloped. He cannot draw the obvious conclusions. In other words, he’s a moron. This reaction is particularly popular with bureaucrats who want to protect “stupid” consumers from themselves. Response 3: Assumption of malice. Your counterpart has the necessary information—he even understands the debate—but he is deliberately confrontational. He has evil intentions. This is how many religious leaders and followers treat disbelievers: If they don’t agree, they must be servants of the devil! In conclusion: Nothing is more convincing than your own beliefs. We believe that introspection unearths genuine self-knowledge. Unfortunately, introspection is, in large part, fabrication posing two dangers: First, the introspection illusion creates inaccurate predictions of future mental states. Trust your internal observations too much and too long, and you might be in for a very rude awakening. Second, we beli...

In the third century BC, General Xiang Yu sent his army across the Yangtze River to take on the Qin dynasty. While his troops slept, he ordered all the ships to be set alight. The next day he told them: “You now have a choice: Either you fight to win or you die.” By removing the option of retreat, he switched their focus to the only thing that mattered: the battle.

Write down what not to pursue in your life. In other words, make calculated decisions to disregard certain possibilities and when an option shows up, test it against your not-to-pursue list. It will not only keep you from trouble but also save you lots of thinking time. Think hard once and then just consult your list instead of having to make up your mind whenever a new door cracks open. Most doors are not worth entering, even when the handle seems to turn so effortlessly.

Whatever has held its own throughout centuries of innovation will probably continue to do so in the future, too. Old technology has proven itself; it possesses an inherent logic even if we do not always understand it. If something has endured for epochs, it must be worth its salt. You can take this to heart the next time you are in a strategy meeting. Fifty years into the future will look a lot like today. Of course, you will witness the birth of many flashy gadgets and magic contraptions. But most will be short-lived.

Whatever has survived for X years will last another X years. Taleb wagers that the “bullshit filter of history” will sort the gimmicks from the game changers. And that’s one bet I’m willing to back.

in our memories, the source of the argument fades faster than the argument. In other words, your brain quickly forgets where the information came from (e.g., from the Department of Propaganda). Meanwhile, the message itself (i.e., war is necessary and noble) fades only slowly or even endures. Therefore, any knowledge that stems from an untrustworthy source gains credibility over time. The discrediting force melts away faster than the message does.

How can you thwart the sleeper effect? First, don’t accept any unsolicited advice, even if it seems well meant. Doing so, you protect yourself to a certain degree from manipulation. Second, avoid ad-contaminated sources like the plague. How fortunate we are that books are (still) ad-free! Third, try to remember the source of every argument you encounter. Whose opinions are these? And why do they think that way? Probe the issue like an investigator would: Cui bono? Who benefits? Admittedly, this is a lot of work and will slow down your decision making. But it will also refine it.

If you have trouble making a decision, remember that the choices are broader than “no surgery” or “highly risky surgery.” Forget about the rock and the hard place, and open your eyes to the other, superior alternatives.

social comparison bias had kicked in—that is, the tendency to withhold assistance to people who might outdo you, even if you look like a fool in the long run.

“A-players hire people even better than themselves. It’s clear, though, that B-players hire C-players so they can feel superior to them, and C-players hire D-players. If you start hiring B-players, expect what Steve [Jobs] called ‘the bozo explosion’ to happen in your organization.” In other words, start hiring B-players and you end up with Z-players. Recommendation: Hire people who are better than you, otherwise you soon preside over a pack of underdogs. The so-called Duning-Kruger effect applies to such Z-players: The inept are gifted at overlooking the extent of their incompetence. They suffer from illusory superiority, which leads them to make even more thinking errors, thus creating a vicious cycle that erodes the talent pool over time. While his school was

Do you foster individuals more talented than you? Admittedly, in the short term, the preponderance of stars can endanger your status, but in the long run, you can only profit from their contributions. Others will overtake you at some stage anyway. Until then, you should get in the up-and-comers’ good books—and learn from them. This is why I wrote the testimonial in the end.

the contrasting “recency effect” matters as well. The more recent the information, the better we remember it. This occurs because our short-term memory file drawer, as it were, contains very little extra space. When a new piece of information gets filed, an older piece of information is discarded to make room.

First and last impressions dominate, meaning the content sandwiched between has only a weak influence. Try to avoid evaluations based on first impressions. They will deceive you, guaranteed, in one way or another. Try to assess all aspects impartially. It’s not easy, but there are ways around it. For example, in interviews, I jot down a score every five minutes and calculate the average afterward. This way, I make sure that the “middle” counts just as much as hello and good-bye.

not-invented-here syndrome (NIH syndrome), which fools us into thinking anything we create ourselves is unbeatable. NIH syndrome causes you to fall in love with your own ideas. This is valid not only for fish sauces, but for all kinds of solutions, business ideas, and inventions. Companies tend to rate homegrown ideas as far more important than those from outsiders, even if, objectively, this is not the case.