Investing Quotes

“But Stanovich sees it differently. In his book, What Intelligence Tests Miss: The Psychology of Rational Thought, he coined the term “dysrationalia”—the inability to think and behave rationally despite having high intelligence. Research in cognitive psychology suggests there are two principal causes of dysrationalia. The first is a processing problem. The second is a content problem. Stanovich believes we process poorly. When solving a problem, he says, people have several different cognitive mechanisms to choose from. At one end of the spectrum are mechanisms with great computational power, but they are slow and require a great deal of concentration. At the opposite end of the spectrum are mechanisms that have low computational power, require very little concentration, and make quick action possible. “Humans are cognitive misers,” Stanovich writes, “because our basic tendency is to default to the processing mechanisms that require less computational effort, even if they are less accurate.”9 In a word, humans are lazy thinkers. They take the easy way out when solving problems and as a result, their solutions are often illogical. The second cause of dysrationalia is the lack of adequate content. Psychologists who study decision making refer to content deficiency as a “mindware gap.” First articulated by David Perkins, a Harvard cognitive scientist, mindware refers to the rules, strategies, procedures, and knowledge people have at their mental disposal to help solve a problem. “Just as kitchenware consists in tools for working in the kitchen, and software consists in tools for working with your computer, mindware consists in the tools for the mind,” explains Perkins. “A piece of mindware is anything a person can learn that extends the person’s general powers to think critically and creatively.”
― Robert G. Hagstrom, Investing: The Last Liberal Art