The Psychology of Human Misjudgment

The Psychology of Human Misjudgment

I have long been very interested in standard thinking errors. However, I was educated in an era wherein the contributions of non-patient-treating psychology to an understanding of misjudgment met little approval from members of the mainstream elite. Instead, interest in psychology was pretty well confined to a group of professors who talked and published mostly for themselves, with much natural detriment from isolation and groupthink. And so, right after my time at Caltech and Harvard Law School, I possessed a vast ignorance of psychology. Those institutions failed to require knowledge of the subject. And, of course, they couldn’t integrate psychology with their other subject matter when they didn’t know psychology.

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I was aware that man was a “social animal,” greatly and automatically influenced by behavior he observed in men around him. I also knew that man lived, like barnyard animals and monkeys, in limited size dominance hierarchies, wherein he tended to respect authority and to like and cooperate with his own hierarchy members while displaying considerable distrust and dislike for competing men not in his own hierarchy. But this generalized, evolution-based theory structure was inadequate to enable me to cope properly with the cognition I encountered. I was soon surrounded by much extreme irrationality, displayed in patterns and subpatterns. So surrounded, I could see that I was not going to cope as well as I wished with life unless I could acquire a better theory-structure on which to hang my observations and experiences.

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And, partly. I had found that theory structure was a superpower in helping one get what one wanted. As I had early discovered in school wherein I had excelled without labor, guided by theory, while many others, without mastery of theory, failed despite monstrous effort. Better theory, I thought, had always worked for me and, if now available, could make me acquire capital and independence faster and better assist everything I loved. And so I slowly developed my own system of psychology. More or less in the self-help style of Ben Franklin and with the determination displayed in the refrain of the nursery story: “‘Then I’ll do it myself,’ said the little red hen.”

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found that introductory psychology texts, by and large, didn’t deal appropriately with a fundamental issue: Psychological tendencies tend to be both numerous and inseparably intertwined, now and forever, as they interplay in life. Yet the complex parsing out of effects from intertwined tendencies was usually avoided by the writers of the elementary texts. Possibly the authors did not wish, through complexity, to repel entry of new devotees to their discipline. And, possibly, the cause of their inadequacy was the one given by Samuel Johnson in response to a woman who inquired as to what accounted for his dictionary’s misdefinition of the word “pastern.” “Pure ignorance,” Johnson replied. And, finally, the text writers showed little interest in describing standard antidotes to standard psychology-driven folly, and they thus avoided most discussion of exactly what most interested me.

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academic psychology has some very important merits alongside its defects. I learned this eventually, in the course of general reading, from a book, Influence,aimed at a popular audience, by a distinguished psychology professor, Robert Cialdini,

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The ant learns a little behavior from experiences, but mostly it merely responds to ten or so stimuli with a few simple responses programmed into its nervous system by its genes, sometimes walk round and round until they perish.

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When one thus sees perception so easily fooled by mere contrast, where a simple temperature gauge would make no error, and realizes that cognition mimics perception in being misled by mere contrast, he is well on the way toward understanding, not only how magicians fool one, but also how life will fool one. This can occur, through deliberate human manipulation or otherwise, if one doesn’t take certain precautions.

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Man’s often wrong but generally useful psychological tendencies are quite numerous and quite different. The natural consequence of this profusion of tendencies is the grand general principle of social psychology: cognition is ordinarily situation dependent so that different situations often cause different conclusions, even when the same person is thinking in the same general subject area.

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1. Reward and Punishment Superresponse Tendency

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the system has no integrity for the customers if the night work shift can’t accomplish its assignment fast.

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finally, somebody got the happy thought that it was foolish to pay the night shift by the hour when what the employer wanted was not maximized billable hours of employee service but fault-free, rapid performance of a particular task. Maybe, this person thought, if they paid the employees per shift and let all night shift employees go home when all the planes were loaded, the system would work better. And, lo and behold, that solution worked.

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“If you would persuade, appeal to interest and not to reason.”

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Skinner was right in his main idea: Incentives are superpowers. The outcome of his basic experiments will always remain in high repute in the annals of experimental science.

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I always call the “Johnny-one-note” turn of mind that eventually diminished Skinner’s reputation the man-with-a-hammer tendency, after the folk saying: “To a man with only a hammer every problem looks pretty much like a nail.” Man-with-a-hammer tendency does not exempt smart people like Blanchard and Skinner.

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it won’t exempt you if you don’t watch out. I will return to man-with– a-hammer tendency at various times in this talk because, fortunately, there are effective anti-dotes that reduce the ravages of what pretty much ruined the personal reputation of the brilliant Skinner.

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One of the most important consequences of incentive superpower is what I call “incentive caused bias.”

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A man has an acculturated nature making him a pretty decent fellow, and yet, driven both consciously and sub-consciously by incentives, he drifts into immoral behavior in order to get what he wants, a result he facilitates by rationalizing his bad behavior,

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the cognitive drift of that surgeon is present in every profession and in every human being. And it causes perfectly terrible behavior.

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Widespread incentive-caused bias requires that one should often distrust, or take with a grain of salt, the advice of one’s professional advisor, even if he is an engineer.

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The general antidotes here are: especially fear professional advice when it is especially good for the advisor; learn and use the basic elements of your advisor’s trade as you deal with your advisor; and double check, disbelieve, or replace much of what you’re told, to the degree that seems appropriate after objective thought.

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people who create things like cash registers, which make dishonest behavior hard to accomplish, are some of the effective saints of our civilization because, as Skinner so well knew, bad behavior is intensely habit-forming when it is rewarded.

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The strong tendency of employees to rationalize bad conduct in order to get rewards requires many antidotes in addition to the good cash control promoted by Patterson. Perhaps

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So incentive-caused bias is a huge, important thing, with highly important antidotes, like the cash register and a sound accounting system. But when I came years ago to the psychology texts, I found that, while they were about one thousand pages long, there was as little therein that dealt with incentive-caused bias and no mention of Patterson or sound accounting systems.

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Somehow incentive-caused bias and its antidotes pretty well escaped the standard survey courses in psychology, even though incentive-caused bias had long been dis-played prominently in much of the world’s great literature, and antidotes to it had long existed in standard business routines. In the end, I concluded that when something was obvious in life but not easily demonstrable in certain kinds of easy, repeatable academic experiments, the truffle hounds of psychology very often missed it.

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For instance, economists, speaking from the employer’s point of view, have long had a name for the natural results of incentive-caused bias: “agency cost.”

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economists have typically known that, just as grain is always lost to rats, employers always lose to employees who improperly think of themselves first.

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Employer installed antidotes include: tough internal audit systems, severe public punishment for identified miscreants, as well as misbehavior-preventing routines and such machines as cash registers.

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have a strong incentive to prevent all waste in operations within their ownership. After all, they live on the difference between their competitive prices and their overall costs and their businesses will perish if costs exceed sales.

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man tends to “game” all human systems,

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Antigaming features, therefore, constitute a huge and necessary part of almost all system design.

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avoid as much you can, rewarding people for what can be easily faked.

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money is now the main reward that drives habits. A monkey can be trained to seek and work for an intrinsically worthless token, as if it were a banana, if the token is routinely exchangeable for a banana. So it is also with humans working for money– only more so, because human money is exchangeable for many desired things in addition to food, and one ordinarily gains status from either holding or spending it. Moreover, a rich person will often, through habit, work or connive energetically for more money long after he has almost no real need for more. Averaged out, money is a mainspring of modern civilization, having little precedent in the behavior of nonhuman animals. Money rewards are also intertwined with other forms of reward. For instance, some people use money to buy status and others use status to get money, while still others sort of do both things at the same time.

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Granny’s Rule, to be specific, is the requirement that children eat their carrots before they get dessert. And the business version requires that executives force themselves daily to first do their unpleasant and necessary tasks before rewarding themselves by proceeding to their pleasant tasks. Given reward super-power, this practice is nice and sound. Moreover, the rule can also be used in the nonbusiness part of life. The emphasis on daily use of this practice is not accidental.

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1. Liking/Loving Tendency

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And what will a man naturally come to like and love, apart from his parent, spouse and child? Well, he will like and love being liked and loved. And so many a courtship competition will be won by a person displaying exceptional devotion, and man will generally strive, lifelong, for the affection and approval of many people not related to him.

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One very practical consequence of Liking/Loving Tendency is that it acts as a conditioning device that makes the liker or lover tend: to ignore faults of, and comply with wishes of, the object of his affection, to favor people, products, and actions merely associated with the object of his affection (as we shall see when we get to “Influence-from-Mere-Association Tendency,” and to distort other facts to facilitate love.

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1. Disliking/Hating Tendency

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the dislikings and hatreds never go away completely. Born into man, these driving tendencies remain strong. Thus, we get maxims like the one from England: “Politics is the art of marshalling hatreds.” And we also get the extreme popularity of very negative political advertising in the United States.

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Disliking/Hating Tendency also acts as a conditioning device that makes the disliker/hater tend to: ignore virtues in the object of dislike, dislike people, products, and actions merely associated with the object of his dislike, and distort other facts to facilitate hatred.

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Distortion of that kind is often so extreme that miscognition is shockingly large. When the world Trade Center was destroyed, many Muslims immediately concluded that the Hindus did it, while many Arabs concluded that the Jews did it. Such factual distortions often make mediation between opponents locked in hatred either difficult or impossible. Mediations between Israelis and Palestinians are difficult because facts in one side’s history overlap very little with facts from the other side’s.

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1. Doubt-Avoidance Tendency

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The brain of man is programmed with a tendency to quickly remove doubt by reaching some decision. It is easy to see how evolution would make animals, over the eons, drift toward such quick elimination of doubt. After all, the one thing that is surely counterproductive for a prey animal that is threatened by a predator is to take a long time in deciding what to do. And so man’s Doubt Avoidance Tendency is quite consistent with the history of his ancient, nonhuman ancestors.

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what usually triggers Doubt-Avoidance Tendency is some combination of puzzlement and stress.

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1. Inconsistency-Avoidance Tendency

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The brain of man conserves programming space by being reluctant to change, which is a form of inconsistency avoidance. We see this in all human habits, constructive and destructive. Few people can list a lot of bad habits that they have eliminated, and some people cannot identify even one of these. Instead, practically everyone has a great many bad habits he has long maintained despite their being known as bad. Given this situation, it is not too much in many cases to appraise early-formed habits as destiny.

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The rare life that is wisely lived has in it many good habits maintained and many bad habits avoided or cured.

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“An ounce of prevention is worth a pound of cure.” What Franklin is here indicating, in part, is that Inconsistency-Avoidance Tendency makes it much easier to prevent a habit than to change it.

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Also tending to be maintained in place by the anti-change tendency of the brain are one’s previous conclusions, human loyalties, reputational identity, commitments, accepted role in a civilization,

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My guess is the anti-change mode was significantly caused by a combination of the following factors: It facilitated faster decisions when speed of decision was an important contribution to the survival of nonhuman ancestors that were prey. It facilitated the survival advantage that our ancestors gained by cooperating in groups, which would have been more difficult to do if everyone was always changing responses. It was the best form of solution that evolution could get to in the limited number of generations between the start of literacy and today’s complex modern life.

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It is easy to see that a quickly reached conclusion, triggered by Doubt-Avoidance Tendency, when combined with a tendency to resist any change in that conclusion, will naturally cause a lot of errors in cognition for modern man.

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What Keynes was reporting is that the human mind works a lot like the human egg. When one sperm gets into a human egg, there’s an automatic shut-off device that bars any other sperm from getting in. The human mind tends strongly toward the same sort of result. And so, people tend to accumulate large mental holdings of fixed conclusions and attitudes that are not often reexamined or changed, even though there is plenty of good evidence that they are wrong.

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One of the most successful users of an antidote to first conclusion bias was Charles Darwin. He trained himself, early, to intensively consider any evidence tending to disconfirm any hypothesis of his, more so if he thought his hypothesis was a particularly good one.

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Moreover, the tendency will often make man a “patsy” of manipulative “compliance-practitioners,” who gain advantage from triggering his subconscious Inconsistency-Avoidance Tendency. Few people demonstrated this process better than Ben Franklin. As he was rising from obscurity in Philadelphia and wanted the approval of some important man, Franklin would often maneuver that man into doing Franklin some unimportant favor, like lending Franklin a book. Thereafter, the man would admire and trust Franklin more because a nonadmired and nontrusted Franklin would be inconsistent with the appraisal implicit in lending Franklin the book.

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1. Curiosity Tendency

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Curiosity, enhanced by the best of modern education (which is by definition a minority part in many places), much helps man to prevent or reduce bad consequences arising from other psychological tendencies. The curious are also provided with much fun and wisdom long after formal education has ended.

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1. Kantian Fairness Tendency

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a “golden rule” that required humans to follow those behavior patterns that, if followed by all others, would make the surrounding human system work best for everybody. And it is not too much to say that modern acculturated man displays, and expects from others, a lot of fairness as thus defined by Kant.

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many freeway drivers, including myself, will often let other drivers come in front of them, in lane changes or the like, because that is the courtesy they desire when roles are reversed.

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1. Envy/Jealousy Tendency

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As I have shared the observation of life with Warren Buffett over decades, I have heard him wisely say on several occasions: “It is not greed that drives the world, but envy.”

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My guess is that people widely and generally sense that labeling some position as driven by envy/jealousy will be regarded as extremely insulting to the position taker, possibly more so when the diagnosis is correct than when it is wrong. And if calling a position “envy-driven” is perceived as the equivalent of describing its holder as a childish mental basket case, then it is quite understandable how a general taboo has arisen. But should this general taboo extend to psychology texts when it creates such a large gap in the correct, psychological explanation of what is widespread and important? My answer is no.

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1. Reciprocation Tendency

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The automatic tendency of humans to reciprocate both favors and disfavors has long been noticed as it is in apes, monkeys, dogs, and many less cognitively gifted animals. The tendency facilitates group cooperation for the benefit of members.

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What both human and ant history suggest is that nature has no general algorithm making intra-species, turn-the-other-cheek behavior a booster of species survival; that it is not clear that a country would have good prospects were it to abandon all reciprocate-disfavor tendency directed at outsiders; and if turn-the-other-cheek behavior is a good idea for a country as it deals with outsiders, man’s culture is going to have to do a lot of heavy lifting because his genes won’t be of much help.

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The standard antidote to one’s overactive hostility is to train oneself to defer reaction. As my smart friend Tom Murphy so frequently says, “You can always tell the man off tomorrow, if it is such a good idea.”

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Of course, the tendency to reciprocate favor for favor is also very intense, so much so that it occasionally reverses the course of reciprocated hostility. Weird pauses in fighting have sometimes occurred right in the middle of wars, triggered by some minor courtesy or favor on the part of one side, followed by favor reciprocation from the other side, and so on, until fighting stopped for a considerable period. This happened more than once in the trench warfare of World War I, over big stretches of the front and much to the dismay of the generals.

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Like other psychological tendencies, and also man’s ability to turn somersaults, reciprocate-favor tendency operates to a very considerable degree at a subconscious level. This helps make the tendency a strong force that can sometimes be used by some men to mislead others, which happens all the time.

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For instance, when an automobile salesman graciously steers you into a comfortable place to sit and gives you a cup of coffee, you are very likely being tricked, by this small courtesy alone, into parting with an extra five hundred dollars. This is far from the most extreme case of sales success that is rooted in a salesman dispensing minor favors. However, in this scenario of buying a car, you are going to be disadvantaged by parting with an extra five hundred dollars of your own money. This potential loss will protect you to some extent. But suppose you are the purchasing agent of someone else– a rich employer, for instance. Now the minor favor you receive from the salesman is less opposed by the threat of extra cost to you because someone else is paying the extra cost. Under such circumstances, the salesman is often able to maximize his advantage, particularly when government is the purchaser.

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Wise employers, therefore, try to oppose reciprocate-favor tendencies of employees engaged in purchasing. The simplest antidote works best: Don’t let them accept any favors from vendors. Sam Walton agreed with this idea of absolute prohibition. He wouldn’t let purchasing agents accept so much as a hot dog from a vendor. Given the subconscious level at which much Reciprocation Tendency operates, this policy of Walton’s was profoundly correct. If I controlled the Defense Department, its policies would mimic Walton’s.

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After accumulating this one-in-six statistic, Cialdini changed his procedure. His practitioners next wandered around the campus asking strangers to devote a big chunk of time every week for two years to the supervision of juvenile delinquents. This ridiculous request got him a one hundred percent rejection rate. But the practitioner had a follow-up question: “Will you at least spend one afternoon taking juvenile delinquents to a zoo?” This raised Cialdini’s former acceptance rate of 1/6 to ½– a tripling.

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The importance and power of reciprocate-favor tendency was also demonstrated in Cialdini’s explanation of the foolish decision of the attorney general of the United States to authorize the Watergate burglary.

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There, an aggressive subordinate made some extreme proposal for advancing Republican interests through use of some combination of whores and a gigantic yacht. When this ridiculous request was rejected, the subordinate backed off, in gracious concession, to merely asking for consent to a burglary, and the attorney general went along. Cialdini believes that subconscious Reciprocation Tendency thus became one important cause of the resignation of a United States president in the Watergate debacle, and so do I. Reciprocation Tendency subtly causes many extreme and dangerous consequences, not just on rare occasions but pretty much all the time.

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To the extent the feeling of guilt has an evolutionary base, I believe the most plausible cause is the mental conflict triggered in one direction by reciprocate favor tendency and in the opposite direction by Reward Superresponse Tendency pushing one to enjoy one hundred percent of some good thing.

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1. Influence-from-Mere Association

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there is another type of conditioned reflex wherein mere association triggers a response. For instance, consider the case of many men who have been trained by their previous experience in life to believe that when several similar items are presented for purchase, the one with the highest price will have the highest quality. Knowing this, some seller of an ordinary industrial product will often change his product’s trade dress and raise its price significantly hoping that quality-seeking buyers will be tricked into becoming purchasers by mere association of his product and its high price.

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With luxury goods, the process works with a special boost because buyers who pay high prices often gain extra status from thus demonstrating both their good taste and their ability to pay. Even association that appears to be trivial, if care-fully planned, can have extreme and peculiar effects on purchasers of products. The target purchaser of shoe polish may like pretty girls. And so he chooses the polish with the pretty girl on the can or the one with the pretty girl in the last ad for shoe polish that he saw.

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the most damaging miscalculations from mere association do not ordinarily come from advertisers and music providers. Some of the most important miscalculations come from what is accidentally associated with one’s past success, or one’s liking and loving, or one’s disliking and hating, which includes a natural hatred for bad news.

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For instance, a man foolishly gambles in a casino and yet wins. This unlikely correlation causes him to try the casino again, or again and again, to his horrid detriment. Or a man gets lucky in an odds-against venture headed by an untalented friend. So influenced, he tries again what worked before– with terrible results.

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The proper antidotes to being made such a patsy by past success are: to carefully examine each past success, looking for accidental, noncausative factors associated with such success that will tend to mislead as one appraises odds implicit in a proposed new undertaking, and to look for dangerous aspects of the new undertaking that were not present when past success occurred.

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People disagree about how much blindness should accompany the association called love. In Poor Richard’s Almanack Franklin counseled: “Keep your eyes wide open before marriage and half shut thereafter.” Perhaps this “eyes-half-shut” solution is about right, but I favor a tougher prescription: “See it like it is and love anyway.”

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Hating and disliking also cause miscalculation triggered by mere association. In business, I commonly see people underappraise both the competency and morals of competitors they dislike. This is a dangerous practice, usually disguised because it occurs on a subconscious basis.

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“Persian Messenger Syndrome.” Ancient Persians actually killed some messengers whose sole fault was that they brought home truthful bad news, say, of a battle lost. It was actually safer for the messenger to run away and hide, instead of doing his job

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Sometimes lawyers, knowing their clients will hate them if they recommend an unwelcome but wise settlement, will carry on to disaster. Even in places well known for high cognition, one will sometimes find Persian Messenger Syndrome.

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The proper antidote to creating Persian Messenger Syndrome and its bad effects, like those at CBS, is to develop, through exercise of will, a habit of welcoming bad news. At Berkshire, there is a common injunction: “Always tell us the bad news promptly. It is only the good news that can wait.” It also helps to be so wise and informed that people fear not telling you bad news be-cause you are so likely to get it elsewhere.

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Influence-from-Mere-Association Tendency often has a shocking effect that helps swamp the normal tendency to return favor for favor, [especially when the favor recipient’s] condition is unpleasant, due to poverty, sickness, subjugation, or something else. Sometimes, when one receives a favor, the favor may trigger an envy-driven dislike for the person who was in so favorable a state that he could easily be a favor giver. Under such circumstances, the favor receiver, prompted partly by mere association of the favor giver with past pain, will not only dislike the man who helped him but also try to injure him. This accounts for a famous response, sometimes dubiously attributed to Henry Ford: “Why does that man hate me so? I never did anything for him.”

Notes:

Why do some people hate people who have helped them a lot, especially if the person sees some unfairness in the scenario.

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A final serious clump of bad thinking caused by mere association lies in the common use of classification stereotypes. Because Pete knows that Joe is ninety years old and that most ninety-year-old persons don’t think very well, Pete appraises old Joe as a thinking klutz even if old Joe still thinks very well. Or, because Jane is a white-haired woman, and Pete knows no old women good at higher math, Pete appraises Jane as no good at it even if Jane is a whiz. This sort of wrong thinking is both natural and common.

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Pete’s antidote is not to believe that, on average, ninety-year-olds think as well as forty year-olds or that there are as many females as males among Ph.D.’s in math. Instead, just as he must learn that trend does not always correctly predict destiny, he must learn that the average dimension in some group will not reliably guide him to the dimension of some specific item.

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1. Simple, Pain-Avoiding Psychological Denial

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That’s Simple, Pain-Avoiding Psychological Denial. The reality is too painful to bear, so one distorts the facts until they become bearable. We all do that to some extent, often causing terrible problems. The tendency’s most extreme outcomes are usually mixed up with love, death, and chemical dependency.

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In chemical dependency, wherein morals usually break down horribly, addicted persons tend to believe that they remain in respectable condition, with respectable prospects. They thus display an extremely unrealistic denial of reality as they go deeper and deeper into deterioration.

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1. Excessive Self-Regard Tendency

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We all commonly observe the excessive self–regard of man. He mostly misappraises himself on the high side,

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Such misappraisals also apply to a person’s major “possessions.” One spouse usually overappraises the other spouse. And a man’s children are likewise appraised higher by him than they are likely to be in a more objective view. Even man’s minor possessions tend to be overappraised. Once owned, they suddenly become worth more to him than he would pay if they were offered for sale to him and he didn’t already own them.

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There is a name in psychology for this overappraisal-of-our-own-possessions phenomenon: the “endowment effect.” And all man’s decisions are suddenly regarded by him as better than would have been the case just before he made them.

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Man’s excess of self-regard typically makes him strongly prefer people like himself.

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cliquish

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Some of the worst consequences in modern life come when dysfunctional groups of cliquish persons, dominated by Excessive Self-Regard Tendency, select as new members of their organizations persons who are very much like themselves.

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In lotteries, the play is much lower when numbers are distributed randomly than it is when the player picks his own number. This is quite irrational. The odds are almost exactly the same and much against the player. Because state lotteries take advantage of man’s irrational love of self-picked numbers, modern man buys more lottery tickets than he otherwise would have, with each purchase foolish.

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Excesses of self-regard often cause bad hiring decisions because employers grossly overappraise the worth of their own conclusions that rely on impressions in face-to-face contact. The correct antidote to this sort of folly is to underweigh face-to-face impressions and overweigh the applicant’s past record.

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Because man is likely to be overinfluenced by face-to-face impressions that by definition involve his active participation, a job candidate who is a marvelous “presenter” often causes great danger under modern executive-search practice.

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According to Tolstoy, the worst criminals don’t appraise themselves as all that bad. They come to believe either (1) that they didn’t commit their crimes or (2) that, considering the pressures and disadvantages of their lives, it is understandable and forgivable that they behaved as they did and became what they became.

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On the personal level a man should try to face the two simple facts: fixable but unfixed bad performance is bad character and tends to create more of itself, causing more damage to the excuse giver with each tolerated instance, and in demanding places, like athletic teams and General Electric, you are almost sure to be discarded in due course if you keep giving excuses instead of behaving as you should.

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The main institutional antidotes to this part of the “Tolstoy effect” are: a fair, meritocratic, demanding culture plus personnel handling methods that build up morale, and severance of the worst offenders.

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Of course, when you can’t sever– as in the case of your own child– you must try to fix the child as best you can. I once heard of child-teaching method so effective that the child remembered the learning experience over fifty years later. The child later became Dean of the USC School of Music and then related to me what father said when he saw his child taking candy from the stock of his employer with the excuse that he intended to replace it later. The father said, “Son, it would be better for you to simply take all you want and call yourself a thief every time you do it.”

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excess of self-regard is often counterproductive in its effects on cognition, it can cause some weird successes from overconfidence that happens to cause success. This factor accounts for the adage: “Never underestimate the man who overestimates himself.”

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Of all forms of useful pride, perhaps the most desirable is a justified pride in being trustworthy. Moreover, the trustworthy man, even after allowing for the inconveniences of his chosen course, ordinarily has a life that averages out better than he would have if he provided less reliability.

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1. Overoptimism Tendency

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“What a man wishes, that also will he believe.”

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One standard antidote to foolish optimism is trained, habitual use of the simple probability math

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The mental rules of thumb that evolution gives you to deal with risk are not adequate. They resemble the dysfunctional golf grip you would have if you relied on a grip driven by evolution instead of golf lessons.

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1. Deprival Superreaction Tendency

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The quantity of man’s pleasure from a ten dollar gain does not exactly match the quantity of his displeasure from a ten-dollar loss. That is, the loss seems to hurt much more than the gain seems to help.

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He will often compare what is near instead of what really matters. For instance, a man with $10 million in his brokerage account will often be extremely irritated by the accidental loss of $100 out of the $300 in his wallet.

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Deprival Superreaction Tendency and Inconsistency-Avoidance Tendency often join to cause one form of business failure. In this form of ruin, a man gradually uses up all his good assets in a fruitless attempt to rescue a big venture going bad. One of the best antidotes to this folly is good poker skill learned young. The teaching value of poker demonstrates that not all effective teaching occurs on a standard academic path.

| Location: 777 | Color: yellow |

it causes the gambler to have a passion to get even once he has suffered loss, and the passion grows with the loss.

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the most addictive forms of gambling provide a lot of near misses and each one triggers Deprival Superreaction Tendency.

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Deprival Superreaction Tendency often does much damage to man in open-outcry auctions. The “social proof” that we will next consider tends to convince man that the last price from another bidder was reasonable, and then Deprival Superreaction Tendency prompts him strongly to top the last bid. The best antidote to being thus triggered into paying foolish prices at open-outcry auctions is the simple Buffett practice: Don’t go to such auctions.

| Location: 785 | Color: orange |

1. Social-Proof Tendency

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The otherwise complex behavior of man is much simplified when he automatically thinks and does what he observes to be thought and done around him.

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man’s evolution left him with Social-Proof Tendency, an automatic tendency to think and act as he sees others around him thinking and acting.

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And in the highest reaches of business, it is not all uncommon to find leaders who display followership akin to that of teenagers. If one oil company foolishly buys a mine, other oil companies often quickly join in buying mines. So also if the purchased company makes fertilizer. Both of these oil company buying fads actually bloomed, with bad results.

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A South Dakota hunting license was, say, $2 for South Dakota residents and $5 for nonresidents. All the Nebraska residents, one by one, signed up for South Dakota licenses with phony South Dakota addresses until it was my father’s turn. Then, according to him, he barely prevented himself from doing what the others were doing, which was some sort of criminal offense.

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In social proof, it is not only action by others that misleads but also their inaction. In the presence of doubt, inaction by others becomes social proof that inaction is the right course.

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Learn how to ignore the examples from others when they are wrong, because few skills are more worth having.

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1. Contrast-Misreaction Tendency

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Because the nervous system of man does not naturally measure in absolute scientific units, it must instead rely on something simpler. The eyes have a solution that limits their programming needs: the contrast in what is seen is registered. And as in sight, so does it go, largely, in the other senses. Moreover, as perception goes, so goes cognition. The result is man’s Contrast-Misreaction Tendency.

Notes:

Anchoring bias

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Contrast-Misreaction Tendency is routinely used to cause disadvantage for customers buying merchandise and services. To make an ordinary price seem low, the vendor will very frequently create a highly artificial price that is much higher than the price always sought, then advertise his standard price as a big reduction from his phony price.

| Location: 869 | Color: yellow |

a frog tossed into very hot water would jump out, but that the same frog would end up dying if placed in room-temperature water that was later treated at a very slow rate. My few shreds of physiological knowledge make me doubt this account. But no matter, because many businesses die in just the manner claimed by my friend for the frog. Cognition, misled by tiny changes involving low contrast, will often miss a trend that is destiny. One of Ben Franklin’s best-remembered and most useful aphorisms is “A small leak will sink great ship.” The utility of the aphorism is large precisely because the brain so often misses the functional equivalent of a small leak in a great ship.

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1. Stress-Influence Tendency

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Everyone recognizes that sudden stress, for instance from a threat, will cause a rush of adrenaline in the human body, prompting faster and more extreme reaction.

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And everyone who has taken Psych 101 knows that stress makes Social-Proof Tendency more powerful.

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a phenomenon less well recognized, but still widely known, light stress can slightly improve performance– say, in examinations– whereas heavy stress causes dysfunction. But few people know more about really heavy stress than that it can cause depression. For instance, most people know that an “acute stress depression” makes thinking dysfunctional because it causes an extreme of pessimism, often extended in length and usually accompanied by activity stopping fatigue. Fortunately, as most people also know, such a depression is one of mankind’s more reversible ailments. Even before modern drugs were available, many people afflicted by depression, such as Winston Churchill and Samuel Johnson, gained great achievement in life.

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– so much so that changes in behavior triggered by mere-association, like those caused by much modern advertisement, are today often said to come from “Pavlovian” conditioning.

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1. Availability-Misweighing Tendency

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This mental tendency echoes the words of the song: “When I’m not near the girl I love, I love the girl I’m near.” Man’s imperfect, limited-capacity brain easily drifts into working with what’s easily available to it. And the brain can’t use what it can’t remember or what it is blocked from recognizing because it is heavily influenced by one or more psychological tendencies bearing strongly on it, as the fellow is influenced by the nearby girl in the song. And so the mind overweighs what is easily available and thus displays Availability-Misweighing Tendency.

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The main antidotes to miscues from Availability-Misweighing Tendency often involve procedures, including use of checklists, which are almost always helpful.

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The great algorithm to remember in dealing with this tendency is simple: An idea or a fact is not worth more merely because it is easily available to you.

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1. Use-It-or-Lose-It Tendency

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All skills attenuate with disuse.

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Throughout his life, a wise man engages in practice of all his useful, rarely used skills, many of them outside his discipline, as a sort of duty to his better self. If he reduces the number of skills he practices and, therefore, the number of skills he retains, he will naturally drift into error from man with a hammer tendency. His learning capacity will also shrink as he creates gaps in the lattice-work of theory he needs as a framework for understanding new experience. It is also essential for a thinking man to assemble his skills into a checklist that he routinely uses. Any other mode of operation will cause him to miss much that is important.

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Skills of a very high order can be maintained only with daily practice.

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1. Drug-Misinfluence Tendency

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1. Senescence-Misinfluence Tendency

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Practically no one is good at learning complex new skills when very old. But some people remain pretty good in maintaining intensely practiced old skills until late in life, as one can notice in many a bridge tournament.

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Old people like me get pretty skilled, without working at it, at disguising age-related deterioration because social convention, like clothing, hides much decline. Continuous thinking and learning, done with joy, can somewhat help delay what is inevitable.

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1. Authority-Misinfluence Tendency

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Such cases are also given attention in the simulator training of copilots who have to learn to ignore certain really foolish orders from boss pilots because boss pilots will sometimes err disastrously.

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1. Twaddle Tendency

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Man, as a social animal who has the gift of language, is born to prattle and to pour out twaddle that does much damage when serious work is being attempted. Some people produce copious amounts of twaddle and others very little.

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“The principal job of an academic administration is to keep the people who don’t matter from interfering with the work of the people that do.”

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1. Reason-Respecting Tendency

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In general, learning is most easily assimilated and used when, life long, people consistently hang their experience, actual and vicarious, on a latticework of theory answering the question: Why? Indeed, the question “Why?” is a sort of Rosetta stone opening up the major potentiality of mental life.

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Unfortunately, Reason-Respecting Tendency is so strong that even a person’s giving of meaningless or incorrect reasons will increase compliance with his orders and requests. This has been demonstrated in psychology experiments wherein “compliance practitioners” successfully jump to the head of the lines in front of copying machines by explaining their reason: “I have to make some copies.”

Notes:

from Influence

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