How can anyone make rational decisions in a world where knowledge is limited, time is pressing, and deep thought is often unattainable? Some decisions are more difficult than others and yet we often make these decisions in the same way easy decisions are made, on autopilot. We have difficulty contemplating and taking protective actions towards [...]
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Other things being equal when the price of a good rises, the quantity demanded should fall. Economics refer to this as the law of demand. Because there are many counter-examples to this law it’s more of a quick rule of thumb. Giffen goods are ones which people consume more of as the price rises, thus [...]
At the recommendation of Warren Buffett’s Biographer, Alice Schroeder, I’ve been reading The Craft of Interviewing. Schroeder seems pretty crafty at knowing when, what, and how to ask. Rest assured, I have no intention to interview anyone. I do, however, want to ask better questions. I’ve never been taught how to ask questions, which makes [...]
Some of the general heuristics—rules of thumb—that people use in making judgments that produce biases towards classifying situations according to their representativeness, or toward judging frequencies according to the availability of examples in memory, or toward interpretations warped by the way in which a problem has been framed. These heuristics have important implications for individuals and society. [...]
There is common ground in analysing financial systems and ecosystems, especially in the need to identify conditions that dispose a system to be knocked from seeming stability into another, less happy state. Tipping points‘, ‘thresholds and breakpoints’, ‘regime shifts’ — all are terms that describe the flip of a complex dynamical system from one state [...]
Cognitive dissonance is a state of tension that occurs whenever a person holds two cognitions (ideas, beliefs, attitudes, or opinions) that are psychologically inconsistent. Dissonance produces an uncomfortable mental state the the mind needs to resolve. In resolving dissonance our minds trend towards self-justification which makes it hard to admit mistakes. Most people, when confronted [...]
“The only proven way to raise your odds of making a good decision is to learn to use a good decision-making process–one that can get you the best solution with a minimal loss of time, energy, money, and composure.”—John Hammond A good decision making process can literally change the world. Consider the following example from [...]
