Detective Skills

As already said in a prior post, Kahneman's framework of our brains, working in an intuitive system one and a reflexive system two, is key to understand how our minds trick us. In order to be/act reflexively, we must enforce ourselves to de-bias. This painful effort is clearly cited by Beveridge in his book, "The art of Scientific Investigation". Montier argued the same in his 2002 paper.

Being skeptic may be one of the paths to wordily wisdom. FOCUS, ATTENTION, MOTIVATION, AWARENESS are key words.

“Powers of observation can be developed by cultivating the habit of watching things with an active, enquiring mind. It is no exaggeration to say that well developed habits of observation are more important in research than large accumulations of academic learning.” — W. I. B. Beveridge in The Art of Scientific Investigation

Darwin's Mind: The Evolutionary Foundations of Heuristics and Biases (James Montier)

In this old (2002) article, Montier discusses our minds' tricks. It suggests mistakes we make have four common causes, namely:

(i) Self-deception: makes us believe we are better than average. The thing is that we lie to ourselves! It's common to ask to a group "Do you guys think yourselves are a better than average investor?" and get 80% of positive answers. Naturally this number isn't feasible. Framing is also important. Quoting Montier, "We find it incredibly hard to see through the way in which information is presented to us. The brain is effectively modular, if a problem is presented to us in a family fashion we can solve it, but in another guise we fall flat on our faces."

(ii) Simplification: our brain is composed by system one (intuitive, emotional, dreamier, right side of the brain) and system two (reflective, analytical, logical, left side of the brain). Tasks may perhaps start out as the subject of system two but when they become familiar, they are processed in system one. The trick here is try to be more analytical, i.e., use our system two way more than system one.

(iii) Emotion/Affect: emotions are important to our survival. Sentiments like fear are key to living longer, i.e., taking less risks. Hence we have become evolutionarily tuned to listen to our system one (intuitive) responses. Naturally this leads to a couple errors in day to day analytical tasks. Watch out so you do not deceive yourself.

(iv) Social Interaction: information serves to transmit information vertically and horizontally in the social group. Also, social learning is much faster than natural selection. Once we have speech and imitation skills, the possible role of a second replicator emerges as a major evolutionary force. Remember group think is something to avoid.

Think critically and debias yourself!