How do we achieve wisdom? It is hard to improve ourselves simply by looking at our own mistakes. The best way to learn what, how and why things work is to learn from others.
“The reading ofall good books is like conversation with the finest minds of past centuries.”
And any method we use to kill bugs will, unless it completely wipes out a species, cause a population of resistant bugs.
Why isn’t the world covered with dead plants and animals? Partly because bacteria breaks down the tissue of dead plants and animals into nutrients like carbon and nitrogen that are then released back into the environment.
Harm avoidance first. Our brain is equipped to register pain more sensitively than any other emotion.
Pain is the signal that tissue is being damaged.
Even though we are capable of logic, our brain does not operate by the principles oflogic. It operates by selection ofpattern recognition. It’s a dynamic network. It’s not an “if-then” logic machine.
Some behavior may under certain conditions look like altruism but can often be explained by self-benefit. Social recognition, prestige, fear ofsocial disapproval, shame, relieffrom distress, avoidance of guilt, a better after-life or social expectations are some reasons behind “altruistic” acts.
The strategy that is effective in the long run is a modern version of”a tooth for a tooth” or TIT-FOR-TAT. It says that we should cooperate at the first meeting and then do whatever our “opponent” did the last time.
We fear dramatic and threatening events. We fear the loss of our health, family, friends, security, money, social status, power, or jobs. We also fear violence, crime, punishment, rejection, failure, the unknown, the immediate, the unpredictable or the uncontrollable. Studies show that even witnessing a traumatic event can produce the same fear response as experiencing the event ourselves.
To understand and control our environment helps us to deal with the future.
To learn what works and does not and what is good or bad for us means we have to explore. Exploring our environment successfully enables our survival and reproduction.
Being flexible and learning a variety of options to choose from to deal with the world is of great value. This implies that finding new ways to deal with the world is superior to overtraining old patterns.
The brain exists to make better decisions about how to enhance reproductive success.
Women placed more emphasis on a potential mate’s financial prospects. Women also preferred ambitious and industrious men. Women preferred older men. Men preferred younger women. Men ranked physical attractiveness higher than women did. The study also showed that a man felt most jealous when his woman was having sex with someone else. A woman felt most jealous when her man became emotionally attached to someone else.
Self-serving bias - overly positive view of our abilities and future. Includes over-optimism.
Do-something syndrome - acting without a sensible reason.
We tend to dislike people who tell us what we don’t want to hear even when they didn’t cause the bad news i.e., kill the messenger.
Encourage people to tell you bad news immediately.
Behavior that is rewarded on an unpredictable basis has the highest rate of response and is the most difficult to extinguish.
We never look at projections, but we care very much about, and look very deeply at, track records.
Optimism is good but when it comes to important decisions, realism is better.
Actually, I think it’s pretty simple: There’s integrity, intelligence, experience, and dedication. That’s what human enterprises need to run well.
It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.
What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.
Convictions are more dangerous enemies of truth than lies.
There is nothing wrong with changing a plan when the situation has changed.
You can’t avoid wrong decisions. But ifyou recognize them promptly and do something about them, you can frequently turn the lemon into lemonade.
Time, effort, and money spent are gone. Decisions should be based on where you want to be. Not where you’ve been.
“Facts do not cease to exist because they are ignored”
Have someone tell you when your thinking is wrong.
when you find information that contradicts your existing beliefs, you’ve got a special obligation to look at it - and quickly.
mistakes are more easily detected in the works of others than in one’s own.
Deprival super-reaction syndrome - people just go bananas.
I can’t sell the stock now. I have to wait until it gets back up to what I paid for it. Anyway, I don’t realize a loss unless I sell.
“One reason why horse races, bingo and these things have always been so popular is because of all these near misses.” Frequent near misses are like small reinforcements and make us want to try again and again.
“To forbid us something is to make us want it.” We want what we can’t have.
We prefer the default option, i.e., the alternative that is selected automatically unless we change it.
Perhaps the most valuable result ofall education is the ability to make yourself do the thing you have to do when it ought to be done whether you like it or not.
There is nothing so disturbing to one’s well-being and judgment as to see a friend get rich.
On the other hand, the 18th Century Dutch physician Bernard de Mandeville said that vices such as greed, envy, and vanity all lead to public benefits by encouraging enterprise.
How we value things depend on what we compare them with.
The difference between $100 and $110 seems like a larger saving than the difference between $2850 and $2860. But it’s the same $10 saving.
Love your enemies, for they tell you your faults.
When people are free to do as they please, they usually imitate each other.
Make people responsible for their actions. Remember though, when all are accountable, no one is accountable.
It is easy to be wise after the event.
We also seem to have a tendency for romanticizing past achievements.
In hindsight, everything seems obvious. But we should look at earlier decisions in the context oftheir own time.
Around here I would say that if our predictions have been a little better than other people’s, it’s because we’ve tried to make fewer of them.
We love stories and story-telling. Good stories and drama get our attention. They give meaning to events. We rationalize decisions and justify choices by telling ourselves comforting stories.
We are not natural skeptics. Doubting is active and takes effort. Studies show that in order to understand some information we must first accept it as true.
Keep records of important events.
The question is: What are we busy about? Don’t confuse activity with results. There is no reason to do a good job with something you shouldn’t do in the first place.
He that would live in peace and at ease, must not speak all he knows, nor judge all he sees.
The benefits ofcooling-offperiods force us to think things through.
Are our actions observed or not? People may change their behavior merely because they are being observed.
We put different values on the same dollar, and are more willing to risk money we have won than money we have earned.
In one experiment psychologists found that people who lost a $10 theater ticket on the way to the theatre were reluctant to buy a second ticket. Those who instead lost a $10 bill on the way to buy a $10 theatre ticket saw the loss of the money and the purchase of the ticket as unrelated, so they would buy the ticket. But, in both cases, the loss was the same.
Teachers taught much better when they expected a lot from their students.
The tradition ofalways looking for the answer in the most fundamental way available - that is a great tradition and it saves a lot of time in this world.
Assiduity. Well, I’ve always liked that word - because to me it means that you sit down on your ass until you’ve done it.
Studies of car safety show that wearing seat belt makes drivers feel more secure, making them drive faster or more recklessly.
Good thinking is better than good intentions.
Most good things have undesired “side effects.” And thinking is no exception.
We try and predict what individual investments will swim well in relation to the tide. And then we tend to accept the effects of the tide as those effects fall.
The proposal should be evaluated as a $3 million decision, given that an additional person would probably cost at least that amount over his lifetime, factoring in rises, benefits and other expenses.
Up to 150 people per colony, the system can be managed by the force of shame.
The American mathematician John Allen Paulos tells us in Innumeracy to put this statement into the right perspective by considering two more facts. The game sold millions ofcopies and about 3 million teenagers played it. In that age group the annual suicide rate is about 12 people per 100,000. This means that we can expect 3 6 0 0 & 0 playing teenagers (12/100,000 x 3 million players) to commit suicide.
Ask: What else can explain this outcome?
When someone remarked to the French writer Voltaire, “Life is hard,” he retorted, “Compared to what?”
Based on the patterns ofbullet holes in returning airplanes, he suggested that the parts not hit should be protected with extra armor. How could he reach that conclusion? Because he also considered planes that didn’t return.
John’s son David made a proposal “I take out the garbage every day for a month, and you only have to pay me a penny today and then every day afterward I want double as much as I got the day before.”
Compounding refers to “interest on interest.”
Ifwe invest $943 today at 6%, we have $1,000 one year from now. $943 is the present value of$1,000 a year from now.
The more uncertainty there is, the harder it is to find a meaningful probability number.
We do, though, monitor our aggregate exposure in order to keep our “worst case” at a level that leaves us comfortable.
It means that surprises, coincidences, rare events and accidents happen, somewhere, sometime, and to someone if they have opportunities to happen.
Most people think dramatically, not quantitatively.
Often when we make financial decisions we don’t consider our total wealth. Instead we judge a decision by evaluating changes measured in terms of short-term gains and losses.
Ask: What do I end up with? How much will I have ifI succeed and how much will I have if I fail? How certain am I? What is the expected utility?
We should never risk something we have and need for something we don’t need.
He that builds before he counts the cost, acts foolishly;
And he that counts before he builds, finds he did not count wisely.
We learn from history that man can never learn anything from history.
-George Bernard Shaw
It’s not that easy to make lots of money in a business in a capitalistic society. There are people that are looking at what you’re doing every day and trying to figure out a way to do it better, underprice you, bring out a better product or whatever it may be.
The single most common cause of cognitive-based errors was the tendency to stop considering other possible explanations after reaching a diagnosis.
Pilots who report an incident within ten days have automatic immunity from punishment.
“It is likely that unlikely things should happen.”
The label “tested positive” can be scary but remember that the test is not the disease.
People like to look for systems that have worked over the past 20 years or so. If you could make money based on what has worked the past 20 years, all o fthe richest people would be librarians.
Statistics are a record of the past, not a prediction ofthe future.
How can we understand what is happening to us without any reference to the past? We conveniently forget to record our mistakes. But they should be highlighted. We should confess our errors and learn from them. We should look into their causes and take steps to prevent them from happening again. Ask:
What was my original reason for doing something? What did I know and what were my assumptions? What were my alternatives at the time?
How did reality work out relative to my original guess? What worked and what didn’t?
Given the information that was available, should I have been able to predict what was going to happen?
What worked well? What should I do differently? What did I fail to do? What did I miss? What must I learn? What must I stop doing?
When people are uncertain they often automatically do what others do without thinking about the correct thing to do.
People on average act out ofself-interest.
A valuable model produces meaningful explanations and predictions of likely future consequences where the cost ofbeing wrong is high. A model should be easy to use. If it is complicated, we don’t use it. It is useful on a nearly daily basis. If it is not used, we forget it. And what use is knowledge if we don’t use it?
Since no single discipline has all the answers, we need to understand and use the big ideas from all the important disciplines - mathematics, physics, chemistry, engineering, biology, psychology, and rank and use them in order of their reliability.
I found that the people who use their brains don’t lose them.
-Marian Cleeves Diamond
“If you can’t explain it simply, you don’t understand it well enough.” Get to the point.
Follow the cash. “How much cash do I get and when do I get it?”
Energy tends to spread.
You can’t believe how hard it is for people to be simple, how much they fear being simple. They worry that if they’re simple, people will think they’re simple-minded. In reality, of course, it’s just the reverse. Clear tough-minded people are the most simple.
Be problem-oriented. Not method-oriented. Use whatever works.
Make fewer and better decisions.
More information doesn’t equal more knowledge or better decisions. And remember that today we not only have access to more information, but also misinformation.
You can’t make a good deal with a bad person.
It’s not that I’m so smart; it’s just that I stay with problems longer.
To apply myself industriously to whatever business I take at hand, and not divert my mind from my business by any foolish project of growing suddenly rich; for industry and patience are the surest means of plenty.
Warren Buffett was asked how he evaluated new business ideas, he said he used 4 criteria as filters:
Predictability: “Our definition of understanding is thinking that we have a reasonable probability of being able to assess where the business will be in 10 years.”
Some issues to think about when designing checklists are:
Warren Buffett tells us what to look for in a spouse: “Look for someone who will love you unconditionally and will subtly encourage you to be better than you thought you can be.”
That there is no evidence of harm (or benefit) isn’t the same as evidence that something is safe (or harmful).
“Let’s try and disprove it.”
Avoid what causes the opposite ofwhat you want to achieve.
It’s much better to let some things go uncompensated - to let life be hard - than to create systems that are easy to cheat.
“Let us start with what is being seeked and assume that we already found it.”
“Why do you want to buy this stock? What must happen for the investment to succeed? What is the downside?”
A fool and his money are soon parted.
If we can’t tolerate a possible consequence, remote though it may be, we steer clear of planting its seeds.
Ask: What is the cost of being wrong versus the benefit of being right compared to other investment opportunities? Cost: John may lose money, reputation, and experience mental stress. It will also take his focus away from other business. Benefit: Possibility to make more money over a period of time. Alternative: More time to concentrate on the present business or other opportunities.
For example, when investing money the following can guide us: know the underlying business value, don’t use leverage, enter situations where the management is able and honest, and invest with a huge margin of safety.
Ask: What is my nature? What motivates me? What is my tolerance for pain and risk? What has given me happiness and unhappiness in the past? What things and people am I comfortable with? What are my talents and skills? Do I know the difference between what I want and what I’m good at? Where do I have an edge over others? What are my limitations?
Honesty is the first chapter of the book of wisdom.
Stay out of anything questionable and deal with honorable people. “front-page test:” “Would I be willing to see my action immediately described by an informed and critical reporter on the front page of my local paper, there to be read by my spouse, children and friends?”
If you don’t give any you won’t get any.
Blessed is he that expects nothing, for he shall never be disappointed.
Persist in being reliable.
There are three ways to measure probability: the logical way, the relative frequency way, and the subjective way.