The Art of Thinking Clealy-introduction

Introduction In the fall of 2004, a European media mogul invited me to Munich to partake in what was describedas an “informal exchange of intellectuals.” I had never considered myself an “intellectual”—Ihad studied business, which made me quite the opposite, really—but I had alsowritten two literary novels and that, I guessed, must have qualified me forsuch an invitation. Nassim NicholasTaleb was sitting at the table. At that time, he was an obscure Wall Streettrader with a penchant for philosophy. I was introduced to him as an authorityon the English and Scottish Enlightenment, particularly the philosophy of DavidHume. Obviously I had been mixed up with someone else. Stunned, I nevertheless flashed a hesitantsmile around the room and let the resulting silence act as proof of my philosophicalprowess. Right away, Taleb pulled over a free chair and patted the seat. I satdown. After a cursory exchange about Hume, the conversation mercifully shiftedto Wall Street. We marveled at the systematic errors in decision making CEOsand business leaders make—ourselves included. We chatted about the fact thatunexpected events seem much more likely in retrospect. We chuckled about why itis that investors cannot part with their shares when they drop belowacquisition price. Following the event, Taleb sent me pages from his manuscript, a gem of a book, which Icommented on and partly criticized. These went on to form part of hisinternational best seller, The Black Swan. The book catapulted Taleb into the intellectual all-star league. Meanwhile, myappetite whetted, I began to devour books and articles written by cognitive andsocial scientists on topics such as “heuristics and biases,” and I also increasedmy e-mail conversations with a large number researchers and started to visit theirlabs. By 2009, I realized that, alongside my job as a novelist, I had become astudent of social and cognitive psychology. The failure to think clearly, or what experts call a “cognitive error,” is a systematic deviationfrom logic—from optimal, rational, reasonable thought and behavior. By “systematic,”I mean that these are not just occasional errors in judgment but rather routinemistakes, barriers to logic we stumble over time and again, repeating patterns throughgenerations and through the centuries. For example, it is much more common thatwe overestimate our knowledge than we underestimate it. Similarly, the dangerof losing something stimulates us much more than the prospect of making asimilar gain. In the presence of other people we tend to adjust our behavior totheirs, not the opposite. Anecdotes make us overlook the statistical distribution (base rate) behind it, not the other wayround. The errors we make follow the same pattern over and over again, pilingup in one specific, predictable corner like dirty laundry, while the other corner remains relatively clean (i.e., they pile up in the “overconfidencecorner,” not the “under confidence corner”). To avoid frivolous gambles with the wealth I had accumulated over the course of my literarycareer, I began to put together a list of these systematic cognitive errors,complete with notes and personal anecdotes—with no intention of ever publishing them. The list was originally designed to be used by me alone. Some of thesethinking errors have been known for centuries; others have been discovered inthe last few years. Some come with two or three names attached to them. I chosethe terms most widely used. Soon I realized that such a compilation of pitfallswas not only useful for making investing decisions but also for business andpersonal matters. Once I had prepared the list, I felt calmer and morelevelheaded. I began to recognize my own errors sooner and was able to change course before any lasting damage was done. And, for the first time in my life, I wasable to recognize when others might be in the thrall of these very samesystematic errors. Armed with mylist, I could now resist their pull—and perhaps even gain an upper hand in mydealings. I now had categories, terms, and explanations with which to ward offthe specter of irrationality. Since Benjamin Franklin’s kite-flying days,thunder and lightning have not grown less frequent, powerful, or loud—but theyhave become less worrisome. This is exactlyhow I feel about my own irrationality now. Friends soonlearned of my compendium and showed interest. This led to a weekly newspapercolumn in Germany, Holland, and Switzerland, countless presentations (mostly tomedical doctors, investors, board members, CEOs, and government officials), andeventually to this book. Please keep in mind three things as you peruse these pages: First, the list of fallacies inthis book is not complete. Undoubtedly new ones will be discovered. Second, themajority of these errors are related to one another. This should come as nosurprise. After all, all brain regions are linked. Neural projections travelfrom region to region in the brain; no area functions independently. Third, I am primarily a novelist and an entrepreneur, not a social scientist; I don’thave my own lab where I can conduct experiments on cognitive errors, nor do Ihave a staff of researchers I can dispatch to scout for behavioral errors. In writing this book, I think of myself as a translator whose job is to interpretand synthesize what I’ve read and learned—to put it in terms others can understand.My great respect goes to the researchers who, in recent decades, have uncovered these behavioral and cognitive errors. The success of this book is fundamentallya tribute to their research. I am enormously indebted to them. This is not ahow-to book. You won’t find “seven steps to an error-free life” here. Cognitive errorsare far too engrained to rid ourselves of them completely. Silencing them wouldrequire superhuman willpower, but that isn’t even a worthy goal. Not allcognitive errors are toxic, and some are even necessary for leading a goodlife. Although this book may not hold the key to happiness, at the very leastit acts as insurance against too much self-induced unhappiness. Indeed, my wishis quite simple: If we could learn to recognize and evade the biggest errors inthinking—in our private lives, at work, or in government—we might experience aleap in prosperity. We need no extra cunning, no new ideas, no unnecessarygadgets, no frantic hyperactivity—all we need is less irrationality.