Category Archives: Ways to be wrong

A Way to Be Wrong Called Hindsight Bias

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Your mind projects wrongness on the world via hindsight bias, the sense that what happened was bound to happen.

Hindsight Bias - The tendency to believe, after learning the outcome, that you knew it all alongRandomness does not look random. You overlook the decisive role of chance.  Certainty is an illusion. And this illusion can cover the rocks while you sail right onto them. Wrongness.

Bill Belichick is a lucky so-and so. Have you seen his girlfriend? His New England Patriots’ brilliant success over the last dozen years seems so inevitable now: the future Hall of Fame quarterback; the genius coach; the great organization. How else could it have turned out?

Differently. Their first two Super Bowls wins came from field goals of more than forty yards, kicked in the last ten seconds of each game. The Patriots’ most recent titles came when their opponents pulled defeat out of the jaws of victory. Totaling results from their nine Super Bowls, the Patriots have been outscored by their
opponents by 38 points.

The Patriots’ image is improved by hindsight bias. We remember the past imperfectly. We forget the parts that don’t fit the narrative we have now. We remember the skill but forget the luck. Wrongness. 

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Imagine all the people in the world are sitting in one room. Each holds a coin. They all stand up and begin flipping their coins. They sit down when it comes up tails. The last person standing will have seen their coin come up heads thirty-two times in a row.

There’s no skill involved. It’s a function of base size: We started with seven billion coin flips. But our winner could be forgiven if she thought she were something special. She is not. She is no more likely than you are to get heads next time. (This concept applies handsomely to high-flying mutual funds, by the way.)

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When you see a successful person, you are often looking at the winner of an extended series of coin tosses. Probably smart and hardworking, since those characteristics dramatically leverage the value of luck. A coin-toss winner nonetheless.

Hindsight bias obscures the role of chance in their achievement. As Paul Getty said, the secret to success is to get up early, work hard, and strike oil.

Would Ray Kroc, builder of McDonald’s, have sold billions of hamburgers if the owners of a drive-in restaurant—the McDonald brothers—had not astounded him by purchasing eight of his Prince Castle five-spindle Multimixers? Would George W. Bush have been president if he had been born George W. Guànmù? Do you
want fries with that?

It seems so certain now, but what were the odds that Bill Gates would become the richest man in the world? Gates is brilliant, hardworking, and visionary. He is also lucky.

In 1968, when Gates was in the eighth grade, the Lakeside School Mothers’ Club invested the proceeds from a rummage sale into a computer terminal and a block of time on a mainframe computer in downtown Seattle. This decision dramatically increased the possibility that a kid at Lakeside Middle School could learn computer
programming. Had the mothers’ club bought the sorely needed movie projector instead, Bill Gates might have ended up a lawyer like his father.

A few years later, fledgling Microsoft was working on a programming language for IBM’s first PC. As it happened, IBM was unable to purchase an operating system for the PC from Digital Research, the likeliest vendor. IBM asked Gates if Microsoft could help.

Although Microsoft did not have an operating system, he said they could (you have to take your luck). They bought one from Seattle Computer Products, tweaked it for the PC, and sold it to IBM for fifty thousand dollars. Microsoft kept the rights. Gates’ shrewdness displayed dramatically increased the positive effects of his good luck. But you still could not have predicted Microsoft’s extraordinary success the day before IBM said yes. Bill Gates won more than his share of coin flips along the way.

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Hindsight bias is wrongness that distorts the past. Because common sense learns from the past, hindsight bias is wrongness that weakens common sense. When you look back, don’t forget: things didn’t have to turn out this way.

Learn more about ways to be wrong to get yourself on the path to being right more often.

[i] “Randomness does not look random.” Nassim Taleb, Fooled by Randomness (New York: Random House, 2004),
54.
[ii] “…hindsight bias…” Scott Plous, The Psychology of Judgment and Decision Making (New York: McGraw-Hill,
1993), 138.
[iii] “…by purchasing eight of his Prince Castle five-spindle Multimixers?” Ray Kroc with Ronald Anderson,
Grinding It Out—The Making of McDonalds (Chicago: Contemporary Books, 1977), 6.
[iv] “…a bright kid at Lakeside Middle School could learn computer programming.” Stephan Manes, Paul Andrews,
Gates: How Microsoft’s Mogul Reinvented an Industry and Made Himself the Richest Man in America (Seattle:
Cadwaller & Stern, 2013—Kindle Edition).

A Way to Be Wrong Called Loss Aversion

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The hunter makes a hole in a coconut. Bigger than Monkey’s hand, smaller than Monkey’s fist. The hunter fills the coconut halfway with rice—Monkey’s favorite food—and stakes it tight to the ground. Monkey happens by, reaches into the coconut, and grabs a fistful of rice.

Now Monkey is stuck. Now the hunter returns. Will Monkey drop the rice and escape? Maybe not. Maybe Monkey wants rice too much. Monkey is in danger of dying from loss aversion. She bears risk of capture to avoid the pain of losing a fistful of rice. She is caught by her thinking before she is caught by the hunter.

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Loss Aversion. Evolution designed your brain for survival, not self-awareness. GumptionadeDan and Amos both want to see their Jumbos play the Bombers—bitter rivals—tonight. They both live in the same suburb, about an hour’s drive from the Fudge Forum, home of the Jumbos. Dan bought his ninety-five- dollar ticket to the game this morning. Amos bought his a few months ago. It starts to snow around 4:00 p.m. It is soon obvious there will be dangerous weather tonight. The Jumbos and the Bombers will play the game, but Dan and Amos face the disappointment of missing it.

Which of them is more likely to risk the drive? That is to say, which of them is more likely to be wrong? Having bought his ticket this morning, Dan will chase his ninety-five dollars through a blizzard, notwithstanding the fact that on any other weeknight, ninety-five dollars would not be enough to get him to drive all the way downtown and back in a light drizzle.

Dan fails to stop and ask himself two simple questions: “Would I drive through a blizzard if I had been given this ticket?” He would not. “Then why would I do it now?” After all, a ticket is a ticket, regardless of where it came from. That is so logical. People are so psycho-logical.

Dan starts toward downtown and ends up being dropped off at home at 4:00 a.m. by the state police, his car abandoned on the highway, not having gotten within ten miles of the game.

The force of loss aversion made Dan’s imagined pain of regret loom large in his unconscious mind. He accepted great risk to avoid this loss. Wrongness. Where was his common sense? Where was his gumption? Where, Monkey, where?

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In December 1965, Frankie Valli and the Four Seasons reached number three on the Billboard chart with “Let’s Hang On (To What We’ve Got).” This is a cry that originates deep in the human unconscious. Loss aversion was—and is—a subset of death aversion.

To stay alive, Your Hairy Ancestor had to survive the process of getting food and shelter. Loss of food threatened death by starvation. Loss of shelter threatened death by exposure. Movement invited attack by other survivors, including saber-toothed tigers and fellow proto-humans. Replacing lost necessities was uncertain at best and fatal at worst.

The threat of loss received a more powerful response than the opportunity for gain among those individuals who survived long enough to be your ancestor. Reference points laid down a million years ago influence your intuitive response to modern threats, including threats that are more symbolic than actual.

Such as the loss of a ninety-five- dollar Jumbos ticket. Not a life or death matter, but you would think so by what happened. Why don’t you have more common sense? Why can’t you tell the difference between real and symbolic threats? Why this wrongness?

Because, as Leonard Mlodinow neatly put it, evolution designed your brain for survival, not self-awareness.

 

Learn more about ways to be wrong to get yourself on the path to being right more often.

 

[i] “Monkey is in danger...” - Robert Pirsig, Zen and the Art of Motorcycle Maintenance (New York: William Morrow & Company, 1974),303.

[ii] Which of them is more likely to risk the drive? [Chasing Losses]. Daniel Kahneman, Thinking Fast and Slow (New York: Farrar, Straus & Giroux, 2011), 343.

[iii] …evolution designed your brain

A Way to Be Wrong Called Anchoring

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You and several other people are sitting in a room. At the front of the room is a numbered game wheel, the kind you see at a fair. A man spins it. The wheel is rigged to stop on 65. You are not told this.Anchoring, a way to be wrong

It stops on 65. The man asks everyone to write down that number. He then asks you to answer a few questions, including this one: “What percentage of UN member states are African?” [i]

The answer that you and the others give averages out to 45%. The average answer of a different group of people, who saw the wheel land on 10, was only 25%.

Really?

The wheel stopped on                            Resulting Estimate of African UN member states

65                                                                                                 45%

10                                                                                                  25%

Like most of us, you have a weakness in your thinking called anchoring. You can be influenced by an irrelevant number on a game wheel. Your logic about African states and the UN is psycho-logic.

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Disinterested speculation about the UN is one thing, but would anchoring ever affect an important personal decision? Yes. A woman whose maiden name is Brown is more likely to marry another Brown than a Smith or a Jones, despite the fact that there are more Smiths and Joneses out there. People are anchored to their own name. [ii]

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It’s not helpful to be influenced by irrelevant reference points. It’s just normal.

Your brain does a lot of work without asking your permission. It’s good that you don’t forget to breathe. But anchoring and other glitches in your automatic thinking weaken your common sense.

Here is a checklist to help you overcome these glitches and make better decisions right now.

Learn more about ways to be wrong to get yourself on the path to being right more often.

 

 

[i] What percentage of UN member states are African? Daniel Kahneman, Thinking Fast and Slow (New York: Farrar, Straus & Giroux, 2011), 119–20. 130 

[ii] People are anchored to their own name. Leonard Mlodinow, Subliminal: How Your Unconscious Mind Rules Your Behavior (New York: Pantheon Books, 2012), 19.