Thanks to my parents in law who gave me the book Klar denken, klug handeln: 104 Denkfehler und Irrwege, die Sie besser anderen überlassen (EN version is The Art of Thinking Clearly)written by Rolf Dobelli I got a comprehensive overview about 104 brain fallacies that can heavily influence the way we decide.

With this post I’ll share my top 10 of the 104 mentioned fallacies and provide a fast to skim trough list for upcoming (bigger) decisions.

Let’s start with 4 small examples – all based on the same fallacy – simple logic. Some I got to know already from the awesome book Thinking, Fast and Slow by nobel price winner Daniel Kahneman.

### #1 The simple logic fallacy

All examples show how one fails with simple logic, if the fast part of our brain is used, trying to minimize energy consumption and therewith avoiding the usage of our deeper thinking brain parts (that consumes much more energy).

Check your first intention to answer the questions.

For me it was really interesting to see how fast the first answer was provided and that it needs concentration and extra effort to avoid the fast answer and check for the correct one.

Example | Fast answer | Correct answer |
---|---|---|

#1 | 10 Cent | 5 Cent (5 Cent + 1,05€) |

#2 | 24 | 47 |

#3 | 75 km/h | 66,66… km/h (they cover the full distance from B to A! lLet’s say they need one hour from A to B, it takes 2 hours from B to A, so in total 3h … 200 km/3 h = 66,66 km/h) |

#4 | 100′ | 5′ (as each machine needs 5 minutes to produce one shirt) |

**Learning:**If a solution seems to be obvious – maybe at least do the recheck by calculating the way back 😉

### #2 The Survivorship Bias

- Behind every successful highly visible startup are many invisible crashed ones.
- The stock market is filled by current survivors but one has forgotten all the died companies

**Learning:**Ask for the failure stories. In addition to the provided numbers, how many did not survive? This provides a much better baseline for the next decision.

### #3 The base rate neglect

What is more feasible: A) He is truck driver B) He is a professor for literature in Frankfurt

But based on the probabilities you have to chose A.

There are fare more truck drivers in the world than professors for literature and you can assume that at least some more of them are listening to Mozart 😉

### #4 Anchoring

As soon as we start estimating something, we use an anchor (something we already know) as orientation. And we use and get influenced by anchors everywhere. The more we don’t know about something to estimate the value of let’s e.g. take the price of a house we can get anchored by a randomly provided number (that is at least somewhere in a range we could imagine).

That behavior is heavily used by people who are experts in selling things. They provide you an anchor early on (can be days before the final price negotiation) and often one will accept the offer that is somewhere around and thereby connected with the anchor.

In addition it is an important strategy to provide an anchor that shows a much higher price. That way you can make someone feel proud when negotiating an even “better price”.

**Learning:**Being aware of anchoring helps to avoid being manipulated. Check the facts, try to get more offers and compare.

### #5 Numbers: Averages and exponential growth

#### Averages

How does your average change?

That simple example shows that we always have to be aware of the underlying distribution and possible outliers.

Would you cross a river that is on average one meter deep? Sure?

Many things do not follow a normal distribution and applying an average is just plain wrong.

**Learning:**Check the underlying distribution. Is it possible that one outlier dominates the average? What is your median and standard deviation and does it support your average.

If not check for percentiles and possible skewed or other than normal distributions. Get to know some good guys – statisticians 😉

#### Exponential growth

- A) For the next 30 days you’ll get 1000€ every day
- B) For the next 30 days you’ll get on day one 1 cent, day two 2 cents, day three 4 cents and so on … daily doubled until day 30

What would you chose based on your intuition? (answer: A = 30.000, B >10.000.000 😉

**Learning:**Don’t trust your gut feeling regarding exponential growth, better use your calculator (or the as an approximation the simple 70/growth rate formula)

### #6 Motivation crowding

### #7 Social proof and group think

#### Special case of social proof – group think

**Learning:**Especially in knit groups, express your opposite view and request the hidden assumptions. If necessary nominate an

*Advocatus diaboli*

**Learning:**Use your brain. Even if 50 million people believe in something (stupid) it is not already the truth.

### #8 The sunk cost fallacy

**Learning:**There are many good reasons to continue something, but it is not a good one to consider an already done investment. What counts is the current situation and our assumption about the future.

### #9 The hindsight bias

**Learning:**Start reading more about the background of a decision and assumption a decision is based on. Start using a diary to check ones notes with the current real development of things.

### #10 News Illusion

#### ##1 Wrong risk landscape and weighting of the importance of topics

#### ##2 Most of the news are not relevant

#### ##3 Waste of time

**Learning:**By reducing our news consumption behavior we can win a lot more freedom, time and independence.

### Further readings

Why can’t we read anymore – great post explaining how distracting permanent news consumption can be

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