Finding the Flaws in Your Thinking
I recently listened to a Books of Titans podcast reviewing Seth Godin’s book, This is Marketing. The host recommended that people first read Thinking, Fast and Slow by Daniel Kahneman, to better understand the concepts presented in Godin’s book.
“Thinking, Fast and Slow is a foundational book," said the host. “It’s one you really need to read right now.”
Morgan Housel, a prominent investor and writer, frequently references Kahneman’s principles as well. Here are just a few examples (that I highly recommend reading):
Given the frequency with which Kahneman’s book and principles are referenced, they are worth remembering and applying to our lives.
Thinking, Fast and Slow is long and dense. It covers many topics, and it took me several weeks to read.
The book opened my eyes to the common flaws in human thinking and decision making.
I have more notes on Kahneman’s book than almost any other book I’ve read. And I can’t even say these are the most important points. But the following are two helpful lessons you can start using today.
Beware of substitution
How often are you asked a difficult question? Difficult is a relative and subjective measure, so that might actually be a difficult question.
But here’s the answer: more often than you think.
When you’re asked a difficult question – something where a clear answer doesn’t quickly come to mind – your brain substitutes an easier question rather than expending effort to answer the hard question.
Then your brain answers the easier question and uses a process called intensity matching to provide an answer for the hard question.
How it works
Imagine your friend is car shopping and finds a sweet Corvette. He asks for your opinion on a fair price.
Your friend was foolish to ask you - you don’t know anything about cars.
This falls into the category of “hard questions.”
But you want to give your friend an answer – he obviously values your opinion. So your brain substitutes his original question for an easier one – how much do I like this car?
That question is easy to answer:
Sports cars are super cool.
It’s blue, and blue is your favorite color.
You remember one of your favorite movies featured a blue Corvette.
Answer to the easy question: you like this car a lot!
Unfortunately, a lot isn’t an appropriate answer to your friend’s original question – what is a fair price for this car?
So your brain uses intensity matching to convert your answer to the easy question – a lot – to a dollar value.
$34,000– poof! That’s your answer to the hard question.
Turns out, the sticker price on the car was $33,000, so your friend paid full price based on your stupid answer to a substituted question.
How to avoid this mental trap
Simply being aware that your brain performs this trick will help you avoid it.
And keep in mind, there are plenty of situations where substitution doesn’t matter. It’s not worth your mental energy to dig in and answer the hard question.
But sometimes it does matter. Sometimes you’re answering questions with high stakes, like:
How much should I pay for this car?
Is this stock purchase a wise investment? or
When it does matter, remind yourself that the mind substitutes questions. Then determine what information you need to answer the hard question.
If it’s a car purchase, run the Kelly Blue Book and the Car Fax reports.
Compare with prices at other dealers. Review your personal finances to see how much you can afford.
Simply, find the data you need and spend time analyzing it. Make a list of pros and cons. Talk to people with expertise in the topic.
And when you make a decision, ask yourself one more time, “Am I answering the question I set out to answer?”
Regression to the mean
When you look at an average, you can be reasonably certain that most people in the population are pretty close to that average – otherwise the average would be different.
For example, let’s say the average 45 year old male can perform 15 push-ups without stopping.
That means if you pick a random 45 year old male, it’s a pretty safe bet he can perform between 12 and 18 push-ups. And more often than not, he’ll probably hit 15 on the nose.
There will always be the guys who are grossly out of shape and can only do one push-up. Just like there will always be the guys who are in crazy shape and can do 60 push-ups.
But if that out of shape 45-year-old does one push-up every day, soon he will be able to perform two. After a couple months he will be able to do three, four, five, and keep inching closer to the mean.
Conversely, if the 45-year-old fitness buff stops doing push-ups, it won’t be long before he can only perform 55, then 52, then 47, continuously inching closer to the mean.
This is how averages work. There are always outliers, but the vast majority find themselves very close to the average.
How it works
Where the logical flaw comes into play is when we make predictions about ourselves.
We almost always view ourselves more favorably than we should, and we rarely consider regression to the mean when predicting our actions or abilities.
Nobody knows this better than Planet Fitness.
Almost every person who walks through the Planet Fitness doors for the first time thinks:
“$10 per month! What a steal! Every workout will only cost me pennies.”
These new members, hopped up on free pizza and new year resolutions, didn’t consider regression to the mean.
According to a recent NY Mag article, the average New York Sports Club member attended the gym just under once per week in 2018.
Planet Fitness doesn’t publish their attendance numbers – for obvious reasons. But New York Sports Club is a nicer, much more expensive gym, so it’s probably safe to assume that Planet Fitness average attendance is lower.
Back to our new PF member. Freshly signed up, the new member leaves without working out – his belly is too full of pizza to do crunches.
He shows up four times a week for the first three weeks. Then he goes on vacation and misses a week.
When he gets back, he goes three times a week for the next month.
Then twice a week.
Then once a week.
One year later, that eager PF cadet hasn’t been to the gym in three months.
His average attendance for the year – about .75 visits per week – is the same as the population average.
How to avoid this mental trap
Just like with substitution, awareness of the mental trap helps you avoid it.
When you understand regression to the mean, you start your predictions with the population average. From there, you can adjust up or down, slightly, based on external factors.
Using the example above, external factors might include the frequency with which you’ve been exercising at home, or the fact that you just got cleared by your doctor after an ACL surgery. Those factors might bump your average attendance slightly higher than population averages – but only slightly.
As Kahneman says, “Be warned: your intuitions will deliver predictions that are too extreme, and you will be inclined to put far too much faith in them.”
If you want your numbers to be higher or lower than population averages, you must have external factors that are unique from the population. If you want your gym attendance to beat the pathetic weekly average of one visit, implement these measures:
8 hours of sleep per night
Eating a balanced diet, and
Prioritize recovery outside the gym – stretching, rolling, icing, and rest
Know the averages. Know you are not unique.Then develop systems that make you unique so you can beat the averages.
Go forth and use reason
As I mentioned, Kahneman’s book is dense,but it is packed with valuable information that can change your life.
If you found these tips helpful and want to hear more, let me know on Twitter or via email.
I’m happy to do a part two.
