WHY YOU SHOULD KEEP A DIARY – Hindsight Bias

When we look back then past events look very obvious to us. But that was not as obvious as it looks now. People who know hindsight bias, also fall under the trap of it. So, the author has suggested us a way to handle it.

When we read any history book then feel that events that occurred were so obvious but living those moments are much difficult.

Business – If any businessman achieved success then he will look back in past and rate his probability of success much higher.

Investment – In 2007, everyone talks about the great growth potential of the economy and in 2017 also, post GST we will have a strong economy, we will post stronger economic growth. But when we look back to 2008 and recent GDP falls. It looks obvious to us.

So, when we have maintained records of our observations and decisions then we can track the quality of our decisions. We can look back on our decision and on what basis, we have taken a decision.

This entire series will be review with various examples from books which are Thinking, Fast and Slow and The Art of Thinking Clearly.

EVEN TRUE STORIES ARE FAIRYTALES -Story Bias

We work on interpret information as being part of a larger story or pattern, regardless of whether the facts support or not. We want our lives to form a pattern that we can easily follow. It is clear that people first used stories to explain the world before they began to think scientifically. Making mythology older than philosophy. This has led to the story bias.

Business – Good storytellers know that including specific details is essential to capturing the listener’s imagination and making a story believable. So that businessman uses this bias to build a story around the products/services which can easily attract huge customers. When any good story about any product getting circulated then people are more likely to listen, empathise and act.

Investment – We are getting attracted by stories and those stories getting sold everywhere. We get to know about the story of any company and that attracts us, we invest rather checking that does these stories has any truth or not? If it is true then also, does it make sense at the current level of the price? When there is a success of any company, we get many stories on it. So that when any rosy story comes to us, we should check it thoroughly without any biases in mind with searching for disconfirming evidence. I always quote that “Stories are for kids, not for investors.”

This entire series will be review with various examples from books which are Thinking, Fast and Slow and The Art of Thinking Clearly.

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