You Are Not As Rational As You Think
-
Upload
yang-ao-wei- -
Category
Self Improvement
-
view
192.083 -
download
4
Transcript of You Are Not As Rational As You Think
![Page 1: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/1.jpg)
RationalYou are not as
As You ThinkAn Insight To The Processes Behind Those Irrational Choices That We Make All The Time (Without Even Realizing)
![Page 2: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/2.jpg)
I l lustrated byYang Ao [email protected]
ADRENALINE(Fight or Flight
Neurotransmitters)
SEROTONIN(MoodNeurotransmitters)
ENDORPHINS(Euphoria
Neurotransmitters)
DOPAMINE(PleasureNeurotransmitters)
GLUTAMATE(Memory
Neurotransmitters)
NORADRENALINE(Concentration Neurotransmitters)
![Page 3: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/3.jpg)
Imagine this
![Page 4: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/4.jpg)
You’re walking along a
pathway…
![Page 5: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/5.jpg)
Ahead, you saw this huge, fierce-looking pit bull sitting in the middle of the path.
![Page 6: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/6.jpg)
How would you react?
![Page 7: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/7.jpg)
Would you look at the dog and start analyzing stuff like these?
![Page 8: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/8.jpg)
Would you look at the dog and start analyzing stuff like these?
![Page 9: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/9.jpg)
Most unlikely.
![Page 10: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/10.jpg)
Instead, your mind tells you just one thing -
![Page 11: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/11.jpg)
![Page 12: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/12.jpg)
The logical thing to do then, is to get away from it.
![Page 13: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/13.jpg)
Such decision-making process -
![Page 14: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/14.jpg)
.
Right from the moment you saw the dog, to the time you turned away from the pathway ahead
![Page 15: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/15.jpg)
.
– happened in a matter of a split-second.
![Page 16: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/16.jpg)
In psychology, such mental ability that allows people to decide and think rapidly without being burdened
by overwhelming information, is known as:
![Page 17: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/17.jpg)
HEURISTICS
![Page 18: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/18.jpg)
Heuristics are mental shortcuts or strategies that people use to form
judgements and make decisions without having to spend too much time researching and
analyzing information.
![Page 19: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/19.jpg)
These rule-of-thumb strategies shorten decision-making time and allow people to function without constantly stopping to think about their next course of action.
![Page 20: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/20.jpg)
Whether we are aware of it or not, we apply heuristics in our everyday life whenever we’re
trying to make a decision or to solve a problem.
![Page 21: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/21.jpg)
We so frequently and automatically employ these efficient mental rules because they work and serve us well under many circumstances.
![Page 22: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/22.jpg)
Unfortunately, heuristics at times, can also lead to severe and systematic errors.
![Page 23: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/23.jpg)
When this happens, it can result in what is known as:
![Page 24: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/24.jpg)
Cognitive Biases
![Page 25: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/25.jpg)
Cognitive biases are habitual and predictable ways of thinking that
leads to errors .
![Page 26: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/26.jpg)
They are the innate tendencies of the human mind to think, judge, and behave in irrational ways.
![Page 27: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/27.jpg)
When we are making judgments and decisions about the world around us, we like to think that we are objective, logical, and capable
of taking in and evaluating all the information that is available to us.
![Page 28: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/28.jpg)
The reality is, however, that our judgments and decisions are often riddled With errors and influenced by a wide variety of biases.
![Page 29: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/29.jpg)
Interestingly, many of us are largely unaware of these built-in psychological inefficiencies
despite the frequency with which they occur in our daily lives and the regularity with
which we fall victim to them.
![Page 30: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/30.jpg)
So… Without further ado, let us start to
explore some of these most common
cognitive biases.
![Page 31: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/31.jpg)
The Anchoring Bias
![Page 32: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/32.jpg)
You had just decided to use your bonus to buy yourself a new car.
![Page 33: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/33.jpg)
You did some research online and found that the average price of that model you wanted was
$26,000.
![Page 34: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/34.jpg)
You then went shopping at the local car lot and the dealer offered you the same vehicle for $25,000,
which you gladly and immediately accepted.
![Page 35: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/35.jpg)
That’s $1,000 less than what you were expecting to pay!
$ 1,000 OFF!
![Page 36: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/36.jpg)
Later on, you found out that another car dealer was offering the exact same model for just $22,000!
![Page 37: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/37.jpg)
That was a full $3,000 less than what you paid for, and $4,000 less than the average price you found online.
-$ 3,000
-$ 4,000
![Page 38: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/38.jpg)
Afterwards, you might berate yourself for making that quick decision to buy on the first offer and not shopping around more for a better deal!
![Page 39: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/39.jpg)
![Page 40: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/40.jpg)
When people are trying to make a decision, they often use an “anchor” or focal point as a reference
or starting point.
![Page 41: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/41.jpg)
Studies have shown that people have the tendency to rely too much on the very first piece of information that is offered (the “anchor”) when making decisions.
![Page 42: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/42.jpg)
In short, it means that we favor the first bit of information we learn.
![Page 43: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/43.jpg)
![Page 44: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/44.jpg)
![Page 45: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/45.jpg)
![Page 46: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/46.jpg)
Now, back to the car buying experience we talked about earlier.
![Page 47: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/47.jpg)
Since your initial research indicated that $26,000 was the average
price, the first offer you encountered seemed like
a great deal.
![Page 48: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/48.jpg)
You overlooked further information, such as the possibility that other dealers might have lower prices, and made a decision on the information you already had, which served as an anchoring point in your mind.
![Page 49: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/49.jpg)
In 1998, a group of psychologists designed a field study to look at how setting Purchase Quantity Limits affect buying behavior.
![Page 50: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/50.jpg)
79¢
![Page 51: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/51.jpg)
Cans of soup were put on sale with a sign reading:
![Page 52: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/52.jpg)
Cans of soup were put on sale with a sign reading:
![Page 53: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/53.jpg)
Most people concluded this limit was there to protect the store from being wiped out of the sale item of overly-eager bargain hunters.
![Page 54: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/54.jpg)
However, this limit served a very different purpose.
![Page 55: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/55.jpg)
The results showed that purchase limits can actually increase sales.
![Page 56: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/56.jpg)
shoppers who bought soup from the display with no limit purchased an average of 3.3 cans of soup,
![Page 57: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/57.jpg)
whereas buyers with limits of 12 purchased an
average of 7 cans of soup.
shoppers who bought soup from the display with no limit purchased an average of 3.3 cans of soup,
![Page 58: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/58.jpg)
The brain anchored with the number 12 and
adjusted downward.
![Page 59: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/59.jpg)
The anchoring effect impacts many areas of our daily lives - way beyond financial and purchasing decisions.
![Page 60: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/60.jpg)
The Confirmation Bias
![Page 61: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/61.jpg)
Let’s say, you are someone who strongly believes in astrology.
![Page 62: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/62.jpg)
As a strong believer, you would go through the readings of your personal horoscope every day.
![Page 63: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/63.jpg)
Naturally, you would then look for evidence which supports those forecasts or interpret events in
ways that align your zodiac predictions.
![Page 64: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/64.jpg)
![Page 65: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/65.jpg)
People have the tendency to favor information, ideas and opinions
that confirm their beliefs.
![Page 66: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/66.jpg)
They also tend to selectively search for evidence to support those beliefs, while discounting or ignoring everything else which contradicts them.
![Page 67: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/67.jpg)
When people want a certain idea/concept to be true, they simply end up believing it to be true.
![Page 68: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/68.jpg)
Beliefs
![Page 69: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/69.jpg)
Expectations
shape Beliefs
![Page 70: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/70.jpg)
Perceptions
Expectations
shape
in turn, shape
Beliefs
![Page 71: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/71.jpg)
Conclusions
Perceptions
Expectations
shape
in turn, shape
Beliefs
Which then shape
![Page 72: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/72.jpg)
Confirmation bias tells us that we don’t perceive circumstances objectively -
![Page 73: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/73.jpg)
Confirmation bias tells us that we don’t perceive circumstances objectively -
We only pick out those bits of data that make us feel good because they validate our pre-existing beliefs,
opinions and prejudices.
![Page 74: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/74.jpg)
.
If you believe in UFOs and aliens (or any other weird stuff) ……
![Page 75: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/75.jpg)
.
Then, you’ll probably be spending your time trying to search for information and evidence to prove that
they exist, so as to confirm your belief.
![Page 76: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/76.jpg)
The Availability Heuristic
![Page 77: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/77.jpg)
Are there more English words that begin with the letter R or are there more English words with R as the 3rd letter?
![Page 78: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/78.jpg)
Let’s try an exercise to figure that out.
![Page 79: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/79.jpg)
Think of 10 English words that begin with the letter R.
r_________r_________r_________r_________r_________
r_________r_________r_________r_________r_________
![Page 80: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/80.jpg)
This should be pretty easy, isn’t it?
rackribbonroserightrum
rabbitrunratherrubyrubbish
![Page 81: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/81.jpg)
Now, try to think of 10 English words with R as the 3rd letter.
__r_________r_________r_________r_________r_______
__r_________r_________r_________r_________r_______
![Page 82: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/82.jpg)
Try it. Don’t cheat!
__r_________r_________r_________r_________r_______
__r_________r_________r_________r_________r_______
![Page 83: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/83.jpg)
Did it take you a longer time to think of these words?
arrestparagraphcarryscrewcargo
correctdirectthrowsurfaceair
![Page 84: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/84.jpg)
After doing this exercise, are you now convinced that there are more words beginning with the letter
R than there are words with R as the 3rd letter?
![Page 85: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/85.jpg)
Well, according to Quora, there are 22,809English words that have R as the third letter, but only 8,955 words that begin with R.
![Page 86: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/86.jpg)
![Page 87: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/87.jpg)
The availability heuristic is a useful mental shortcut that aids us in determining the frequency and
probability of something that might happen.
![Page 88: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/88.jpg)
It is the ease with which instances come to mind.
![Page 89: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/89.jpg)
When we are trying to make a decision, a number of related events or situations would immediately spring to our mind.
![Page 90: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/90.jpg)
And because those events are more readily available in our memories, we tend to assume that those situations happen more frequently than others.
![Page 91: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/91.jpg)
We then make our decisions and choices based on those assumptions, often, without
even considering other alternatives.
![Page 92: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/92.jpg)
Things that come to mind with more ease are believed to be far more common and more accurate reflections of the real world.
![Page 93: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/93.jpg)
Also, under the influence of availability heuristic, people have the tendency to heavily weigh their judgments toward more recent information, making new opinions biased toward the latest news that they received.
![Page 94: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/94.jpg)
Many of us simply love thriller movies featuring terrifying man-eating sharks.
![Page 95: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/95.jpg)
It has been observed that at times when such blockbusters
were being screened, the news media often joined the hype by
making reports of Shark attacks more frequently.
![Page 96: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/96.jpg)
Regularly flashing and exposing news and media about a certain topic (e.g. shark attacks) to people can lead them to believe that events relating to that topic are more common than they truly are.
![Page 97: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/97.jpg)
Breaking News
WOMAN BRUTALLY ATTACKED AND KILLED BY SHARK
![Page 98: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/98.jpg)
According to National Geographic, the chance of you, or anyone being killed by a shark is 1 in
3,700,000.
![Page 99: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/99.jpg)
By the way, do you know that you are far, far more likely to die from a flu or from a fall?
![Page 100: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/100.jpg)
According to statistics…This is the chance of you dying from a flu or from a fall in your lifetime:
![Page 101: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/101.jpg)
1 in 63
According to statistics…… This is the chance of you dying from a flu or from a fall in your lifetime:
![Page 102: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/102.jpg)
1 in 631 in 218
According to statistics…… This is the chance of you dying from a flu or from a fall in your lifetime:
![Page 103: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/103.jpg)
The Gambler’s Fallacy
![Page 104: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/104.jpg)
Let’s say if you toss a coin……
![Page 105: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/105.jpg)
and you got tails up for 6 times in a row.
![Page 106: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/106.jpg)
How is that likely to affect your prediction for the next toss?
![Page 107: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/107.jpg)
Most of us would be very tempted to assume that a head up is more likely in the next toss, don’t we?
![Page 108: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/108.jpg)
But just how likely is that?
![Page 109: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/109.jpg)
The truth is, regardless of the past 6 results, the chance of getting either one in the next
toss remains exactly the same as before, i.e. -
![Page 110: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/110.jpg)
The truth is, regardless of the past 6 results, the chance of getting either one in the next
toss remains exactly the same as before, i.e. -
![Page 111: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/111.jpg)
![Page 112: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/112.jpg)
The gambler’s fallacy is the tendency to expect outcomes to “even out” over the short
run for random events.
![Page 113: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/113.jpg)
It is the mistaken belief that, for random independent events, the lower the frequency of an outcome in the recent past, the greater is the likelihood of that outcome in the future.
![Page 114: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/114.jpg)
The belief is false because it is based on the assumption that chance is “self-correcting”, so that a shift in one direction indicates an
impending shift in the opposite direction.
![Page 115: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/115.jpg)
It springs out of our misinterpretation of random events because our perception of how random things ought to be, is just not random at all.
![Page 116: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/116.jpg)
Way back in the Year 1913, at the Monte Carlo Casino……
![Page 117: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/117.jpg)
People were running to this particular table of roulette where 16 blacks had come out in a row.
![Page 118: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/118.jpg)
Everyone was trying to put a Red bet down because it was
“supposed to” due for one.
![Page 119: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/119.jpg)
17, 18, 19, 20…….
![Page 120: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/120.jpg)
It went up to 26 blacks in a row and the casino made millions of dollars in those few minutes!
![Page 121: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/121.jpg)
The Planning Fallacy
![Page 122: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/122.jpg)
You have just received a new project.
![Page 123: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/123.jpg)
You looked at the resources you currently have, made a list of those that you lack but needed, and calculated all the possible costs involved.
![Page 124: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/124.jpg)
Then, you estimated that it would probably take you 30 to 40 days to complete the project.
![Page 125: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/125.jpg)
It turned out that you took more than 60 days to complete it, and at a cost nearly twice that
of what you had originally intended.
![Page 126: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/126.jpg)
![Page 127: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/127.jpg)
The planning fallacy is the tendency for people to underestimate the time that it will take to complete an upcoming task.
![Page 128: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/128.jpg)
It is a form of optimistic bias and
happens despite people knowing that similar
tasks had taken longer to complete in the past.
![Page 129: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/129.jpg)
According to cognitive explanations, the bias results from the kinds
of information that people consider.
![Page 130: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/130.jpg)
When making a task-completion prediction, people’s natural inclination is to plan out the specific steps that they will
take to successfully complete the project.
![Page 131: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/131.jpg)
The problem with this approach is that events don’t usually unfold exactly as planned.
![Page 132: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/132.jpg)
Given the vast amount of potential obstacles, there is a great likelihood that people will encounter unexpected problems, delays, and interruptions.
![Page 133: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/133.jpg)
The people who built the Sydney Opera House were expecting that it would be completed in the Year 1963.
![Page 134: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/134.jpg)
However, it was only until 10 years later - in 1973 - that a scaled-down version finally opened.
![Page 135: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/135.jpg)
The original cost was estimated at $7 million.
![Page 136: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/136.jpg)
But its delayed completion led to a cost of $102 million; 14.5x more than that which was planned.
![Page 137: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/137.jpg)
The Sunk Cost Fallacy
![Page 138: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/138.jpg)
You’d just bought a pair of tickets to a concert which you were really excited about.
![Page 139: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/139.jpg)
Unfortunately, on the actual day of the event, you fell sick.
![Page 140: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/140.jpg)
Although you were unwell and most definitely wouldn’t enjoy
it, you still went anyway.
![Page 141: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/141.jpg)
You didn’t want to “waste your money”, so you rather went
and suffered.
![Page 142: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/142.jpg)
![Page 143: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/143.jpg)
A sunk cost is any past cost that has already been paid
and cannot be recovered.
![Page 144: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/144.jpg)
The sunk cost may not necessarily be a precise quantity, but an economic term for a sum paid, in the past, that
is no longer relevant to decisions about the future.
![Page 145: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/145.jpg)
The sunk cost fallacy is the tendency of people to irrationally follow through on an activity that is
not meeting their expectations because of the time and/or money they have already spent on it.
![Page 146: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/146.jpg)
It arises out of aversion to loss and describes how a past decision can influence a present or future decision.
![Page 147: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/147.jpg)
It involves an individual making a decision about a current situation based on
what they have previously invested in the situation.
![Page 148: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/148.jpg)
Sunk cost fallacy makes you finish the meal when you are already full.
![Page 149: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/149.jpg)
It makes you hold on to investments that are underperforming.
![Page 150: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/150.jpg)
It makes you sit through a sucky movie which could bore you to death.
![Page 151: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/151.jpg)
It fills your home with things you no longer want or use.
![Page 152: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/152.jpg)
Main ideasHeuristics Cognitive biases
The anchoring BiasThe confirmation BiasThe Availability HeuristicThe Gambler’s FallacyThe planning FallacyThe Sunk Cost Fallacy
![Page 153: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/153.jpg)
![Page 154: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/154.jpg)
The term “heuristic reasoning” is popularized by the most influential psychologists working in the area of Human
Judgment - Daniel Kahneman and Amos Tversky.
![Page 155: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/155.jpg)
Kahneman, an Israeli-American psychologist who originally studied attention,
became world famous when he published (1970) a series
of experimental studies with Tversky on how people assess probabilities in everyday life, which shortcuts (heuristics) they use and what biases
that can occur in such assessments.
![Page 156: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/156.jpg)
They also developed a theory of decision making under uncertainty, which at key points deviates
from prevailing economic models.
![Page 157: You Are Not As Rational As You Think](https://reader034.fdocuments.in/reader034/viewer/2022051404/586f8f9c1a28ab54768b7681/html5/thumbnails/157.jpg)
For these works, Kahneman won the Nobel Prize in Economics in 2002.