System 1 & system 2 #28
After having read M. Mauboussin and J. Montier, I could not go on without reading the book of the guru of behavioural economics from whom all started Daniel Kahneman.
From my previous readings I was already familiar with many of the biases such as : inside view, overconfidence, loss aversion, cognitive ease, framing, immediate gratification, but it’s always great to read about new examples illustrating how true these are again and again. Here are some of my takeaways from this book, gathered in May 2015 :
- the human mind can be summarized in two systems 1 and 2, emotional vs rational, learn in which situation to use one or the other
- be optimistic but not overconfident
- expertise in a specific task can only be achieved when there is high velocity of the feedback loop. For instance, when driving, mistakes have immediate consequences. But in investing, it can take several years before finding out whether a given decision was the right one.
- judge decision making by its process not by its outcome
- make formal check lists and scorecards
I liked the chapter where the author reminds us why experts abound everywhere in society, because “admitting ones inability to predict is socially unacceptable” lol. I also discovered this famous and enjoyable funny quote from former US President Truman “I am looking for a one armed economist, because they all keep saying…on the other hand”.
My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.