2 years back when I was visiting India – I came across this cool book. I was more surprised to see Jeff Bezos saying some good words about this book. I believe Jeff Bezos is one of the smartest business man out there. I admire him for doing so much with so little (well until, Amazon started turning profits). I was kinda surprised to see him saying some good words about this book. I bought it but never got around to read it till now. I love this book. It does boil down some common thinking pitfalls and how to use counter intuition to overcome it. I wanted to write a review for it but I don’t want to write a long write up on it and use different tools to enhance the core concepts of this book. So here we go…
This book gives you 8 counter intuitive thinking tools. To make it simple I have them tabulated them. The author uses a lot of examples of sports and financial world throughout the book but I think these strategies can be employed anywhere.
1. The Outside View
Intuitive Thinking: Thinking that the problem you have is unique and needs a unique solution
Counter Intuitive Remedy:
- Collect these kinds of problems
- Check the success rate of solution
- If required draw a histogram
- Pick/Predict a solution
2. Open to Options
Intuitive Thinking: Tunnel vision, not considering alternatives. Incentives may enforce tunnel vision further.
Counter Intuitive Remedy:
- Explicitly consider the alternatives
- Seek Dissent
- Keep a log of previous decisions
- Don’t decide with emotions
- Check the incentives – for you, for others.
3. The Expert Squeeze
Intuitive Thinking: Our uncritical reliance on experts and their opinions
Counter Intuitive Remedy:
- Match the problem you face with most appropriate solution
- Seek diversity in solution space
- Use technology when possible – again, like creating a sample data and studying it.
4. Situational Awareness
Intuitive Thinking: Role of context in decision making. Not knowing how others influence us in picking a solution. Thinking that you are in control of the problem and only you decide everything.
Counter Intuitive Remedy:
- Be aware of the situation
- Consider the situation first and individual second
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Watch out for the Institutional Imperative – coined by Warren Buffett – implies how companies blindly copy other companies.
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Avoid inertia – periodically revisit the processes.
5. More is Different
Intuitive Thinking: Pitfalls of understanding complex systems at a wrong level
Counter Intuitive Remedy:
- Consider the system at the correct level
- Watch for tightly coupled systems
- Use simulations to create virtual worlds
6. Evidence of Circumstance
Intuitive Thinking: Predicting cause and effect for system based on attributes rather than circumstances.
Counter Intuitive Remedy:
- Ask whether the theory behind your decision making accounts for circumstance
- Watch for the correlation-and-causality trap
- Balance simple rules with simple conditions
7. Grand Ah-Whooms
Intuitive Thinking: Phase transitions, assuming that small changes to a system don’t mean anything
Counter Intuitive Remedy:
- Study the distribution of outcomes for the system you are dealing with.
- Look for ah-whooms moments – the small changes that lead to big ones.
- Beware of forecasters
- Mitigate the downside and capture the upside
8. Sorting Luck from Skill
Intuitive Thinking: Not knowing the role of skill and luck in outcomes and to what measure.
Counter Intuitive Remedy:
- Evaluate the mix of skill and luck in the system you are analyzing
- Carefully consider the sample size
- Watch for change within the system or of the system
- Watchout for the halo effect
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