Sunday Book Review – Think Twice

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…

think-twice

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
  • Watch out for the Institutional Imperative – coined by Warren Buffett – implies how companies blindly copy other companies.

  • 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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