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An insider’s peek into the minds of contrarian investors who strive for atypical excellence…

How To Foolproof Yourself Against Salesmen & Media Bias

Understanding the common psychological pitfalls that makes you vulnerable

Table of Contents
INTRODUCTION ...................................................................................................................... 5 MENTAL PITFALL: ACCURACY-PRECISION CONFUSION ......................................... 9 MENTAL PITFALL: ANCHORING ..................................................................................... 10 MENTAL PITFALL: BIGNESS BIAS................................................................................... 12 MENTAL PITFALL: CONFIRMATION BIAS.................................................................... 14 MENTAL PITFALL: CORRELATION-CAUSALITY FALLACY.................................... 15 MENTAL PITFALL: ENDOWMENT EFFECT .................................................................. 16 MENTAL PITFALL: HERD BEHAVIOUR ......................................................................... 17 MENTAL PITFALL: LAZY INDUCTION ........................................................................... 18 MENTAL PITFALL: LUDIC FALLACY ............................................................................. 21 MENTAL PITFALL: MENTAL ACCOUNTING ................................................................ 24 MENTAL PITFALL: MONEY ILLUSION........................................................................... 27
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Table of Contents MENTAL PITFALL: NARRATIVE FALLACY .................................................................. 28 MENTAL PITFALL: OVERCONFIDENCE ........................................................................ 31 MENTAL PITFALL: RECENCY BIAS ................................................................................ 32 MENTAL PITFALL: STATUS QUO & LOSS/REGRET AVERSION BIAS.................... 33 MENTAL PITFALL: SUNK COST FALLACY ................................................................... 34 MENTAL PITFALL: SURVIVORSHIP BIAS...................................................................... 36 MENTAL PITFALL: TURKEY THINKING........................................................................ 38 MENTAL PITFALL: WISHFUL THINKING...................................................................... 40 MEDIA TRICK: CONTEXT TWISTING ............................................................................. 43 MEDIA TRICK: HEADLINE JUDGEMENT....................................................................... 44 MEDIA TRICK: IMAGES...................................................................................................... 45 MEDIA TRICK: NAMES, TITLES, WORD CHOICE & TONE ....................................... 46
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Table of Contents MEDIA TRICK: SELECTION & OMISSION ..................................................................... 47 MEDIA TRICK: SOURCE BIAS ........................................................................................... 48 MEDIA TRICK: STORY PLACEMENT .............................................................................. 49

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Introduction
How useful are the mainstream mass media in making you more informed? As you may have already suspected, the hidden biases, vested interests and veiled agendas are taking you for a ride. Like it or not, the mainstream mass media exerts tremendous influence on our lives by shaping our beliefs and attitudes. It also affect our awareness (or lack of awareness) of certain issues. Those who can control or influence the media are in a very powerful position to shape public opinion. Obviously, vested interests (e.g. salesmen, politicians, advertisers, public relations companies) are jockeying around to take that role. One very important source of the media’s revenue comes from advertising. As a result, there is an issue of conflict of interest. For example, “Journalists have long faced pressure to shape stories to suit advertisers and owners …. the vast majority of TV station executives found their news departments ‘cooperative’ in shaping the news to assist in ‘non-traditional revenue development.” (McChesney, Robert W. “The Political Economy of Media: Enduring Issues, Emerging Dilemmas”. Monthly Review Press, New York, (May 1, 2008), p. 43, ISBN 978158367161-0)

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Introduction To make matters worse, among the different media, newspapers are facing a secular decline in profitability. As Warren Buffett said, For most newspapers in the United States, we would not buy them at any price. They have the possibility of going to just unending losses. As the profitability of newspapers decline, their dependence on advertising revenue increases. That means the problem of conflict of interest will grow. As a result, newspapers will be under increasing pressure to bend to the interests of their advertisers. Often, these advertisers have a vested interest in promoting certain viewpoints, to the detriment of readers. As long-time readers of Contrarian Investors’ Journal (http://cij.inspiriting.com) had seen it again and again, the mainstream media is full of misinformation and bias. Therefore, it is more and more important for all of us to critically assess media reports, advertisements, infomercials in this age of increasing hidden bias, vested interests and veiled agenda. To be able to do so, one must at the very least develop an awareness of common mental pitfalls that the human brain is hard-wired to be susceptible to. The media and advertising industry, whether intentionally and/or directly or not, introduces bias by exploiting our susceptibility to mental pitfalls. Therefore, only with such self-awareness would we be able to proceed to the next step of assessing what we read.

Introduction There are two parts to this report. The first part is the most important part—it opens your eyes to the common mental pitfalls that the human mind is vulnerable to. It will require constant practice on your part to strengthen yourself against them. The second part lists some of the tricks that are often used to sway your opinion. Learn the content of this report thoroughly, and it will serve you well in the years to come!

Part 1: Common Mental Pitfalls

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Part 2:

Tricks Of The Media

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About Contrarian Investors’ Journal
Contrarian Investors’ Journal (http://cij.inspiriting.com) is a web journal for atypical investors who are not afraid to think differently. It is one of the rare few investment publications that dare to think outside the box, violate the status quos, challenge conventional views, criticise mainstream opinions and offer in-depth insights that are highly original in nature. Having said that, this is an investment journal not for everyone—its contrarian style of thought goes against the grain of conformist thinking and crowd emotions. But in the long run, it is such kind of thinking that separates the legendary investors of excellence from the average. As Robert Kiyosaki said in his book, Rich Dad's Guide to Investing, "Don't be average!" you will not find the thoughts of the average in the Contrarian Investors' Journal. Be warned—experience shows that not everyone can accept its thinking and sarcasm or have the patience to understand its underlying analysis! But for those who want to understand how the best of the very bests investors think (and they think differently from the rest), this publication is highly recommended.

Copyright © 2010 Contrarian Investors’ Journal (http://cij.inspiriting.com). All rights reserved.