Don't take news anchors seriously

Max planck got bored after giving same lecture on Quantum mechanics after winning the Nobel Prize so
he and his driver decided to interchange each other. After the driver deliver the talk a person asked a
question, then he I said that my chauffer will answer this simple question.

There are two types of knowledge real knowledge and chauffer knowledge

1. Real knowledge the person who has reported time and effort to understand a topic

2. chauffer knowledge is the knowledge to put on show, usually presented by the news anchors

In conclusion do not confuse the company's spokesperson The Ring Master the newscaster with those
who possesses to knowledge. How to differentiate between the one who know and the other who don't
know

There is a clear difference: The one who knows recognize the limit of what they know and what they
don't know. If they found themselves outside of their limits we keep quiet or simply.

You control less than you think

A person got angry on his friend because he thought that the lottery numbers buyed by his friend will
not work for him but when his friend enquired does these numbers affect your chance of winning the
lottery draw has no answers.

Similarly people in the casino throw the dies harder if they want to get a higher number and if they want
to want a smaller number they throw the dice lightly.

Illusion of control is a tendency to believe they can control things over which the do not have any
control.

Example of a person can withstand noise in a room with panic button then the one without panic
button.

In offices it will be cold for people, hot for others, so clever technician create the illusion of control by
installing fake temperature dials. Temperature will not change but only the display will change.

World economy fundamentally uncontrollable system the announcement by the federal had saw the
heads of the bank only inject little of tangible value in the real economy.
Do you think you have everything in control it is impossible therefore focus on few things of importance
that you can really influence.

When rewards are given for the quantity what people do they break the single piece into two and get a
reward for two things.

So when a company board promised bonus for achieving target then what happens is managers invest
more energy in reducing the number of target rather than growing the business. It is example of
incentive super response tendency.

People respond to incentives by doing what is in their best interest in two ways

first they quickly and radically change their behavior and second people respond to the incentive
themselves not on the Grand intentions behind them

Good incentive systems compromise both in 10th and reward.

If you want to influence the behavior of people or organizations you need not to always preach about
values and visions, incentives work better at these places this need not to be monetary incentives it can
be anything in usable from good grades to some momenta or special treatment After life

For lawyers architect consultant accountants school driving teachers always negotiate of fixed price do
not pay them on an hourly basis. Be aware of the investment advisers too, they are not interested in
financial well being but in earning a Commission on a particular financial product.

Never ask a barber if you need a haircut.

In conclusion keep an eye on the intensive super response tendency the persons or organisation
behaviour changes ask yourself what incentive can be written behind it 90% of the cases will come
under this and the remaining 10% will be because of passion idocity psychosis malise

Natural regression to mean

The things which are at their peak will come to their natural mean and things which are at the bottom
will also come to their natural mean.

Example of stock who's price at peak for the last 3 years, will not be the top most stock in the coming
years

Athletes which are at their peak may not be at the peak in their coming years because it is to do with the
natural variations in performance.

So whenever we feel that we go to doctor and after that I will got better in few days or the company had
a bad year so it got a consultant and now reserves back to normal it is the regression to mean error
Humans are Biased towards judging a decision by its result rather than evaluating it from the decision
making process. This fallacy is known as the history error.

Evaluate surgeon on the basis of his preparation for surgery and the procedure for execution of
operation. Also the sample size should be large enough to arrive at a good conclusion.

In short, never judge a decision on the basis of a route come when randomness and external factors play
a role. There should be e rational and understandable reasons to arrive at a conclusion or a method that
will work.

Paradox of choice

if you are provided with more number of options there would be less sales.

As compared to have a limited number of options. Because when they are bombarded with lots of
information for brain confuses to arrival to final result so because of this phenomenon if we provide
customers with the appropriate number of choices, there will be more probability that he or she will
purchase the product.

Finally making a selection from a used number of choices always lead to discontent because you cannot
pick the ideal one for you. For example in dating sites.

So in this age of unlimited choices good enough is the new optimum

There is nothing more effective in selling anything then getting the customer to believe, really believe,
that you like him and care about him. Person was extremely successful by sending a card to his
customers every month which contains only one sentence I like you.

The more we like someone the more inclined we are to buy from for help that person. According to
research, a person looks pleasant to us if

1. He looks attractive to us

2. He is similar to us in terms of origin personality or interest

3. He like us

As a result of this advertising is full of attractive people.

Complement work wonders even if they ring hollow as a drum.

Selling through personal let works only because of the liking bias.

Politicians are also a master of liking bias depending upon the makeup and interest of the audience they
deliver their talk accordingly to make feel every person an indispensable member of the team.
Amiability works better than bribery.

In short if you are a salesperson make your customers think that you like them and if you are a
consumer always examine the product independent of who is the seller

Endowment effect

We charge things for more price if we are selling than what we ourselves would be willing to spend.

In real estate, the endorsement effect is more palpable. Tailors become more attached to their dress
and systematically overestimate their value.

Effect not only positions but also real ownership. Example of person who builds until the end of an
option get the feeling that the object is practically there's thus increase its value.

Enlarge options such as the mining writes the oil blocks for mobile radio frequencies the successful
bidders turn out to be economic loser when he caught up in the fervor and over bids.

you feel more disappointed when you are rejected in the final round of job selection process. It is
irrational as other you get the job or not that's the only thing matter.

In short don't cling to things. Consider your property something that Universe has gifted to you
temporarily and it can be gone away in a blink of an eye.

Never be too excited. Improbable coincidences are precisely very rare but very possible events. It's not
surprising when they finally happen. What would be most surprising is that they never happen.

Members of a closed group develop the team spirit unconsciously. One of the fantasies of such groups
believes in the invincibility: Both our leader and the group are confident in a plan the plan will work and
then luck will be on our side.

The illusion of unanimity: If others are of the same opinion any deviating view must be wrong. No one
wants to become the one who destroys the team Unity. Expressing reservations could mean exclusion
from it.

In our evolutionary past, such banishment guaranteed death; hence we have a strong urge to remain in
the group's favor
The business world is no stranger to groupthink. A Swiss airline had been closed because of this.

If you are in a tight unanimous group, you must speak what you feel and believe even if your team does
not like it. If you lead a team appoint someone as devil's advocate. He might be not the most popular
person of the team but he might be the most important person of the team

Humans respond to the expected magnitude of an event( prize of the lottery ), not to its likelihood.

The humans lack an intuitive grasp of probability. They will look more at the size of the prize rather than
counting the odds of winning the prize.

If you have to choose one of the better processes

1. Process A reduces the contamination from 5 % to 2%

2. Process B reduces the contamination from 1 % to 0%

Most people will think that process B is better, but actually process A is better because it reduces the
contamination by 3% but B reduces the contamination only by 1%.

Humans do not have intuitive grasp of risk and thus we distinguish poorly between different threats.
People are equally afraid of a 99% chance as they are of 1% chance of contamination by a toxic chemical
and directional response butter common one

Rare is valuable.

To close a deal of a real estate, the dealer says to his client that some other person is also interested for
this property, the prospect of disappearing opportunity makes the client close the deal early.

When we are deprived of an option physically Demat more attractive it is a kind of act of deficiance.

In conclusion the typical response for scarcity is lapse in clear thinking. Always asses a product or service
solely on the basis of its price in benefits. It should be of no importance if an item is disappearing fast,
nor if anybody other is interested in that.

Base rate neglect means to overlook the statistical reality and discard the fundamental of the
distribution level.

In medicine base rate neglect plays a vital role. For example

Migraines can point to a viral infection or a brain tumor. Viral infections are much more common so the
doctor first accesses the patient for viral fever before testing for tumors.

You are not a wine taster, and you have to predict from which country it comes. You do not consume
wine and the label is not present.
The only lifeline you have is the base rate. Experience three fourth of the world's total wine comes from
France so you can guess France.

Most MBA graduates think that in medium term they will be on the boards of global companies. But
they got a base rate crash course when someone in the convocation told them the chance of landing a
spot on the board of a Fortune 500 company is less than 1 percent. No matter how smart in ambitious
you are, the most likely scenario is that you will end up in middle management.

Gamblers Fallacy leads to believe that something must change. In a casino a ball can land on black slot
25 times continuously because it is an independent event.

If we take a closer look at the independent and interdependent events, purely independent events really
only exist at the casino in the lottery and in the theory. In real life, in the financial markets and in
business, with the weather and your health, events are often interrelated what has already happened
has an influence on what will happen. So gamblers fallacy work for Independent event and regression to
mean work for independent events

If you do not have any idea about thing and you have to guess about it, mostly you will fall prey to
anchors. Anchors are some previous figures about which we are confident.

Anchors can be used to negotiate prices. For example and as first conversation with his client a
consultant said that- I will tell you this now so you are not surprised when you receive the quote, Mr X.
We have just completed a similar project for one of your competitors and it was in the range of 5 million
dollars. The anchor was dropped, the price negotiation started at exactly 5 million.

Inductive thinking means the inclination to draw Universal certainties from individual observations.

Example share price rocketed after a person has invested some amount in it has the stocks continue to
write even after months his apprehensions turn into excitement. He concluded that this is stock may
never come down and he invested his life savings in it, turning a blind eye to the huge clustered risk this
posses. He has fallen hook line and sinker for induction.

One can make a fortune by using Inductive thinking. All one has to do is sending a few emails to 1 lakh
people. Send a market forecast of price rise to 50,000 and cast of price fall to other. Suppose after that
the prices have fallen. Now this time send only to 50000 who received the correct prediction. Divide
these 50,000 into two groups and repeat the above procedure. Continue doing this after 10 months
around hundred people will remain all of whom you have advised impeccably correct. Some of these
people will trust you with their money take it and start a new life in Brazil.
A skydiver has developed the confidence that he will never fall because he has not fall in forest first
thousand jumps. 2 months later he was dead while jumping. Inductive thinking can have devastating
results that we cannot do without it.

Induction seduces us and leads to a conclusion such as mankind has always survived so we will be able
to tackle any future challenges too.

To assume that our existence to date is an indication of our future survival is a serious flaw in reasoning.
Probably the most serious of all

Loss aversion means a loss weigh about twice that of a similar gain. Losing $100 cost you a greater
amount of happiness then the delight you will feel if one gives you a hundred dollars.

If you want to make someone convince about something, don't focus on advantages instead highlight
how it will help then does the disadvantages.

A- women who do BSE have an increase chance of finding a tumor in the early stage

B- women who do not do BSE have a decreased chance of finding the tumor in early stage

B will make more people convinced.

The fear of losing something motivates people more than the prospect of gaining something of equal
value.

For a business of home insulation, the most effective way of encouraging the customer to purchase a
product is to tell them how much the money they are losing if they would not insulate their home as
opposed to how much money they would save with it.

Multi-millionaire was upset because he lost a hundred dollar bill. What a waste of emotion, since the
value of his portfolio, fluctuated by this amount every second.

Management Gurus push employees in large companies to be bolder and more entrepreneurial. The
reality is employees tend to be risk-averse. Because at best they get a nice bonus but at worst, they can
be fired. This prevents risk-taking among the employees.

We can't fight it: I will is more powerful and more plentiful than good. We are more sensitive to
negative than to positive things. On the street, scary faces stand out more than smiling ones. Remember
bad behavior longer than good- iD except of course when it comes to ourselves.
When we work in groups it is a human tendency that individuals put a lesser effort than they would have
put when they were alone. Because the individual do not get recognition if the group achieves
something.

Zero performance is noted in the group and can result in punishments like exclusion from the group.

Then who came up with the much-vaunted idea that teams achieve more than individual workers. It
might be Japanese. But in the West teams function better if and only if there is a small team and consists
of diverse specialized people because interest groups individual performances can be traced back to
each specialist.

In group sweet and to hold back not only in terms of participation but also in the terms of accountability.
Nobody wants to take responsibility of poor decision of the whole group. Therefore people hide behind
team decisions. That is also known as diffusion of responsibility.

Contrary to this, teams tend to take bigger than their members should take on their own because if a
decision goes wrong, the whole team is to be blamed not a single person. This effect is called the risk
shift.

In conclusion: People behave differently in a group than when alone. The disadvantages of a group can
be mitigated by making individual performances as visible as possible.

One cannot imagine easily the benefits of compound growth because humans have intuitively learned
linear growth from our ancestors. Calculate the doubling time of any quantity at accounting rate use the
rule of 70. Nothing that grows exponentially, grows forever. Most politicians economist and journalist
forget that.

If one is asked to put rice on a chessboard search that first square contains 1 piece, second 2 peice,third
4 piece and so on compoundingly. The total amount of rice required will be less than that is available on
the whole Earth. So when it comes to growth rates, do not trust on your intuitions, always use a
calculator to actually calculate it.

Warren Buffett says that don't go to auctions. Even if you go, decide fair price of that product , write it
on a paper and never bid more than that.

Astoundingly, more than half of pores acquisitions destroyed value according to a Mckinsey study.
Every story has a page like play x or coach y was responsible for the teams' victory in the league. This is
an ironclad rule in every newsroom. Always on the lookout for the 'people angle', journalist take this
principle one step further and fall prey to fundamental attribution error. This describes the tendency to
overestimate individuals influence and underestimate external, situational factors.

The fundamental attribution error is particularly useful to whittling negative events into a near little
package. Example the blame for what was legally post on two individuals- the Yugoslav assassin in
Sarajevo has World War 1 on his conscience and Hitler single-handedly cause world War 2.

We see this same pattern when companies announce good or bad results. All eyes shift to the CEO's
office even if we know the truth: success depends far more on the economic climate and the industries
attractiveness than a brilliant leadership.

We should not judge those guilty of fundamental attribution error too harshly. Our preoccupation with
other people stems from our evolutionary past: Belonging to a group was necessary for survival.
Reproduction, defense, and hunting large animals all these were an impossible task for individuals to
achieve alone. Banishment means certain that and those who actively opted for the solitary life
disappeared from the gene pool.

In short our life dependent on and revolve around others, which explains why we ask to obsessed with
our fellow humans today. The result of this is that we spend about 90% of the time thinking about other
people and dedicate just 10 percent to accessing other factors and contexts.

False Casualty:

Consider the headline- employee motivation leads to higher corporate profits. Does it really? Maybe
people are simply motivated because the company is doing well

More women on a corporate board the more profitable the firm is. But does it actually work? Are 2
highly profitable firms simply tend to recruit more women on their boards? Business book authors and
consultants of

ten operate with similar false casualties.

Students get better grades at school if their home contains a lot of books. This is another fine example of
false casualty. The truth is that educated parents tend to value their children's education more than
uneducated ones do. Plus, Educated parents often have more books at home. In short, a dost covered
copy of War and Peace alone present going to influence animals grades what counts is parents in
education level as well as their genes.
The Halo effect occurs when a single aspect diesel service and affects how we see the full picture.

The company Cisco was driving at a time. Business journalist praised its success in every discipline: It's
wonderful customer service perfect strategy, unique corporate culture, and charismatic CEO. In March
2000, the most valuable company in the world. When Cisco stock plummeted 80% of the following years
the journalist changed their tune. And suddenly started writing about poor customer service clumsy
acquisitions bad corporate culture and insipid CEO. This is a halo effect.

A single quality like beauty social status produces a positive or negative impression that out sense
everything health and the overall effect is disproportionate.

For example, dozens of studies have shown that we automatically regard good looking people has more
please in honest and intelligent. The effect can even be protected is a school where the teachers
unconsciously give good looking students better grades.

Advertising as found in the hello effect. The smiling celebrities have nothing to do with the arbitrary
products that we never stop to consider while their support should be of any importance to us. But this
is exactly the sneaky part of Halo effect. All that needs to register is the attractive face cream lifestyle
and the product.

The negative effects of Halo effect can lead to great injustice and even stereotyping when nationality
gender and race become a feature.

The Halo effect limits our view of true characteristics. To counteract it, go beyond face value. Factor of
the most striking features.

Risk is not directly visible therefore always consider what the alternative paths are. Looking at an
alternative path from outside is a difficult task and from inside it is an impossible task. Your brain will do
everything to convince you that your success is warranted -no matter how risky your dealings are and
will obscure any thought of paths other than the one you are on.

Be critical when you encounter predictions whenever you hear one, make sure to smile no matter how
bleak it is. Then ask yourself first what incentive does the expert have? if he is an employee, could he
lose his job if he is always wrong? Or he is a self-appointed guru who earns a living through books and
lectures? the latter type of forecaster relies on the media attention, his prophecies tend to be
sensational. Second, how good is his success rate? how many predictions has he made over the past few
years? Out of these, how many have been right and how many have not ? This information is vital yet
often unreported
We are easy prey for the conjunction fallacy because we have an innate attraction to harmonious or
plausible stories. The more convincingly impassively or vividly the stories are portrayed the greater the
risk of false reasoning.

For example A) Seattle Airport is closed flights are cancelled.

B) Seattle airport is closed due to bad weather. Flights are cancelled.

What is more likely? Is more likely since B implies that an additional condition has been met, name the
bad weather. With the atom bomb read accident or a strike close the airport however when faced with
the plausible story with don't stop to consider with such things.

Two types of Thinking exists. The first one is intuitive automatic and direct. The second one is conscious,
rational, slow, laborious and logical. Unfortunately, intuitive thinking draw the conclusion long before
the conscious mind does, the difference between intuitive and conscious thinking is much more
significant. Important decision remember that, had intuitive level we have a soft spot for plausible
stories. Therefore, be on the Lookout for convenient details and happy endings. Remember: If an
additional condition has to be met, no matter how possible it sounds, it will become less, not more,
likely.