We are always on a journey to better design our job. This has been my mood during this current Brazilian crisis. I (almost) always come down to qualitative key issues that deter me from further exploring investment ideas, many of those related to people and incentives. The Brazilian Government is no exception. Brazil is a company with a critical governance problem. But I am not that into politics, so let the media, politicians, consultants and lobbyists do their jobs.
However, today I wanted to discuss the last topic of the book Psychology of Intelligence Analysis by Richard Heuer, namely biases. I consider it to be an interesting subject as its definition per se is already curious. If anyone has a bias, it’s because neutrality occurs somewhere, somehow. But, by definition, there is no “neutral” behavior and that’s why I find it ingenious. And that’s what Lee Ross, a psychologist at Stanford University calls “naive realism”, meaning we see the world as it truly is, without bias or error.
Anyhow, the best debate on the topic I have stumbled so far is the classic Charlie Munger’s lecture entitled the Psychology of Human Misjudgement, that I strive to read yearly. As the time goes by, it gets easier to grasp thoughtful concepts and internalize those. If you prefer to listen rather than to read, you can find the full lecture right below.
In Heuer’s book, however, there’s a list of interesting behaviors the CIA have apprehended along the way; simple little tricks cleaning up the path to clearer thinking:
- Specifying in advance what would cause you to change your mind will also make it more difficult for you to rationalize such developments if they occur, as not really requiring any modification of your judgment
- Statistical data, in particular, lack the rich and concrete detail to evoke vivid images, and they are often overlooked, ignored or minimized
- Consistency can also be deceptive
- People save residual non-accurate information even after being told they are inaccurate
- Be cautious with causation. Remember variance and/or randomness exist
- The tendency to reason according to similarity of cause and effect is frequently found in conjunction with the bias toward inferring centralized direction. Together, they explain the persuasiveness of conspiracy theories
- People have better intuitive understanding of odds than of percentages
- Base-rate fallacy: numerical data are ignored unless they illuminate causality
- People tend to underestimate both how much they learn from new information and the extent to which new information permits them to make correct judgments with greater confidence
- Fighting hindsight: if it was the opposite, would I be surprised based on the previous report?
- Consciously avoid any prior judgment as a starting point
- The act of constructing a detailed scenario for a possible future event makes that event more readily imaginable and, therefore, increases its perceived probability
- Expectations or theory are unlikely to be given great weight and tend to be dismissed and unreliable, erroneous, unrepresentative, or the product of contaminating third variable influences