The journey in search of wisdom begins with our brain, its physiology and the mechanisms of reaction to the experiences to which we are subjected.
Mistakes of judgment, which all human beings tend to make, can be kept under control by knowledge.
Likewise, acquiring analytical skills and abilities protects us from being misled by numbers. Ultimately, our brain is a muscle to train to make it work better and better: there are simple techniques and gimmicks that we can learn to master for this purpose and that we could discover in this article.
How our brain is made
Let’s start by remembering that our anatomy affects our behavior: the classic example is represented by the story of Phineas Gage, a worker who worked on the construction of the railway. It survived an explosion but its prefrontal cortex was damaged, radically changing its character and becoming arrogant and impulsive.
Another often cited example is that of Charles Whitman, who killed 14 people in 1966 and wounded 38 by shooting from the clock tower of the University of Austin, Texas. The autopsy showed that he had a tumor that pressed on the amygdala, the region of the brain connected to emotional states and social behaviors.
The human brain is made up of at least 100 billion nerve cells or neurons, connected to each other by dendrites that allow each neuron to interact with others. Connections are the cause of our mental abilities, the number of cells is not important, but the number of potential relationships between them.
Evolution selects the connections that produce behaviors useful for survival and reproduction.
The brain physically changes because of our experiences, because the neural connections that are created change.
Experiences are the reason why every human being is unique. If we encounter a stressful condition, our response is due to how we have lived, to what we have experienced up to that moment, not only to the specific situation we are dealing with.
According to Margareth Thatcher, society does not exist; there are individuals who act according to their interest, to protect their close “family” and themselves, according to a behavior useful for survival.
Since cooperation is in our interest, people, while not being altruistic by nature, are cooperatives.
The prejudices explained by psychology
What drives our mind to err on its judgment?
There are 28 main biases, that is “inclinations, prejudices, self-deception”, perfectly coded. Knowing them, we can turn them into a kind of self-check list that can help us avoid them.
One of the most common biases keeps us hooked on ideas or information from the past, which we use as starting points for future decisions. In the same way, we tend to give us explanations that agree with the opinions we have already formed.
We have difficulty memorizing, and tend to remember selectively. All these psychological inclinations have been ascertained and studied by Charles Munger and experts of the caliber of Daniel Kahneman, and it is proven that all of us are exposed to these 28 harmful behaviors.
However, as Munger explains: we can learn to recognize them, learn from our mistakes and from those that are committed by other people. There is no way to live without making mistakes, the important thing is to learn to manage them.
The prejudices seen through mathematics
Mathematician Jerry King wrote: “There will come a day when ignorance of mathematics will be considered socially despicable behavior like smoking in public.”
In fact, knowing the laws of physics and mathematics allows us to understand the errors of judgment due to the deceptions caused by our “psychological response” to numbers.
What are these mistakes? Often, we are unable to consider that actions have two types of consequences: expected and unanticipated. In particular, we tend not to think systemically. Yet, the interaction between the parties is fundamental.
Let’s think about this situation: on a campus there are mice, students are encouraged to kill them because a dollar will be paid for each dead mouse they deliver. At some point, students start raising mice in order to kill and earn them.
Good intentions cannot eliminate bad consequences, so before acting we must try to consider the picture in the most systemic way possible.
The more complex the system, the more parts are related to each other, the more risky it is, also because the causes are not always sized for the effect: in 1988, in London, the tiredness of a mechanic who had worked for more 12 hours, it led him to forget to remove a small cable from an old exchange while he was installing a new railway signaling system. His mistake caused the collision of two trains and the death of 35 people.
The Mars Climate Orbiter $ 125 million robotic space probe literally disappeared on September 23, 1999. What had happened? There had been an error in the conversion from pounds to Newton (decimal metric system). The navigation team of the Jet Propulsion Laboratory used the metric system in its calculations, while Lockheed Martin Astronautics of Denver, Colorado, who had designed and built the spacecraft, provided crucial acceleration data expressed in the English system, i.e. in pounds.
This mistake sent the 56-mile spacecraft too close to Mars, sending it to destroy itself in the Martian atmosphere. In other words, the probe has been lost in translation.
Context, coincidence, probability: how do we perceive them?
One of the things we don’t pay enough attention to when it comes to numbers is considering the context. Talking about “big” or “small” doesn’t make sense if you don’t place value in its context.
In the same way, we underestimate the fact that time is money. Earning a dollar today has more value than earning it tomorrow, because in the past time the dollar will have produced interest, that is, increased its value.
We are often amazed at coincidences that seem amazing to us, to the point that there are those who cloak them in mystery.
If Mary is thinking about Jill and the phone rings and it’s Jill, Mary will think it is a truly extraordinary fact, because her brain does not consider and keep track of non-events, i.e. the many times she has thought about Jill and the phone didn’t ring.
The same mistake is not considering that if a thing has a one in a million chance of happening, in a country of 280 million people like the United States, this can happen 280 times a day.
Again: if we flip a coin and get an uninterrupted series of 7 heads, we think it is extraordinary, instead of considering that the probability has no memory, every time we throw the coin in the air the past is reset and the odds that the head comes out are always 50%. What came out in the previous launch does not in the least influence the possibility of getting her head for the eighth time.
The same applies to so-called average values. What is the point of saying “the average house price is a million dollars” if castles have been added to the sum? The median is much more instructive and rational: the median is the midpoint of distribution where half of the values are above and half below this value.
If 9 people have 1 million and 1 person has a billion, the average is around 101 million, very far from reality, while the median is 1 million.
The brain is a muscle and like all muscles it can be trained
There are activities, tools, which we can use to think better. Here are a few.
1. Models of reality
Munger was asked what was the best question he should have asked himself. His response was: “Is there anything I can do to make my mental processes better? And I would answer: develop the habit of mastering the multiple models that underlie reality. It’s fun, and it works so well! “
A model is an idea that helps you better understand how the world works. It is like looking at a reality from many different points of view, considering its facets. Doing so helps to achieve a holistic view of things, in other words to master the big picture, that is, the big picture.
Having a holistic vision means interpreting the world using knowledge from multiple disciplines, because the world is multidisciplinary, it cannot be explained solely on the basis of physics, or economics, or biology.
2. The art of simplification
Charles Munger, speaking of his success, says: “We have a real passion for keeping things simple.” Similarly, Jack Welch, a former CEO of General Electric, said: “You can’t believe how difficult it is for people to be simple, how afraid they are of simplicity.”
To be successful, it is fundamentally important to be problem-oriented, problem-oriented, not method-oriented, method-oriented. And it is important to learn how to turn big problems into small ones, by dividing them, but continuing to look holistically at the problem as a whole.
One technique that can be applied is to define the problem on paper, put the key factors and their relationships in black and white. We often try to gather a lot, too much, information, and just as often we focus on irrelevant details. You need to cancel out the background noise and look at the big picture.
Ask yourself: why am I doing this? What’s the really important thing? Will getting more information influence my decision?
The focus drives understanding and efficiency. It is impossible for our brain to process too many things correctly at the same time. Decisions and actions are simplified when focusing on one at a time.
Often the best thoughts come when you are not stressed out, we have no time limits, there are no judgments hanging over us. Thinking takes time, the simple truth is that we often don’t do it well because we are busy doing other things.
5. Rules and filters
What can help us avoid problems? Based on our knowledge of reality, we must establish lists of “what to do” and “what to avoid”. Munger explains his golden rule: “If someone offers you anything with a big commission and a 200-page prospect, don’t buy it.”
Cosa si intende per filtro? Qualcosa che rapidamente ci aiuta a prendere decisioni, perché ci aiuta a escludere automaticamente alcune cose. Possiamo stabilire dei criteri basati su prove e ragionevolmente predittivi, in modo da verificarli durante la formazione del nostro giudizio come se stessimo seguendo una sorta di check list (lista di controllo).
The checklist is one of the most popular security systems. It is used, for example, for aviation safety. In 1987, Northwest Airlines flight 255 crashed shortly after take-off, all 155 people on board died. The investigation showed that the crew had not performed the taxi check list ( check procedure during the movement of the aircraft on the ground) to make sure that flaps and slats were correctly positioned for take-off.
The simultaneous power failure of the flap alarm system contributed to the accident, because it did not automatically signal to the crew that the plane was not correctly configured for takeoff. The captain had over-trusted the automatic systems, and this trust caused the tragedy.
Warren Buffett replied to those who asked him how he assessed the new business proposals that were submitted to him: “Can I understand it? This is the first filter. If it passes, here’s the second: does it seem to have any kind of competitive advantage? If yes, the third filter is triggered: is the management team composed of honest and reliable people? Finally, is the price right? If the idea also passes this last filter, I take out the checkbook. “
The evidence comes from facts, observations, experience, comparisons and experiments. They help us to have information and to be able to verify what could happen, or if something is true or false.
In 1986 the Challenger space shuttle exploded killing all astronauts on board. The commission of inquiry came to find out what had happened thanks to a series of practical experiments, which managed to reproduce the problem: the failure of a seal that was unable to work well in the cold.
The scientific method involves these steps:
- Analyze the problem to be solved (observation of a phenomenon).
- Imagine the reasons for a behavior (formulation of a hypothesis).
- Predict the consequences of a specific solution.
- Test the solution: if I do this, what happens?
As it clearly appears, in the scientific method the testability of the solution and the production of the tests are key factors.
7. Reverse thinking: try to start with the conclusion in the head
It is important to learn to avoid behaviors that can cause the opposite of what you want to achieve. If we say to someone, “Don’t think about red”, immediately that person will think about red. Why? It is simple: to know what it must not do, the human brain must first of all think about it.
This is why it is important to focus on phrases like: “I want to hit the ball well”, instead of “I don’t want to hit the ball badly”.
To reduce mistakes, we should study the failures that caused severe consequences. We can learn a lot from the exercise of understanding why something went wrong.
The reverse thinking method applies like this: let’s imagine that we have already achieved our goal, and ask ourselves: what is the purpose? Was this what I wanted? If the answer is yes, let’s move on.
What is needed to really achieve it? We continue step by step in the process of “thinking backwards”, going back to the beginning. By working backwards we can easily see how and if something works.
The golden rules
To conclude, here is the list of the golden rules of Charles Munger, to be applied both in personal and professional life:
- knowledge produces compound interests (reserve one hour a day for your growth);
- if you keep reading and thinking you will never have work problems;
- admit your stupidity (not to repeat a mistake);
- don’t sell what you wouldn’t buy;
- destroy one of your ideas every year;
- have no ideologies (they hide the facts);
- expand your way of looking at things.