Seeking Wisdom by Peter Bevelin (Detailed Book Summary)

This is a book summary of Seeking Wisdom: From Darwin to Munger by Peter Bevelin.

I read Seeking Wisdom (Amazon) because I noticed that many people had it on their recommended reading lists—some even say it’s their top book of all-time. I may also check out Poor Charlie’s Almanack (Amazon) in the future.

Quick Housekeeping:

All quotes are from the author unless otherwise stated.
I’ve added my own emphasis in bold.

Book Summary Contents: Click a link to jump to a section below

Introduction to Seeking Wisdom
How a Human Works
Evolution & Adaptive Behavior
28 Psychological Reasons for Misjudgments
9 Physics & Math Principles for Reducing Misjudgments
12 Guidelines for Better Thinking

Sloww Seeking Wisdom Book by Peter Bevelin

**Darwin, Munger, & More: Seeking Wisdom by Peter Bevelin (Book Summary)**

Introduction to Seeking Wisdom

“This book is for those who love the constant search for knowledge. I have focused on explaining timeless ideas.”

“This book focuses on how our thoughts are influenced, why we make misjudgments and tools to improve our thinking. If we understand what influences us, we might avoid certain traps and understand why others act like they do. And if we learn and understand what works and doesn’t work and find some framework for reasoning, we will make better judgments. We can’t eliminate mistakes, but we can prevent those that can really hurt us.”
“This book has four parts. First, I explore what influences our thinking. This serves as a foundation. In the second part, I give examples of psychological reasons for misjudgments. The third part explores reasons for misjudgments caused both by our psychology and a lack of considering some basic ideas from physics and mathematics. In the final part I reveal tools for better thinking.”
“The best way to learn what, how and why things work is to learn from others.”

How a Human Works

“It is our brain, its anatomy, physiology and biochemistry and how these parts function that set the limits for how we think. But since our brain’s parts also interact with our body’s anatomy, physiology and biochemistry, we must see brain and body together. They are part of the same system – us.”

System interconnectivity and interactions:

“Interaction is a fundamental property in biology. There are interactions between molecules, genes, neurons, brain regions, cells, organs and among these individual systems. Each system does its own job but they are all coordinated to produce a functional and unique individual.“
“The most striking result of our interactive network is flexibility. A flexibility to take on new roles as conditions change and an ability to produce the same result in different ways.”

Neurons:

“Since it is the connections between neurons that cause our mental capacities, it is not the number of cells that is important but the number of potential connections between them.”
“What we think and feel depends on chemical reactions. And these chemical reactions are a function of how our neurons connect.”
“The connections in our brain are constantly strengthened and weakened, developing and changing. The more we are exposed to certain experiences, the more the specific connections are strengthened, and the better we learn and remember those experiences.”
“What determines how these neurons connect and their patterns? Our genes and life experiences, situational or environmental conditions, and a degree of randomness.“

Genes & Environment:

“Genes control brain chemistry but are turned on and off by the environment.”
“Gene expression depends on environmental conditions. Genes control the chemistry in the brain but need to be activated by the environment. An environmental event must switch them on, or modify their level of activity, before they can start making proteins that influence neural connections. Our genes determine if we inherit a particular characteristic but it is the environment that causes our genes to make proteins that produce certain ‘response tendencies.’ So our behavior emerges from the mutually dependent activity of genetic and environmental factors.“

Experiences:

“Neural connections are shaped by life experiences.”
“The brain changes continually as a result of our experiences. Experiences produce physical changes in the brain either through new neural connections or through the generation of new neurons.”
“Experiences are the reason that all individuals are unique. There are no individuals with exactly the same upbringing, nutrition, education, social stamping, physical, social and cultural setting. This creates different convictions, habits, values and character. People behave differently because differences in their environment cause different life experiences.“
“It’s not just what happens to us that counts – it’s what we think happens to us. We convert our expectations to a biochemical reality meaning that our mental state and physical well-being are connected.”
“Our genes and life experiences determine how neurons connect thereby influencing and setting the limits for our behavior.”

Evolution & Adaptive Behavior

“Evolution is change (structural, physiological, behavioral) – which occurs over time through interaction with the environment.”

Evolution:

“The theory behind evolution is that all individuals alive today have evolved from simpler, more primitive forms of life. Since every living thing uses the same genetic code, it is likely that life descended from a distant common ancestor that had that code.”
“There is fossil, anatomical and molecular evidence of evolution.”
“What major mechanisms are responsible for evolution and for how our brain evolved? Mutation and natural selection.“

Darwin’s Observations:

“Competition and environmental change. In most species (a species is a group of individuals capable of producing fertile offspring; like snakes, lion, humans) there are always more offspring born than can survive to adulthood and reproduce. Darwin saw two reasons for this: (1) Since there is a limited amount of resources (like food, space, mates) there is competition between individuals for these resources, and (2) Since the environment changes over time and from one region to another, there are threats (predators, change in climate, isolation, diseases, change in the physical environment) to the children’s survival and their reproductive success.”
“Individual variability. Within a species, there is an enormous amount of individual variation. No two individuals of the same species are alike in their anatomical structure, physiology or behavior (we’re not an exact copy of our parents). Individuals vary in their cell structure, fighting ability, and social skills. Variations make every individual unique and that variation must in some way be heritable otherwise children wouldn’t resemble their parents more than they resemble other individuals.”
“The world is not fixed but evolving. Species change, new ones arrive and others go extinct.”

Mutation:

“Mutations cause variations.”
“Mutations are caused by a copying error in the sequence of A, C, G and T molecules when DNA is copied. This error in the genes ‘spelling’ may cause a change in a protein leading to a modification in the individual that inherits the gene.”
“After a mutation changes an individual, the environment determines if the change gives the individual an advantage. If the new trait is helpful, the mutated individual is more likely to survive, reproduce and pass the new trait to his children.”
“Often a new trait or a change in an individual doesn’t occur through a single step but through a gradual accumulation of small mutations being selected over a long period of time.”
“Mutation is not the only source of genetic variation. Other mechanisms (sometimes interacting) are genetic drift, gene flow, and symbiosis. Genetic drift happens when random events cause gene frequencies to vary between generations (more important in small populations). Gene flow or migration is the movement of genes in a species from one population to another as the result of interbreeding … Symbiosis is the cooperative interaction between different organisms that can produce genetic changes. There is also co-evolution or the parallel evolution of two species. Another source of variation is gene duplication or the accidental duplication of entire genes. So natural selection is not the only mechanism that changes organisms over time. But it is the only known process that seems to adapt organisms over time.“

Natural Selection:

“Charles Darwin, and independently the British naturalist Alfred Russell Wallace, discovered the theory of evolution by natural selection.”
“Any slight variation in traits that gives an individual an advantage in competing with other individuals of the same or different species or in adapting to changes in their environment increases the chance that the individual will survive, reproduce, and pass along its characteristics to the next generation.”
“Darwin used the word ‘selection,’ but nature doesn’t care who gets selected for survival. Evolution has no goal. Another way to describe natural selection is as a process of elimination. Certain individuals survive because they have structural, physiological, behavioral or other characteristics that prevent them from being eliminated. Those that don’t have these characteristics are eliminated. Heredity enhances the likelihood that the non-eliminated or ‘selected’ variations are preserved.“
“Since environments change over time and with geography, different variants are ‘selected’ under different conditions. Characteristics that are successful in one environment may be unsuccessful in another.”
“Since natural selection is about survival and reproduction, and individuals either survive or die and reproduce or not, it makes sense that individuals are predisposed to act in ways that enhance their own prospects for survival and reproduction. The ancestral environment consisted of limited resources, including reproductive resources, and fierce competition. Self-interest came naturally.”
“Altruistic behavior cannot evolve by natural selection since natural selection favors individuals that are best at promoting their own survival and reproductive success. Only behavior that is selfish or for the mutual good is in an individual’s self-interest and therefore favored by natural selection.“
“Reproduction is the central act in the life of every living thing. Once an individual has survived past the age of reproduction, the individual is evolutionarily useless.”

Pleasure & Pain:

“We are driven by our need to avoid pain (and punishment) and a desire to gain pleasure (and reward). Evolution has made any behavior that helps us survive and reproduce feel pleasurable or rewarding. Behavior that is bad for us feels painful or punishing. Feelings of pain and pleasure are a useful guide to what is good or bad for us.”
“Evolution has given us preferences that help us classify what is good or bad. When these values are satisfied (causing either pleasure or less pain) through the interaction with our environment, these neural connections are strengthened. These values are reinforced over time because they give humans advantages for survival and reproduction in dealing with their environment.”
“Since the brain is formed by life experiences and since an individual doesn’t keep doing what doesn’t work (learns through trial and error), evolution has reinforced the behavior and values that help us survive and reproduce.”
“If pain and pleasure are guides to the behavior that leads to survival and reproduction, fear is our biological warning signal for avoiding pain.”

Cultural Evolution:

“Human society is not only shaped by the evolution of genes, but also by cultural evolution. Practices, methods, tools, myths, ethics, and social norms that are important in the evolution of our behavior. Customs that we learn from the experience of our parents and others – either by teaching or observation.”
“Cultural evolution is faster than genetic evolution since it allows much of what we learn to be passed on and combined with what others around us have learned. Unlike biological evolution, cultural evolution is not inherited. We don’t inherit our parents’ habits. We learn from them.”
“If a certain behavior proves to be beneficial generation over generation, that behavior is favored by natural selection. Assume individuals over time make certain social behavior choices. These choices were transmitted through learning and culture. Over time, they will be favored by natural selection since they positively influence survival and reproduction.”
“Our nature is a product of our biological and cultural history. Evolution explains how we are shaped and biologically constrained. Like our bones, kidney, eyes, and legs, our brain has been shaped by natural selection. Natural selection equipped us with traits that increase our chances for survival and reproduction. It then follows that we consciously or unconsciously behave according to what we perceive is in our own best interest. This is our biological base nature. It is strengthened or weakened depending on our life experiences.”
“There is always some background within which behavior makes sense. Behavior can’t be seen as rational or irrational independent of context. We are created with a series of emotions that are appropriate depending on circumstances. If we change context or environment, we change behavior.“

28 Psychological Reasons for Misjudgments

“This part explores 28 reasons for misjudgments that can be explained by our psychological make-up. Many of the reasons are rooted in psychological tendencies and biases that often influence us subconsciously.”

1. Bias from mere association:

“Automatically connecting a stimulus with pain or pleasure; including liking or disliking something associated with something bad or good. Includes seeing situations as identical because they seem similar. Also bias from Persian Messenger Syndrome – not wanting to be the carrier of bad news.”

2. Underestimating the power of rewards and punishment:

“People repeat actions that result in rewards and avoid actions that they are punished for.”

3. Underestimating bias from own self-interest and incentives.

4. Self-serving bias:

“Overly positive view of our abilities and future. Includes over-optimism.”

5. Self-deception and denial:

“Distortion of reality to reduce pain or increase pleasure. Includes wishful thinking.”

6. Bias from consistency tendency:

“Being consistent with our prior commitments and ideas even when acting against our best interest or in the face of disconfirming evidence. Includes confirmation bias – looking for evidence that confirms our actions and beliefs and ignoring or distorting disconfirming evidence.”

7. Bias from deprival syndrome:

“Strongly reacting (including desiring and valuing more) when something we like and have (or almost have) is (or threatens to be) taken away or ‘lost.’ Includes desiring and valuing more what we can’t have or what is (or threatens to be) less available.”

8. Status quo bias and do-nothing syndrome:

“Keeping things the way they are. Includes minimizing effort and a preference for default options.”

9. Impatience:

“Valuing the present more highly than the future.”

10. Bias from envy and jealousy.

11. Distortion by contrast comparison:

“Judging and perceiving the absolute magnitude of something not by itself but based only on its difference to something else presented closely in time or space or to some earlier adaptation level. Also underestimating the consequences over time of gradual changes.”

12. Bias from anchoring:

“Over-weighing certain initial information as a reference point for future decisions.”

13. Over-influence by vivid or the most recent information.

14. Omission and abstract blindness:

“Only seeing stimuli we encounter or that grabs our attention, and neglecting important missing information or the abstract. Includes inattentional blindness.”

15. Bias from reciprocation tendency:

“Repaying in kind what others have done for or to us like favors, concessions, information and attitudes.”

16. Bias from over-influence by liking tendency:

“Believing, trusting and agreeing with people we know and like. Includes bias from over-desire for liking and social acceptance and for avoiding social disapproval. Also bias from disliking – our tendency to avoid and disagree with people we don’t like.”

17. Bias from over-influence by social proof:

“Imitating the behavior of many others or similar others. Includes crowd folly.”

18. Bias from over-influence by authority:

“Trusting and obeying a perceived authority or expert.”

19. Sensemaking:

“Constructing explanations that fit an outcome. Includes being too quick in drawing conclusions. Also thinking events that have happened were more predictable than they were.”

20. Reason-respecting:

“Complying with requests merely because we’ve been given a reason. Includes underestimating the power in giving people reasons.”

21. Believing first and doubting later:

“Believing what is not true, especially when distracted.”

22. Memory limitations:

“Remembering selectively and wrong. Includes influence by suggestions.”

23. Do-something syndrome:

“Acting without a sensible reason.”

24. Mental confusion from say-something syndrome:

“Feeling a need to say something when we have nothing to say.”

25. Emotional arousal:

“Making hasty judgments under the influence of intense emotions. Includes exaggerating the emotional impact of future events.”

26. Mental confusion from stress.

27. Mental confusion from physical or psychological pain, the influence of chemicals or diseases.

28. Bias from over-influence by the combined effect of many psychological tendencies operating together.

9 Physics & Math Principles for Reducing Misjudgments

“This part illustrates reasons for misjudgments and mistakes that can be reduced by considering some basic principles from physics and mathematics.”

1. Systems thinking:

“Failing to consider that actions have both intended and unintended consequences. Includes failing to consider secondary and higher order consequences and inevitable implications.”
“Failing to consider the whole system in which actions and reactions take place, the important factors that make up the system, their relationships and effects of changes on system outcome.”
“Failing to consider the likely reactions of others – what is best to do may depend on what others do.”
“Failing to consider the implications of winning a bid – overestimating value and paying too much.”
“Overestimating predictive ability or using unknowable factors in making predictions.”

2. Scale and limits:

“Failing to consider that changes in size or time influence form, function and behavior.”
“Failing to consider breakpoints, critical thresholds or limits.”
“Failing to consider constraints – that a system’s performance is constrained by its weakest link.”

3. Causes:

“Not understanding what causes desired results.“
“Believing cause resembles its effect – that a big effect must have a big or complicated cause.”
“Underestimating the influence of randomness in bad or good outcomes.”
“Mistaking an effect for its cause. Includes failing to consider that many effects may originate from one common root cause.”
“Attributing outcome to a single cause when there are multiple causes.”
“Mistaking correlation for cause.“
“Failing to consider that an outcome may be consistent with alternative explanations.”
“Drawing conclusions about causes from selective data. Includes identifying the wrong cause because it seems the obvious one based on a single observed effect. Also failing to consider information or evidence that is missing.”
“Not comparing the difference in conditions, behavior and factors between negative and positive outcomes in similar situations when explaining an outcome.”

4. Numbers and their meaning:

“Looking at isolated numbers – failing to consider relationships and magnitudes. Includes not using basic math to count and quantify. Also not differentiating between relative and absolute risk.”
“Underestimating the effect of exponential growth.”
“Underestimating the time value of money.”

5. Probabilities and number of possible outcomes:

“Underestimating risk exposure in situations where relative frequency (or comparable data) and/or magnitude of consequences is unknown or changing over time.”
“Underestimating the number of possible outcomes for unwanted events. Includes underestimating the probability and severity of rare or extreme events.”
“Overestimating the chance of rare but widely publicized and highly emotional events and underestimating the chance of common but less publicized events.”
“Failing to consider both probabilities and consequences (expected value).”
“Believing events where chance plays a role are self-correcting – that previous outcomes of independent events have predictive value in determining future outcomes.”
“Believing one can control the outcome of events where chance is involved.”
“Judging financial decisions by evaluating gains and losses instead of final state of wealth and personal value.”
“Failing to consider the consequences of being wrong.”

6. Scenarios:

“Overestimating the probability of scenarios where all of a series of steps must be achieved for a wanted outcome. Also underestimating opportunities for failure and what normally happens in similar situations.”
“Underestimating the probability of systems failure – scenarios composed of many parts where system failure can happen one way or another. Includes failing to consider that time horizon changes probabilities. Also assuming independence when it is not present and/or assuming events are equally likely when they are not.”
“Not adding a factor of safety for known and unknown risks. Size of factor depends on the consequences of failure, how well the risks are understood, systems characteristics and degree of control.”

7. Coincidences and miracles:

“Underestimating that surprises and improbable events happen, somewhere, sometime, to someone, if they have enough opportunities (large enough size or time) to happen.”
“Looking for meaning, searching for causes and making up patterns for chance events, especially events that have emotional implications.”
“Failing to consider cases involving the absence of a cause or effect.”

8. Reliability of case evidence:

“Overweighing individual case evidence and under-weighing the prior probability (probability estimate of an event before considering new evidence that might change it) considering for example, the base rate (relative frequency of an attribute or event in a representative comparison group), or evidence from many similar cases.”
“Includes failing to consider the probability of a random match, and the probability of a false positive and false negative. Also failing to consider a relevant comparison population that bears the characteristic we are seeking.”

9. Misrepresentative evidence:

“Failing to consider changes in factors, context or conditions when using past evidence to predict likely future outcomes. Includes not searching for explanations to why past outcome happened, what is required to make past record continue, and what forces can change it.”
“Overestimating evidence from a single case or small or unrepresentative samples.”
“Underestimating the influence of chance in performance (success and failure).”
“Only seeing positive outcomes – paying little or no attention to negative outcomes and prior probabilities.”
“Failing to consider variability of outcomes and their frequency.”
“Failing to consider regression – in any series of events where chance is involved unique outcomes tends to regress back to the average outcome.”

12 Guidelines for Better Thinking

“The purpose of this part is to explore tools that provide a foundation for rational thinking. Ideas that help us when achieving goals, explaining ‘why,’ preventing and reducing mistakes, solving problems, and evaluating statements.”

1. Models of reality:

“A model is an idea that helps us better understand how the world works. Models illustrate consequences and answer questions like ‘why’ and ‘how’.”
“A valuable model produces meaningful explanations and predictions of likely future consequences where the cost of being wrong is high.”
“Use knowledge and insights from many disciplines. Most problems need to be studied from a variety of perspectives.”
“The world is multidisciplinary. Physics doesn’t explain everything; neither does biology or economics. For example, in a business it is useful to know how scale changes behavior, how systems may break, how supply influences prices, and how incentives cause behavior.”
“Since no single discipline has all the answers, we need to understand and use the big ideas from all the important disciplines – mathematics, physics, chemistry, engineering, biology, psychology, and rank and use them in order of their reliability.”
“We need to consider many aspects of an issue and synthesize and integrate them. We need to understand how it all fits together to form a coherent whole. The term synthesis comes from classical Greek and means literally ‘to put together.'”
“Since the best way to learn something is by doing it, we must apply models routinely to different situations. Like any skill, this takes both practice and discipline.”
“Newton’s 1st law: An object in motion tends to continue in motion at a steady speed in a straight line, and an object at rest tends to stay at rest, unless the object is acted upon by an outside force.”
“Newton’s 2nd law: Force is the product of mass and acceleration. Acceleration is any change in speed and/or direction. It depends on the mass (measures an object power to resist change in its state of motion) of an object and the magnitude and direction of the force acting on it.”
“Newton’s 3rd law: Forces work in pairs. One object exerts a force on a second object, but the second object also exerts a force equal and opposite in direction to the force acting on it – the first object.”
“Gravity: Newton found out that there was a force that attracts two objects to each other. Two factors influence the degree of attraction. Mass and distance. The greater the mass of two objects or the closer the distance between them, the greater the attraction between them.”

2. Meaning:

“Words, definitions, propositions, statements, or goals don’t tell us anything. We need to understand what they mean. It is the same with knowledge. Knowledge is only valuable if it’s useful and something is only useful if we understand what it means.“
“All energy tends to spread, to become dispersed, if it is not hindered from doing so.”
“Our lives are based on energy dispersal. Each second, chemicals in our body (converted within us from the food we eat and oxygen we breathe) keep our hearts beating. Our lungs pump oxygen into us and carbon dioxide out. We are energy processing machines. We must keep spreading out energy so that we are warm and keep making chemicals so our hearts beat and muscles work and our lungs function.”
“Entropy measures how much energy is spread out in a process, or how widely spread out it becomes – at a specific temperature. Entropy is a misused word, often used to explain all kinds of ‘disorder.’ Disorder is certainly characteristic of many of our situations in life – failed relationships, social problems, messy desks, disorderly bedrooms, etc. However, entropy has no relevance to these things. Only to the scientific measure of physical energy flow from being concentrated to being spread out.”
“Since energy always flows from being concentrated to less concentrated; physical objects and chemical systems deteriorate, break or become destroyed. But these things don’t happen immediately or spontaneously. The repetition of time and energy must be considered. A small push (or activation energy) is needed to start a reaction.”

3. Simplification:

“Make problems easier to solve. Turn complicated problems into simpler ones. Eliminate everything except the essentials. Break down a problem into its components but look at the problem holistically.”
“Be problem-oriented. Not method-oriented. Use whatever works.”
“Make fewer and better decisions.“
“Dealing with what’s important forces us to prioritize. There are often just a few actions that produce most of what we are trying to achieve. There are only a few decisions of real importance.”
“More information doesn’t equal more knowledge or better decisions. And remember that today we not only have access to more information, but also misinformation.”
“Turn off the noise or what’s irrelevant and look at the big picture.”
“Deal with the situations in life by knowing what to avoid. Reducing mistakes by learning what areas, situations and people to avoid is often a better use of time than seeking out new ways of succeeding. Also, it is often simpler to prevent something than to solve it.”
“Always think with a purpose in mind. Ask: What do I want to achieve or avoid?”
“Before attacking a problem ask if it is worth solving or spending time on.”
“We are more likely to solve a specific problem or gain new insight if we leave the problem alone for awhile and let our subconscious mind work.”

4. Rules and filters:

“Filters help us prioritize and figure out what makes sense. When we know what we want, we need criteria to evaluate alternatives. Ask: What are the most critical (and knowable) factors that will cause what I want to achieve or avoid? Criteria must be based on evidence and be reasonably predictive, i.e., we must do better than chance by relying on them. Try to use as few criteria as necessary to make your judgment. Then rank them in order of their importance and use them as filters.”
“Elimination is a great conservator of effort. For example, place the burden of proof on statements that contradict basic scientific ideas. Eliminate situations that may cause great sorrow, what is not important or knowable, what can’t happen or be achieved, what can’t usefully be predicted or explained, what can’t be tested, what is already disproved, the easy decisions, the wrong assumptions, what we can’t do something about or problems where we don’t have any competence.”
“Doing something according to pre-established rules, filters and checklists often makes more sense than doing something out of pure emotion. But we can’t have too many rules, filters or items without thinking. We must always understand what we’re trying to accomplish.”

5. Goals:

“Meaningful goals need to be backed by reasons as a way of testing that we set the right goal.“
“Goals should be:
- Clearly defined
- Focused on results
- Realistic and logical
- Measurable
- Tailored to our individual needs
- Subject to change”

6. Alternatives:

“One filter that can be used to measure choices against each other is our own personal opportunity cost. Our time and money are limited. If we make a decision to do one thing we are deciding not to do some other available thing. Every minute we choose to spend on one thing is a minute unavailable to spend on other things. Every dollar we invest is a dollar unavailable for other available investments.”
“Choices have costs. Even understanding has an opportunity cost. If we understand one thing well we may understand other things better. The cost of using a limited resource like time, effort and money for a specific purpose, can be measured as the value or opportunity lost by not using it in its best available alternative use (assuming it achieves the same purpose).”
“All decisions are not equally important. Some decisions have a greater influence on our lives. A decision we make today that will influence our lives ten years from now is far more important than one that will influence us only today.”

7. Consequences:

“Consider secondary and long-term effects of an action.“
“Whenever we install a policy, take an action or evaluate statements, we must trace the consequences. When doing so, we must remember four key things:”
- “(1) Pay attention to the whole system. Direct and indirect effects,”
- “(2) Consequences have implications or more consequences, some which may be unwanted. We can’t estimate all possible consequences but there is at least one unwanted consequence we should look our for,”
- “(3) Consider the effects of feedback, time, scale, repetition, critical thresholds and limits,”
- “(4) Different alternatives have different consequences in terms of costs and benefits. Estimate the net effects over time and how desirable these are compared to what we want to achieve.”
“Judge an action by its net consequences over time considering the whole system. Follow up changes in individual variables by determining how the rest of the system will respond over time. Reducing risk in one area may increase it in another. Changes in one variable may change the entire system. One change may cause another change causing another, etc. This includes considering short and long-term consequences since there may be a long time between an action and its full effects.”

8. Quantification:

“Most aspects of our life depend on our ability to quantify and understand patterns and relationships, proportions, or magnitudes.”
“When we translate something into numbers we can make comparisons. How can we evaluate if a decision is intelligent or not if we can’t measure it against a relevant and important yardstick?”

9. Evidence:

“Evidence helps us prove what is likely to happen or likely to be true or false. Evidence comes from facts, observations, experiences, comparisons, and experiments.”
“Do what scientists do: Strive for objectivity. Scientists try to describe the world as it is, not as they want it to be. They seek to answer ‘why’ and ‘how’ questions and try to predict natural phenomena and processes by using methods of scientific integrity.”
“The scientific process involves the following steps (of course, trial and error, luck and intuition also matters – scientists use any methods that help them solve a problem):”
- “Problem or observation – We try to figure something out. We have a problem or we observe some phenomena and wonder what happens and why (what matters is what actually happens).”
- “Guess why – We try to find a possible solution or an explanation (a hypothesis of why or how something happens) that can be proved or disproved by testing it against experiment and observation. Maybe some rule or model can solve the problem or explain our observation. Our guess must be measurable and agree with nature and proven evidence.”
- “Predict consequences – We work out all logical consequences of our guess and see what would be implied if our guess was right.”
- “Test – ‘If I do this, what will happen?’ Testability is key. We compare the implied consequences of our guess with experiment, evidence and observation. We repeat the experiment against error, fraud, coincidence, and change in circumstances or environment. We report our results honestly. The more evidence that agrees with our guess, the more likely the guess was right. If the guess disagrees with experiment or evidence, it is wrong.”
Occam’s Razor: “‘Entities should not be multiplied unnecessarily.’ If we face two possible explanations which make the same predictions, the one based on the least number of unproven assumptions is preferable, until more evidence comes along. Occam doesn’t rule out other explanations. To paraphrase Albert Einstein: ‘Theories should be as simple as possible, but no simpler.'”

10. Backward thinking:

“Whenever we try to achieve a goal, solve problems, predict what is likely to happen or likely to be true or false, we should think things through backwards.”
“Avoid what causes the opposite of what you want to achieve.“
“Thinking backwards, we can determine what actions must be avoided.”
“Instead of asking how we can achieve a goal, we ask the opposite question: What don’t I want to achieve (non-goal)? What causes the non-goal? How can I avoid that? What do I now want to achieve? How can I do that?”
“‘The successes of the wise.’ To reduce mistakes, we should study failures with severe consequences. Both in business and in life. We should look at their causes over time and see if they are unchanged.”
“Other uses of backward thinking are: Study evidence that implies the opposite of what is normal and ask ‘why.’ Use ‘negative’ rules – tell people what they can’t do. Practice zero base thinking – start with a clean sheet of paper and ask: If we weren’t already doing what we do, how can we best achieve our goal?”

11. Risk:

“To protect us from all the unknowns that lie ahead we can either avoid certain situations, make decisions that work out for a wide range of outcomes, have backups or a huge margin of safety.”
“For example, when investing money the following can guide us: know the underlying business value, don’t use leverage, enter situations where the management is able and honest, and invest with a huge margin of safety.”

12. Attitudes:

“Part of avoiding misjudgments and improving our lives is having the right attitude toward life.”
“Since people are different, there is no one-size-fits-all strategy. We each must figure out our own style. But there are guidelines that apply to us all.”
“We should act in a way that agrees with our nature, advantages and limitations and we should establish (and follow) some values.”

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