Daniel Crosby summarized four underlying cognitive biases in the second part of "Behavioral Investors", and proposed ways to resolve these four underlying cognitive biases in Chapter 3.
Today we will learn about the first one.
Cognitive bias 1: Self-awareness-overconfidence-
Self-awareness--inclines to overconfidence, maintaining the feeling of personal ability in behavior rather than a clear mind decision-making .
There are generally three things in our minds: facts, opinions and beliefs.
Facts are reality, and there is no need to argue. The only difference is how much detail we have in our grasp of facts;
belief is the implantation of the group value system in the mind, and refuses to discuss;
and the opinions are our own, and we are used to defending "my opinions".
When we form a point of view, whether right or wrong, is difficult to be eradicated from our brains.
Because we like to actively seek evidence to support our own opinions (confirm bias), we like to find "like-minded" people to strengthen their beliefs (choose support bias) and respond fiercely to attacks on our own opinions (counter-fire correspondence).
The advantage is that we will appear brave and feel good about ourselves when maintaining our own perspective. The disadvantage is that we cannot make decisions clearly (inner)
carefully read our views. There are three types of error manifestations :
① Over-precision: Our views or expectations are too detailed, and this false precision will interfere with our decision-making;
② Over-positioning: Overestimate one's own ability, appear confident, and can increase people's determination, ambition, perseverance and competitiveness in competing for scarce resources;
③ Over-estimation: We always overestimate the probability of positive events, overestimate our control over things, and underestimate the possibility of negative things happening.
Tool to defeat yourself
Because we have problems of over-precision, over-positioning, and over-estimation, our decision-making risks are increasing.
For example, when investing, we are always used to buying an investment target with all our might, and tell ourselves to take a look at it in one go.
Analysis of this mentality is not fearless against risks. The root cause is that I have a high opinion of myself and think that I have found an opportunity to make a fortune this time. So devote yourself to it.
I have read nearly 10 investment books, and all the authors are saying that the future is unknowable and unpredictable, and the future is full of various uncertainties. There is no so-called luck that will pay special attention to you.
How to defeat yourself
1. Develop three habits
1. Try to love the problem itself
Dear sir, I want to do my best to ask you to be patient with all the unsolved problems in your heart, and try to love these problems themselves, just like loving those locked rooms and those books written in foreign languages. Don't seek answers now, because you can't live in these answers, so you can't give you these answers. The key is to live out everything. Face these problems themselves now. Maybe you will slowly, unknowingly, get the answer when you live on a distant day. ——Lene Maria Rilke
2. Don’t worry, take your time
Current damage may bring long-term benefits in the future. Therefore, do not easily accept any view or make assertions about any belief before finding a reasonable reason.
3. Know when to be confident
We should be cautious when evaluating and formulating a suggestion and be confident in its final delivery.
2. Learn four ways
1. Maintain diversity
In investment, research shows that increasing the portfolio to 20 target portfolios has a greater risk-return ratio;
In fitness, do not adopt a single exercise method too much, which can reduce the possibility of injury and increase the duration of persistence;
In work, you cannot only let yourself be responsible for single work content. You must learn to improve the underlying abilities, such as writing, communication, public expression, etc., and actively ask to take on different positions and improve your adaptability.
In reading, for example, this book "Behavioral Investor" was written into such a book by absorbing knowledge from psychology, behavioral , economics, etc. Therefore, our reading range cannot be single, such as history, finance, probability, etc.
When making friends, you cannot communicate with people who are similar to you and have the same views as you. You must be used to listening to different opinions and interacting with people in different fields.
We must control ourselves not to judge our own and others’ opinions, learn to be able to accommodate different opinions in our minds and live a normal life.
2. Learn about teaching
In the teaching process, we can understand our own views more accurately.
Steps: ① Try to find something you don’t understand; ② Try to teach yourself; ③ Teach it to your children or newbies.
Step-by-step teaching or writing can be taken. The important thing is to be clearly expressed so that ordinary people can understand.
3. Observe from an external perspective
When observing from an external perspective, we can avoid being influenced by prejudice, experience, perception, and preconceived data.
In Think Twice, Michael Mobson introduced four steps to look at problems from the outside:
① Choose a reference category-Compare your questions with other similar questions.
②Distribution of evaluation results—check success rate and failure rate.
③Evaluation probability—based on external evidence, timeline estimates, failure rate and success barriers.
④Adjust your predictions- let the bumpy road and the ever-changing environment adjust and change your predictions accordingly.
4. Dialectics
I saw two self-dialogue analogies in an article by Wu Bofan to explain dialectics. He believes that dialectics can be transformed into cognitive increments:
Self-one is the "speaker", self-two is the "listener";
Self-two is the "speaker" speaks, and after hearing it, the self-two "listener" will think quietly Put forward your own point of view, and then, in the face of the views put forward by the "listener", the "speaker" will also make appropriate reactions; the process of
is like playing chess: when you start playing chess on the chessboard, the process unfolds, and finally achieves an unexpected and thoughtful result; whether it is "self-expression" or "dialogue", it is a process of turning the "speaker" into the "listener" and turning the "listener" into the "speaker"; after the speaker hears a passage, he plays a chess and finally draws a fresh conclusion higher than the cognitive stock.
For example, after writing an article, we will modify it. As many writers have said, "Article is modified" - the process of revision is a process of dialogue between oneself and oneself; only after writing an article can you see the defects in it, and only when you see the defects in it can you modify it - the process of repeated revision is also an iterative process, which is also a dialectical process.
If you think it is long-winded, just remember these key points
1. We are always used to being overconfidence and self-esteem;
2. Remember that following the rules is better than personal intelligence;
3. It should be made based on long-term evaluation of interest rates. Assumptions, not based on the so-called story in front of you;
4. Learn to record, including fitness logs, investment decision logs, reflection logs, and record the thinking process, and don’t be deceived by yourself;
5. True reverse thinking is painful, and those decisions that cannot make you uncomfortable and painful will not work very well.
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