Sunday, October 09, 2005

*** Paradox of Choice by Barry Schwartz

Paradox of Choice by Barry Schwartz

There are important lessons to be learned from research, some them not so obvious, and others even counterintuitive…

  1. We would be better off if we embraced certain voluntary constraints on our freedom, instead of rebelling against them.

  2. We would be better off seeking what was ‘good enough’ instead of seeking the best.

  3. We would be better off if we lowered our expectations about the results of decisions.

  4. We would be better off if the decisions we made were nonreversible

  5. We would be better off if we paid less attention to what others around us were doing. P5

A typical supermarket carries more than 30,000 items… and 20,000 new products hit the shelves every year, almost all of them doomed to failure… Supermarkets are unusual repositories for nondurable goods… so buying the wrong brand of cookies doesn’t have significant emotional or financial consequences. But in most other settings, people are out to buy things that cost more money, and as the number of options increases, the psychological stakes rise accordingly. P12

If we’re rational, added options can only make us better off as a society. Those of us who care will benefit, and those of us who don’t care can always ignore the added options. This view seems logically compelling; but empirically it isnt’ true. [Proof that humans are not economically rational.]

When given a free tasting of jam [at the San Mateo Draegers of all places], those given a choice of only 6 flavors ended up choosing to purchase a jam much more often than those who were given a choice of 24 flavors. 30% of people of exposed to the small array of jams actually bought a jar; only 3% of those exposed to the large array of jams did so. P20

Students were asked to evaluate a variety of gourment chocolates, and asked which they would choose for themselves. After the tasting they were offered a box of their favorite chocolates in lieu of cash. Those who only tasted among 6 different chocolates were 400% more likely to choose the chocolates compared to those students who chose among 30 different chocolates. P20

Why can’t people ignore some of the options and treat a 30 option array as if it were a 6 option array? We have a tendency to look around at what others are doing and use them as a standard of comparison. We also suffer from the ‘tyranny of small decisions’; it seems easy to add just one more item to the array. Most important is that people won’t ignore alternatives  if they don’t realize that too many alternatives can create a problem. P21

Ask yourself what is the point of advertising prescription drugs? We can’t just go to the drugstore and buy them. The doctor must prescribe them. Clearly the drug companies hope and expect that we will notice their products and demand that our doctors write the prescriptions. The doctors are now merely instruments for the execution of our decisions. P33

The average 32 year old American has already worked for 9 different companies. P35

People who do their grocery shopping once a week succumb to the same erroneous prediction. Instead of buying several packages of their favorite X or Y, they buy a variety of Xs and Ys, failing to predict accurately that when the times comes to eat X or Y, they would almost certainly prefer their favorite. When people are asked to go shopping one day at time to purchase 1 item in each category, they tend to buy the same thing over and over again [their favorite]. When asked to buy 3 or more days worth of food, they made more varied selections, predicting inaccurately that they would want something different on day 2 from what they had eaten on day one. P52

We probably like to think that we are too smart to be seduced by branding, but we aren’t… Studies have demonstrated that familiarity breeds liking. If you play snippets of music for people or show them slides of paintings and vary the number of times they hear or see the music and the art, people will rate the familiar things more positively than the unfamiliar ones… Nonetheless, when products are essentially equivalent, people go with what’s familiar, even if it is only familiar from advertising. P54

Unfortunately, people give substantial weight to anecdotal evidence, perhaps so much so that it will cancel out positive recommendations based upon 1000s of cases that are communicated by a trusted source as Consumer Reports. Most of us give weight to these kinds of stories, because they are extremely vivid and based upon on a personal, detailed face to face account. P57

When college students who are deciding what courses to take next semester are presented with summaries of course evals from several 100 students that point in one direction, and a videotaped interview with a single student that points in the other direction, they are more influenced by the vivid interview than by the summary judgements of hundreds. P58

One high end catalog seller of mostly kitchen equipment offered a bread maker for $279. Some time later, the catalog began to offer a larger capacity, deluxe version for $429. They didn’t sell too many of these expensive bread makers, but sales of the less expensive one almost doubled! With expensive bread maker serving as an anchor, the $279 machine had become a bargain. P62

The effects of framing:You’re a doctor working in an asian village with 600 sick people. Treatment A will save exactly 200 people. Treatment B has a 1/3 chance of saving all 600, but 2/3 chance that all will die. Which do you chose A or B? The vast majority choose A. They prefer saving definite number. Now consider the following. Same scenario, but if you choose Treatment C – 400 people will die. If you choose Treatment D, there is a 1/3 that no one will die, and a 2/3 chance that everyone will die. Which treatment will you choose now? Now the overwhelming majority choose treatment D. They would rather risk losing everyone than settle for the death of 400. p65

Think about this question: Would you rather have a sure $100 or have me flip a coin and give you $200 if it comes up heads, and nothing if it comes up tails? Most people go for the sure $100… Why? You won’t feel twice as good with $200 in your pocket instead of $100, but you’ll feel much, much better with $100 in your pocket instead of $0. To make the gamble psychologically worthwhile to you, I’d have to offer you something like $240…Now suppose I ask you this: Would you rather lose $100 for sure, or have me flip a coin and if head you lose $200, and tails you lose nothing? Now you are willing to take the risk. Losing the first $100 hurts worse than losing the second $100. So although losing $200 may be twice as bad objectively, it is not twice as bad subjectively. What that means is taking risk to perhaps avoid losing anything is a pretty good deal. People embrace risk in the domain of potential losses. P70

If you’re a satisficer, the number of avialable options need not have a significant impact on your decision making. When you examine an object and it’s good enough to meet your standards, you look no further; thus, the countless other available choices become irrelevant. But if you’re a maximizer, every option has the potential to snare you into endless tangles of anxiety, regret and 2nd guessing. P85

People with high maximization scores experienced less satifaction with life, were less happy, were less optimistic, and were more depressed than people with low maximization scores… What these studies show is that being a maximizer is correlated with being unhappy. They don’t show that being a maximizer causes unhappiness… Nonetheless, I believe that being a maximizer does play a causal role in people’s unhappiness, and I believe that learning how to satisfice is an important step not only in coping with a world of choice but in simply enjoying life. P86

A real maximizer would figure in the costs in time and money and stress of gathering and assessing information. An exhaustive search of the possibilities, which entails enormous information costs is not the way to maximize one’s investment. The true maximizer would determine just how much information seeking was the amount needed to lead to a very good decision. The maximizer would figure out when the information seeking had reached the point of diminishing returns. And at that point, the maximizer would stop the search and choose the best option. P89

The more affluent a society becomes, and the more basic material needs are met, the more people care about goods that are inherently scarce. And if you’re in competition for inherently scarce goods, good enough is never good enough; only the best will do. P95

Those who value freedom of choice and movement will tend to stay away from entangling relationships; those who value stability and loyalty will seek them. P112

According to std economic assumptions, the only opportunity costs that should figure into a decision are the ones associated with the next best alternative… Don’t waste your energy feeling bad about having passed up an option further down the list [than the next best alternative]. P121

Being forced to confront trade offs in making decisions makes people unhappy and indecisive [remember the jam and chocolate examples?] p125

For most of human history, people were not really faced with an array of choices and opportunity costs. Instead people asked themselves ‘Should I take this or leave it?’. In a world of scarcity, opportunities don’t present themselves in bunches, and the decisions people face are between approach and avoidance. But distinguishing between good and bad is far simpler matter than distinguishing from good, better, best. After millions of years of survival based upon on simple distinctions, it may simply be that we are biologically unprepared for the number of choices we face in the moder world. P143

When asked about what the regret most in the last 6 months, people tend to identify actions that didn’t meet expectations. But when asked what they regret most when the look back on their lives as a whole, people tend to identify failures to act. P149

When they examine the actual content of counterfactual thinking [why you think of what might have been instead of what actually happened], researchers find that individuals tend to focus on aspects of a situation that are under their control. When asked to imagine an auto accident that involves someone who is speeding while driving on a rainy day with poor visibility, respondents are much more likely to undo the accident by having the driver be  more cautious than by having the day be clear. P153

There is an important lesson to be taken from this research on counterfactual thinking, and it’s not that we should stop doing it; counterfactual thinking is a powerful intellectual tool. The lesson is that we should try to do more downward counterfactual thinking. While upward counterfactual [imagined states that are better than what happened] thinking may inspire us to do better the next time, downward counterfactual [imagined states that are worse than what happened] thinking may induce us to be grateful for how well we did this time. The right balance of upward and downward may enable us to avoid spiraling into a state of misery while at the same time inspiring us to improve our performance. P154

The 2 factors affecting regret are:
1. Personal responsibility for the result
2. How easily an individual can imagine a counterfactual better alternative p162
The availability of choice exacerbates both of these factors. When there are no options, what can you do? Disappointment maybe, regret no. When you have only a few options, you do the best you can, but the world may simply not allow you to do as well as you would like. When there are many options, the chance increase that there is a really good one out there, and you feel that you ought to be able to find it. When the option you actually settle on proves disappointing, you regret not having chosen more wisely. And as the number of options continues to proliferate, making an exhaustive investigation of the possibilities impossible, concern that there may be a better option out there may induce you to anticipate the regret you will feel later on, when the option is discovered, and thus prevent you from making a decision at all [analysis paralysis indeed!]p163

It should also be clear that the problem of regret will loom larger for maximizers than for satisficers. No matter how good something is, if a maximizer discovers something better, he’ll regret having failed to choose it. Perfection is the only weapon against regret, and endless, paralyzing consideration of the alternatives is the only way to achieve perfection. For a satisficer, the stakes are lower. The possibility of regret doesn’t loom as large, and perfection is unnecessary. P164

Some people simply give up the chase and stop valuing pleasure derived from things. Most are driven instead to pursue novelty, to seek out new commodities and experiences whose pleasure potential has not been dissipated by repeated exposure. In time, these new commodities also will lose their intensity, but people still get caught up in the chase, a process labeled the hedonic treadmill. No matter how fast you run on this machine, you still don’t get anywhere. And because of adaptation, no matter how good your choices and how pleasurable your results, you still end up back where you started in terms of subjective experience. P172

In a study of midwestern college students, they judged that students in California were happier with the climate and more satisfied with life as a whole than Midwesterners. They were right about the first point, but not about the second… Just because its sunny and warm in California doesn’t mean that students who live in California don’t have problems… It may be marginally more pleasant to be stressed and hassled on a warm sunny day than on a freezing, snowy one, but not enough to make much of a difference in your outlook on life. P174

If the decision provides substantial satifaction for a long time after it is made, the costs of making it recede into insignificance. But if the decision provides satisfaction for only a short time, those costs loom large. [Beware of adaptation] If you really enjoy the stereo for 15 years, then the 4 months of deciding what to buy isn’t so bad. But if you end up being excited for only 6 months, you may feel like a fool. P177

Individuals who regularly experience and express gratitude are physically healthier, more optimistic about the future, and feel better about their lives than those who do not. They are more alert, enthusiastic, and energetic than those who do not, and they are more likely to achieve personal goals. And unlike adaptation, the experience of gratitude is something we can affect directly. P181

We probably can do more to affect the quality of our lives by controlling oru expectations that we can by doing virtually anything else… Modest expectations leave room for pleasant surprises. The challenge is to find a way to keep expectations modest. One way of achieving this goal is by keeping  wonderful experiences rare. P187

In a study people were asked to solve a puzzle alongside another individual (who was a confederate of the experimenter). Happy people were only minimally affected by whether the person working next to them was better or worse at the task than they were… Their assessment of their own ability and their mood was slightly higher if they had been working with slower peer, but even with a faster peer, their assessment still went up. In contrast, unhappy people showed increases in assessed ability and feelings after working beside a slower peer, and decreases if they’d been working beside a faster peer… It seemed as though the only thing that mattered to the unhappy person was how they did in comparison to their partner. Better to be told you are pretty bad but that others are worse, than to be told you’re pretty good, but others are better. P195 [How do you feel when doing a similar task as others when you’re faster, and when you’re slower?]

The significance of control to well-being was dramatically demonstrated by a study of elders at a nursing home. One group was given instructions on the importance of being able to take personal responsibility for themselves, and a 2nd group was given instruction about important it was for the staff to take good care of them. The first group was also given several mundane choices to make each day and a plant to take care of in their rooms. The 2nd group didn’t get these things…. The residents with control reported a greater sense of well being, were more active and alert, and lived several years longer on average. P205

People do differ in the types of predispositions they display. Optimists explain successes with chronic [repetitive over time], global [pattern repeats over many circumstances], and personal [self is the primary actor], and failures with transient [low frequency and short lived], specific [special circumstance], universal [external actors] ones. Pessimists do the reverse. Optimists say ‘I got an A’, and ‘She gave me a C’. Pessimists say ‘I got a C’, and ‘He gave me an A.’. p208 [So what are you using this quick test?]

Paradoxically, those nations whose citizens value personal freedom and control the most tend to have the highest suicide rates. These same values allow certain individuals within these cultures to thrive and prosper to an extraordinary degree. The problem is that on the national level, these same values have a pervasive toxic effect. P215 [Home of the free, and land of the depressed]

What can we do?

  • Choose when to choose

  • Review recent decisions you’ve made, both small and large.

  • Itemize steps, time, research and anxiety that went into making those decisions.

  • Remind yourself how it felt to do that work

  • Ask yourself how much your final decision benefited from that work

  • Be a chooser, not a picker

  • Shorten or eliminate deliberations about decisions that are unimportant

  • Ask yourself what you really want in the areas of your life where decisions matter

  • If the world of options doesn’t meet your needs, start thinking about creating better options that do

  • Satisfice more, and maximize less

  • Think about occasions when you settle for good enough

  • Scrutinize how you choose in those areas

  • They apply that strategy more broadly

  • Limit thinking about opportunity costs

  • Unless you’re truly dissatisfied, stick with what you always buy

  • Don’t be tempted by ‘new and improved’

  • Don’t scratch unless there’s an itch

  • Don’t worry if you do this, that you’ll miss out on all the new things the world has to offer

  • You’ll encounter new things anyways because your friends, family and coworkers will tell you about them; but they’ll be those that are time and people tested by others. So they’re more apt to be truly better.

  • Make your decisions non-reversible

  • The very option of being allowed to change our minds seems to increase the chance that we will change our minds. And when we can change our mind about decisions, we are less satisfied with them.

  • With final decisions, we engage in variety of psychological processes that enhance our feelings abou the choice we made relative to the alternatives. If a decision is reversible, we don’t engage these processes.

  • Practice an ‘attitude for gratitude’

  • Keep a notepad by your bedside

  • Every morning or every night, list 5 things that happened that day that you’re grateful for.

  • Regret Less

  • Adopt the standards of a satisficer [what’s good enough for you]

  • Reduce the number of options before making a decision

  • Practice gratitude for what is a good decision rather than focusing on our disappointments with what is bad.

  • Anticipate Adaptation

  • Acknowledge that the thrill of a new purchase or acquisition won’t be quite the same 3 months after you own it.

  • Spend less time looking for the perfect thing to lower your search costs

  • Remind yourself how good things actually are, instead of focusing on how they’re less good than they were at first.

  • Control Expectations

  • Reduce the number of options you consider

  • Be a satisficer rather than a maximizer

  • Allow for serendipity

  • Curtail Social Comparison

  • He who dies w/the most toys is a just a bumper sticker, not wisdom

  • Focus on what makes you happy, and what gives you meaning

  • Learn to love contraints

  • Set and follow rules eg. Always were your seatbelt, brush your teeth before bed, don’t drink and drive, etc.

  • Think only about choices and decisions to which rules don’t apply. This is where you should spend your time and energy.

Saturday, October 08, 2005

** Some Like it Hot by Gary Nabhan

Some Like it Hot by Gary Nabhan

We are what our ancestors ate, and also what they had to regurgitate, for there are as many poisonous plants, fungi, fish, and shellfish surrounding us as there are edible. P4

The weaning of most breast fed children in the world may be precipitated by a gradual decline in the activity of lactase. P18

Around 10,000 years ago, a mutation occurred in the DNA of an isolated population of northern Europeans that allowed them to tolerate milk as a nutrient rich resource… Certain ethnic populations that carried this gene in low frequencies – and then subsequently adopted a pastoral lifestyle and cultured milk consumption – found that their lactase activity gradually extended into adulthood… This small percentage of lactose tolerant individuals was rapidly favored so that within just 15 generations the frequency of lactose tolerance increased dramatically. P19

The evidence suggests that people took up a pastoral way of life first, and developed milk digesting ability later in response to it… Human beings created their own evolutionary pressures (Matt Ridely, Genome 2000) p21

Agrarian populations may have reduced their exposure to dysentery by drinking fermented beverages made from grains, grapes, or potatoes, instead of drinking untreated water. Nomadic people had until recently little exposure to livestock fouled drinking water and hence little hygienic incentive to produce fermented beverages… (Ridely, Genome) p29

Key components of the ancestral diet p40
  1. Our hunter gatherer ancestors may have gained as much as 65% of their calories from vertebrate animals, while seldom eating eggs, and never consuming milk products.

  2. They consumed raw forms of fruits, flowers, leaves, and bulbs.

  3. They rarely ate cereals, certainly not fine ground, fiber depleted grains and seeds.

  4. Neither did they consume quantities of sodium.

  5. They did not consume fermented carbohydrates either as alcohol or vinegar

The very foods that our hominid ancestors ate millions of years ago are still what our metabolisms are best suited to consume… We ignore at our peril, the fact that human biology is designed for Stone Age conditions. P37

Archaeologists seem less certain that there is a single discernible dietary pattern evident among excavated sites. Some scholars have begun to doubt whether Java man ever kept to a uniform diet; some even wonder if ancestral diets contained more or less the same proportion of fats, proteins, sugars, and fiber. P50

Paleonutritionists insist that if you averaged it out over 100,000s of years, the animal to plant ratio of energy intake would be 2/3 meat to 1/3 veggies. [However Loren Cordain, author of Paleo Diet – coming soon to this blog – states] ‘our data clearly indicate that there was no single diet that represented all hunter-gatherer societies.’ P55

It is probable that there was far more genetic differentiation between the populations of our ancestors than there is today. If genetic studies of chimpanzee populations are any indication, there was also greater variability within each breeding population. The chimps within one breeding population on a hillside in Africa express twice as much variability in their mitochondrial DNA than do all of the 6 billion humans currently living around the Earth. P60

If you eat too many fava beans, your GSH levels plummet just as they do when you are given an antimalarial drug. The diminished GSH levels interfere with the growth and replication of malarial parasites, thereby offering any fava bean eater temporary resistance to this infectious disease, but the resistance is clearly enhanced in carriers of a G6PD deficiency allele [which is common in Mediterranean populations. Sardinia having the highest concentration known]. P87

Could the secret of the touted ‘Mediterranean diet’ discovered on Crete be partly due to caloric restriction? There is something deeply cultural about the way Cretans eat – and about what they don’t eat… 60 of 120 that were tracked [50%] strictly observe religious fasts that occur over 180 days each year… Most forego meat, dairy and eggs, while others forego olive oil as well. Snails, calamari, and other invertebrates are acceptable. There are days when one must eat or not eat fish. What are the effects on the health of the fasters? It’s significant – about a 12% reduction in their serum lipoproteins – the amount of fat in their blood. P106

Neither birds, reptiles, nor amphibians have much capacity to chemically sense capsaicin as a source of ‘heat’. Only mammals have the innate ‘sense’ to avoid chiles, and this sensitivity appears to have developed rather recently in their evolution. [How did it happen? Chile seeds to be deposited under trees for shade under the desert sun. Mammals, namely mice and other rodents, are not reliable at dispersing chile seeds accordingly. Worse, they masticate the seeds on many occasions. Birds however, perch on tree branches, and defecate often while perching, allowing the seeds to fall to the base of the tree, where it can germinate and be shaded. How to entice the birds? Birds need carotene in red and orange for their bright plumage? How to discourage the mammals? Capsaicin.]

Why do humans eat capsaicin? Areas closer to the equator would suffer higher ambient temperatures and more rapid meat spoilage… Antimicrobial defenses against meat spoilage were the driving forces behind eating spices, the same ethnic cuisine would contain more spicy meat dishes than vegetable dishes. In addition, the percentage of meat dishes containing spices would increase the nearer the culture lived to the equator. P134

The farther north you live, the tougher it is to get [your] greens – the Inuit must obtain them from the lichen ‘stomach salads’ removed from Caribou intestines [yummy]. P159

Hunter gatherers were likely to exhibit a thrifty genotype that was a vestigial survival mechanism from eras during which they suffered from irregular food availability. ‘During the first 99% or more of man’s life on earth while he existed as a hunter-gatherer, it was often feast or famine. Periods of gorging, alternated with periods of greatly reduced food intake.’ James Neel, 1962 p176

However, this ‘thrifty genotype’ hypothesis has been challenged. Jennie Brand Miller hammered the coffin closed on the ‘thrifty genotype’ hypothesis by refuting its very underpinnings – that famines were more frequent among hunter-gatherers than among agriculturists, leading to the former’s extraordinary capacity to accumulate fat reserves. She found scant evidence that hunter-gatherers suffered from these stresses anywhere near as frequently as the agriculturists did. In fact, periodic starvation and widespread famines increased in frequency less than 10,000 years ago, after various ethnic groups became fully dependent on agricultural yields. Caucasians have repeatedly suffered from famines in historic times, they ought to be predisposed to insulin resistance and diabetes in the ‘thrifty genotype’ is correct. And yet, Caucasians are one of the few groups that do not exhibit much insulin resistance when they consume modern agricultural diet. P178

Why would Caucasians not be predisposed to insulin resistance? 1st, when an ethnic population shifts to an agricultural diet and abandons a diverse cornucopia of wild foods, its members lose many secondary plant compounds that formerly protected them from impaired glucose tolerance. 2nd, when remaining beneficial compounds in traditional crops and livestock are selected out of a people’s diet through breeding, their diet is further depleted of protective factors. [Livestock raised on cereal grains lack omega 3, while their wild counterparts have this fatty acid.] 3rd, the industrial revolution changed the quality of carbohydrates by milling away most of the fiber. 4th, the last 50 years has introduced additives such as trans fat, syrups, fiber depleted starches, which raises blood sugar 3 times higher than humans ever experienced during pre-agricultural periods in our evolution. Although nearly all ethnic populations have come to suffer from foods over the past 25 years, the other changes took place in European societies over 1000s of years. The genetic constituency of European peoples may have slowly shifted with these technological and agricultural changes as they emerged. P180

Tuesday, October 04, 2005

(***) Happiness: The science behind your smile by Daniel Nettle

Happiness: The science behind your smile by Daniel Nettle

The ways people become afraid today reflect the design features of the fear program [created by evolution]. People today are more afraid of Mad Cow disease and spiders than they are of electrical sockets and cars which statistically is totally senseless. We are much more likely to be killed in an auto accident while driving during in the course of 1 month than we are from eating infected beef in our entire lifetime. But there were food transmitted epidemics in Paleolithic Africa, and no lunatics in Range Rovers. P14

Levels of Happiness:
Level 1 - Momentary feelings: Joy, pleasure – physical
Level 2 – Judgement about feelings: well being, satisfaction
Level 3 – Quality of life: flourishing, fulfilling potential

What’s level 2 happiness? If I usually cut myself shaving twice a day, then I could be happy to have cut myself just once today. However, it is unlikely that I took pleasure [level 1] from the cut. The happiness stems from the subsequent processes that compared the pain I went through with the pain I expected. P19

Joy gradually ebbs away, even if the bringer of that joy is still present. The joy program is there to divert other concerns in order to allow us to concentrate on something good, then it would be pretty dysfunctional if it didn’t have a built in shut-down mechanism after a while. Sooner or later we get hungry or tired or need to avoid a predator, so well designed joy should gradually move into the background and allow other programs to capture attention. P32

In 1 study, experimenters contrived to allow participants to find a dime on the copy machine just before they were asked questions about life satisfaction [level 3]. Participants who had just found a dime reported significantly higher satisfaction with their entire lives! That has to be cheapest and most effective public policy measure imaginable. P34

People will use their current mood unless there is evidence that this is not a good cue to how satisfied they are. People [surveyed about] life satisfaction on sunny or rainy days show this clearly. As predicted, on sunny days people reported higher satisfaction, unless the experimenter drew attention to the weather… Once the weather had been mentioned, people realized that it was a plausible reason for their current mood. P35

Those considering negative recent events reported lower satisfaction than those considering positive recent events. But those considering negative distant events reported themselves as happier than those considering positive distant events. The interpretation of this result is all to do with frame of reference. Those considering recent events included them in their summary of how life was going… Those considering past events used them as a comparison with how their life was now. P37

Olympic bronze medallists report higher satisfaction than silver medallists. For them, the natural comparison is with not getting a medal at all… For the silver winners, the natural comparison is the gold, which they missed out on. P38

A majority of people, when asked, would prefer to earn $50,000 in a world where others earned $25,000, than $100,000 in a world where others earned $250,000. p38

One side effect of adaptation is the so called endowment effect, where we think it would be really hard to get along without something we now have, forgetting that we got along quite fine without it for years. The endowment effect is really easy to elicit. Participants were given a choice between a mug and a sum of money. The sum was about $3.50 on average. Alternatively, participants were given a mug for keeps. They were then asked how much money they would accept to give up the mug. Now they said they would need on average $7.12… The participants seemed to believe that the mug was improving their lives by over twice as much in the case where it was already theirs. P40

The purpose of the happiness program in the human mind is not to increase human happiness; it is to keep us striving. That is why it tells us so clearly that if we just had a $50,000 salary, we would be much happier that we are now on $35,000, but as soon as we achieve that goal, [it] whispers that perhaps it was actually closer to $60,000 that is really needed to guarantee lasting bliss. P43

Most people believe that they are better than average drivers, above average on personality traits, and more likely than average to achieve future life goals. Obviously they cannot all be right! Part of these self-enhancement effects may be due impression management… The truth is that we go through the world in a considerable state of uncertainty. For example, it is really hard to get any kind of decent estimate of what the odds are of achieving some major life goal like a happy marriage or a place on the board. Given that we don’t know what the odds are, we need to base our behavior on a guess. A low guess leads to passivity, for why try if the odds are unfavorable? A high guess would lead to striving, and even though that striving might often lead to failure, sometimes it would lead to success. Since we don’t know what the outcome of life will be, it might be better to behave as if we can get what we want if we try hard enough. P54

No organism should ever be completely satisfied for anything more than a short time, because there might always be some better way of doing things just around the corner… Thus, whatever the circumstances, there should be a small, nagging gap between our present contentment and a conceivably possible super contentment. Into this gap swarm peddlers of nostalgia, drugs, spiritual systems, and all kinds of consumer goods. P58

The happiness system has not only to identify better looking alternatives. It has to make us pursue them. Thus it is in its nature to identify things that look like they are associated with status, ease, sex, beauty and other trappings of biological fitness, and tell us that if we only had those circumstances, we would be much happier… The strength of this wanting means that we are quite ready to believe that happiness would be complete if only some set of conditions or other were fulfilled. P62

What matters above all is what one has relative to what everyone else has got… Numerous studies have shown strong effects of relative rather than absolute wealth on satisfaction. P73

One of the clearest demonstrations of the hedonic treadmill is based upon participants in an ongoing social survey of a cross section of the American population who were asked to go down a list of the major consumer goods that people must invest their money in (house, car, TV, travel, pool, 2nd home, etc.). The 1st time they were asked to tick off which of those goods formed part of their ideal life. They were then asked to go down the list again and tick off which of the items they actually had already. The survey was repeated again 16 years later… Over the 16 years, people went from having 1.7 to having 3.1 items, and meanwhile the good life went from consisting of 4.4 items to consisting of 5.6 items. They were still over 2.5 items short of where they wanted to be, just as they had been at the beginning. P77

Although people with acquired disabilities or health problems show very considerable adaptation, the adaptation is often not quite complete, leaving a shadow in their happiness judgments… Another domain where complete adaptation is elusive is exposure to noise. Residents were interviewed 4 months after a new road opened in their neighborhood. They were irritated by the noise, but most felt that they would adapt. 1 year later, they were just as irritated, and become more pessimistic about the possibility of adapting. There is little evidence that people ever do. This is an interesting case because in general people underestimate their own capacity to adapt. P83

One might think that breast surgery could lead to a kind of mammamorphic treadmill, with women who have had alterations immediately as dissatisfied with their bodies as they had been before. [However,] there is some evidence that the improvement in well being is real and lasting. Several studies report increased body and life satisfaction, and decreased psychiatric problems. P84

For non-positional goods, the happiness we derive from them is not predicated on a comparison with what anyone else has. Health and freedom are non-positional goods in this sense. Positional goods have a different psychology. We are satisfied with our income or car in comparison with the incomes and cars we see around us… [Why?] We have evolved in environments where there were numerous possible ways of making one’s living, and our reproductive success would have been dependent not on absolute health, but on relative status. Since it was impossible to know inherently what the optimal behavior in local conditions would be, we evolved a psychology of looking at those around us who seemed to be doing best, and trying to do even better than them. P86

Our implicit theory of happiness will always try to fool us into thinking that amassing more positional goods – keeping up and beating the Joneses – will make us happier in the long run, but objectively this will not happen. On the other hand, health, autonomy, social embededness, and the quality of the environment are real sources of happiness. P87

The best predictor of how happy people are at the end of [a longterm] study is how happy they were at the beginning. It is as if happiness or unhappiness stem in large part from how we address what happens in the world, not what actually happens. Further evidence for this view comes from the fact that people who are happy in their jobs are also happy in their hobbies. If happiness depended mainly upon the objective situation, then you might think that people who found their jobs horrible would develop their hobbies and be especially happy in them, whilst people who loved their jobs would itch for Monday morning to get back to work. In fact, the more enjoyment people get at work, the more they get evenings and weekends too. P92

In pairs of identical twins who had been separated at birth and raised apart [the gold standard for human genetic studies of behavior tendencies], the correlation in happiness was just as high [in separated twins] as those [twins] who had been brought up together… This is powerful evidence that some inherited factors guide our lives powerfully toward a certain level of perceived well being, almost regardless of the environment we live in. p93

Absolutely all personality studies find that a major and reliable discriminator between people is the degree to which they are affected by worry, fear, and negative emotions. A person’s place along this [negative emotion] dimension is not only stable over time but appears to be set at least partly by heredity. P95

It might seem that greater extroversion is an unalloyed benefit, since extroverts report themselves to be happier. However, in recent studies we have found that the restlessness of extroverts makes their family lives unstable in the long term. Moreover, they have an increased risk of serious accidents and hospitalization.

Married people are happier than single people. However, [as a group those that remain married] are also less neurotic, and this is likely to be a cause rather than a consequence of their marital status. We know that neurotic people’s relationships are disproportionately likely to break up, so many of them probably won’t make it into matrimony [or allow them to stay there.] P106 So perhaps marriage doesn’t make you any happier, just that happier people get and stay married more often than unhappy people. And if you’re unhappy and single, don’t expect your happiness to change by finding a spouse – and keep an eye out for that divorce attorney.

If your set point of happiness is determined by your temperament, it seems to imply that it doesn’t much matter what you try to do. Your level of happiness will remain stubbornly unmoved for more than a few feeble days… However, there are techniques in which [high neurotics] can train themselves that seem to have quite a marked effect on how they deal with this vulnerability, which can make a great deal of difference to their being in the world. The [neurotic] may need to consciously remind himself that these things are sources of pleasure. His capacity to enjoy them once he has done this can be just as strong as anyone else’s. He just has to work at initiating them… pp 111-113

If the current [to the brain’s pleasure center in lab animals] is made to depend on pressing a lever, the animals will spend most of their time and energy on lever pressing. In fact, they press the lever 3000 times [in a row to release a single] volley of stimulation. Working for this reward, they will ignore sexually receptive members of the opposite sex, food and even water in their single minded quest for the hit. P124

The dopamine system interacts with a class of brain chemicals called opiods, because of their similarity to opium. Opiods do seem to be directly involved in pleasure… Opiates and opiods are also powerful pain killers. This is a very interesting phenomenon… The function of positive emotions such as pleasure is to make you ignore conflicting demands and continue with an activity that is doing you good. Thus is makes sense to have opiods, which are released by pleasurable activity, dampen down other signals [like pain] that may be competing for your attention. When you are finally getting intimate with the mate of your dreams, you don’t want to be thinking of your bruised knee. P127

A study of hospitalized heroin addicts [shows how the wanting and liking systems are linked]. The participants could work to receive an injection, which in some conditions was [a full dose of] morphine, [or a tiny dose of morphine], and in some conditions saline. To get the solution, they had to press a lever 3000 times in 45 minutes [remember our friends the rats?]… At moderate doses of morphine, participants rated the injections as pleasurable, and worked the lever to get them. In the saline condition, they rated the injections as worthless and no good, and wouldn’t press the lever. At a very low concentration, they still rated the injection worthless and no good, but they worked just as hard at lever pressing… In other words, the low concentration did enough to activate the wanting system, but not enough to activate the liking system. P128

Low ranking individuals [monkeys] have high levels of stress hormones, and relatively low concentrations of serotonin. High ranking individuals have lower stress hormones, and higher serotonin. And in troupes with no alpha male, a subordinate given Prozac will rise to alpha status. This puts a new perspective on the function of serotonin…For low ranking monkeys, it is optimal to shift the balance towards negative emotions. They have more to worry about, and if they are not careful, they will end up dead or ostracized from the group… They need reallocate resources from long term problems such as social grooming and tissue repair to the immediate issues of remaining intact. Stress horomones mobilize the body’s resources in this way. There are some human parallels to this situation. Moving from one social group to another is very stressful… The lower people are on the socio-economic hierarchy, the higher they score on scales of anxiety and depression. P131-2

There are 3 kinds of psychological changes that deliberate manipulation can bring about. The first is reducing the impact of negative emotion; the 2nd, increasing positive emotion; the 3rd is changing the subject.

The Life/Dinner problem as viewed from a Cheetah and a Gazelle:
From the gazelle’s perspective, it needs the fear program to motivate it to keep running to the end, to devote all resources to running however much the muscles protest, to treat the situation as essentially catastrophic, because if it stops, it would be a catastrophe. The cheetah on the other hand is presumably motivated by desire. From the cheetah’s perspective, you would want the desire program to keep running for a while, but be prepared to stop if it felt a bit stiff [tired, hurt], because there is no point getting lame for a plate of gazelle-tartare. The evolutionary legacy of this asymmetry is that negative emotions are potent at capturing our full consciousness and invading all our thoughts, long after the equivalent positive ones would have given up and faded away… p147

The things in modern life that cause us fear, shame, and sadness are really by and large not as threatening as a large carnivore. No one in western societies dies of starvation. The homocide rate is very low. Our social groups are fluid and flexible, so if we fall out with the people in one social network, we will find others. Thus our negative programs, designed as they were to cope with real, ugly, Paleolithic emergencies, go off on needless rumination of fear and worry. P148

Depressed people often have automatic negative thoughts, recurrent ideas pop into their heads that have no real basis. By identifying what they are, and discussing their baselessness, the client can counter their impact on mood when they arise. Negative emotions also make us exaggerate and catastrophize, that is a assume because one thing goes wrong everything we do is disastrous. Cognitive Behavior Therapy (CBT) identifies these distortions and false inferences and provides [rational] counter arguments.The therapy is in a way a conversation between the [lower] emotional system and the our more rational [higher] cognitive system. P149

Natural selection doesn’t give a fig for our happiness. It just wants us alive and making babies, miserably if need be. – Randolph Nesse

CBT, even if successful, doesn’t make you more happy so much as less unhappy… In certain cases, that may be enough. The negative emotions are peculiarly debilitating and can stop you attaining any kind of perspective and direction in life. A slight lack of pleasure, on the other hand, doesn’t stop you getting on with things if you have other sources of direction in life. [Think about the life/dinner problem] p151

How could it possibly be the case that something so simple as asking people to do pleasant things more often would make them happier, and why hadn’t they long ago discovered this for themselves? The answer may be to question whether people’s decisions are really driven by happiness… Our minds are equipped with a dopamine drunk wanting [not liking] system that draws us to compete for a promotion or a higher salary; a larger house or more material goods; an attractive partner or 2.4 kids. It draws us to these things, not because they make us happy, but because the ancestors who got the stone age equivalents of these things are our ancestors, and those who did not were biological dead ends. Although we implicitly feel that the things we want in life will make us happy, this may be a particularly cruel trick played by our evolved mind to keep us competing… All the evidence suggests that you would probably be happier not caring about your promotion and doing volunteer work [or pursuing your hobbies]… It is quite possible that people could be so preoccupied with wanting things that they could forget to do things they enjoy. Naturally this will make them dissatisfied, though they will quite possibly be successful by all orthodox and evolutionary criteria. P152

The wanting [striving] system is supposed to enslave you, to make you maximize your reproductive success. The negative emotion system is supposed to be hyperactive, because suffering ten false alarms is better than getting killed. P154

The more complex a person’s self image is, the less their happiness in life swings up and down when they do well or badly at something. The reason is very clear; if I am just an academic, and I have an academic setback, then my whole self seems less efficacious and worthwhile. However, if I have many other facets to myself, then the effect of the setback on my identity is much less severe. P156

A large body of work over the last 2 decades has shown that writing regularly about one’s experiences clearly has beneficial effects on well-being and health. It even makes a measurable difference on immune function. Writing seems to have its healing effects whether the experiences are positive or negative… I suspect that writing itself allows us to become more mindful of our thoughts, and at the same time take distance from them, replicating in a way the effects of CBT. P158

Evolution should never make us completely happy, and make us quickly adapt to the baseline of best thing we have at the moment, and focus on the possibility of getting something better in the future, even if we don’t know what that is yet…
If the environment is difficult but can’t be changed and affects everyone else just as badly, turn off extreme unhappiness. If something really and permanently bad for fitness happens, use the emergency responses, but damp them down over time and return to the set point. This viewpoint makes sense of the many finding in this book:
  1. The vast majority of people say they are more happy than unhappy; irregardless of poverty, employment, disability, bereavement, etc.

  2. Very few people say they are completely happy. Most people feel that they will be even happier in the future.

  3. Happiness with domains like income and material goods is relative to what others around are getting.

  4. People adapt quickly to positive changes in life

  5. People become very unhappy after seriously negative life events, but in most cases there is substantial adaptation to the new conditions. P165-6

Evolution’s purposes are served if it can trick us in to working for things that are good for our fitness. It can do this by making us believe that those things bring happiness, and that happiness is what we want. It doesn’t actually have to deliver the happiness in the end… In other words, evolution hasn’t set us up for the attainment of happiness, merely its pursuit… We don’t necessarily learn from experience that this is a trick, because we are not necessarily designed to do so… This view makes sense many of the other findings reviewed in this book
  1. People are fascinated by the idea of happiness and will follow any system that seems to promise it [ah, what does that make the readers of this book then?]

  2. Wanting and liking are partly dissociable.

  3. We make many behavioral choices that probably bring no pleasure [working long hours for a raise]

  4. People make quite inaccurate judgments about the effect of goal attainment on their happiness

  5. People sometimes require training to make them do things that they actually enjoy. P169-70

The social scientists who foresaw the age of leisure failed to see that human motivation is driven by wanting rather than liking… The vast majority of people do not make these choices [of pursuing leisure]. Instead, their positional psychology drives them to work harder and harder to amass greatly increased range of material goods. [And thus we have America.] p179

Sunday, October 02, 2005

(***) The Wisdom of Crowds by James Surowiecki

(***) The Wisdom of Crowds by James Surowiecki

[In 1906, British scientist Francis Galton analyzed the guesses to a contest where patrons wagered on the weight of butchered meat from a fat ox.] Galton arranged the guesses (787 in total) in order from highest to lowest and calculated the mean of the group’s guesses… Galton undoubtedly thought that the avg guess of the group would be way off the mark. After all, mix a few very smart people [butchers, farmers, cattlemen, well smart when it comes to slaughtering cattle at least] with some mediocre and dumb people [county fair patrons], and it seems likely that you’ll end up with a dumb answer. But Galton was wrong. The crowd had guessed that the ox, after it had been slaughtered and dressed, would weight 1,197lbs… The ox [actually] weighed 1,198lbs. In other word, the crowd’s judgement was essentially perfect.” Pxiii

In 1968, the US sub Scorpion disappeared in the North Atlantic… Although the Navy knew the sub’s last reported location, it had no idea what had happened to the Scorpion, and only the vaguest sense of how far it might have traveled after it had last made radio contact. As a result, the area where the navy began searching was a circle 20 miles wide and many 1000s of feet deep. You could not imagine a more hopeless task… A naval officer, John Craven concocted a series of scenarios… Then he assembled a team of men with a wide range of knowledge including mathematicians, submarine specialists, salvage men, etc. Instead of asking them to consult w/each other to come up with an answer, he asked each of them to offer his best guess about how likely each scenario was… He took all the guesses, and used a formula called Baye’s theorem to estimate the Scorpion’s final location. The location that Craven came up with was not a spot that any individual member of the group had picked… The final estimate was a genuinely collective judgement that the group as a whole had made, as opposed to representing the individual judgement of the smartest people in it… 5 months after the Scorpion disappeared, a navy ship found it. It was 220 yards from where Craven’s group had said it would be. Pxx

[From Who Wants to Be a Millionaire, you are allowed to ask the audience for help or an expert]. The experts did okay, offering the right answer – under pressure – almost 65% of the time… The random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio picked the right answer 91% of the time. P4

A classic demo of group intelligence is the jelly beans in the jar experiment, in which invariably the group’s estimate is superior to the vast majority of the individual guesses. When finance professor Jack Treynor ran the experiment in his class with a jar that held 850 beans, the group estimate was 871. Only 1 of the 56 people in the class made a better guess. P5

There are 2 lessons to draw from these experiments. 1st in most of them the members of the group were not talking to each other or working on the problem together. They were making individual guesses, which were aggregated and then averaged…2nd the group’s guess will not be better than that of every single person in the group each time… But there is no evidence in these studies that certain people consistently outperform the group… Over 10 experiments, the group’s performance will almost certainly be the best possible. P5

Groups that are too much alike find it harder to keep learning, because each member is bringing less and less new information to the table…Bringing new members into the organization, even if they’re less experienced and less capable, actually makes the group smarter simply because what little the new members do know is not redundant with what everyone else knows. P31

Between 1984 and 1999, almost 90% of mutual fund managers underperformed the Wilshire 5000 index [a relatively low bar]. P33

A number of studies have concluded that non-psychologists, for instance, are actually better at predicting people’s behavior than psychologists are… The between expert agreement in a host of fields, including stock picking, livestock judging, and clinical psychology is below 50% [meaning that at best the experts could be no better than below 50% right!]… More disconcertingly, one study found that the internal consistency o medical pathologists’ judgments was just .5, meaning that a pathologist presented with the same evidence would, ½ the time offer a different opinion. [Experts are prone to bias, and quick judgment, leading to overestimation of the likelihood that they’re right.] p33

A survey found that physicians, nurses, lawyers, engineers, entrepreneurs, and invst bankers all believed that they knew more than they did… It wasn’t just that they were wrong; they also didn’t have any idea how wrong they were. P34

Homogeneous groups become cohesive more easily than diverse groups, and as they become more cohesive they also become more dependent on the group, more insultated from outside opinions, and therefore more convinced that the group’s judgment on important issues must be right. [This is called groupthink, and it is not good.] p36

The classic illustration of the power of conformity is an experiment in which groups of people to judge which of 3 lines was the same size as a line on a white card. The groups of 7 to 9 had only 1 subject and the rest, unbeknownst to the subject, were confederates of the experimenters. The subject was placed at the end of the row of people, and each was asked to give his choice out loud. There were 12 cards in the experiment, and with the 1st 2 card, everyone in the group identified the same lines. Beginning with the 3rd card, the confederates began to pick lines that were clearly not the same size… The unwitting subjects changed the position of their heads to look at the lines from a different angle. They stood up to scrutinize the lines more closely… Most importantly, a significant number of the subjects simply went along with the group… 70% of the subjects changed their real [accurate] opinion at least once, and 33% went along with the group at least ½ the time. In one variant of the experiment, a confederate instead of going along with the group, picked the lines that matched the line on the card, effectively giving the subject an ally. And that was enough to make a huge difference… The rate of conformity plummeted. P38

The smartest groups are made up of people with diverse perspectives who are able to stay independent of each other. Independence doesn’t imply rationality or impartiality. You can be biased and irrational, but as long as you’re independent, you won’t make the group any dumber. P41

Social proof is the tendency to assume that if lots of people are doing something or believe something, there must be good reason why. This is different from conformity because you are not afraid of peer pressure or being reprimanded. [To test this] experimenter’s put a single person on a street corner and had him look up at an empty sky for 60 seconds. A tiny fraction of the passing pedestrians stopped to see what the guy was looking at, but most just walked past. Next time around, they put 5 skyward looking people on the corner. This time 4 times as many people stopped to gaze at the empty sky. When they put 15 people on the corner, 45% of all passersby stopped, and increasing the cohort yet again made more than 80% of the pedestrians tilt their heads. P43 [Could private religious faith be explained by this?]

People are in general overconfident. They overestimate their ability, their level of knowledge and their decision making prowess. And people are more overconfident when facing difficult problems than when facing easy one. This is not good for the overconfident decision makers themselves, since it means that they’re more likely to choose badly. But it good for society as whole, because overconfident people are less likely to get sucked into negative information cascade, and in the right circumstances are even able to break cascades. Remember that a cascade is kept going by people valuing public information more highly than private information. Overconfident people don’t do that… They make the public information seem less certain. And that encourages others to rely on themselves rather than just follow everyone else. P61

If you want to improve an organization’s decision making, one of the best things you can do is make sure that decisions are made simultaneously rather than one after another… One key to successful group decisions is getting people to pay much less attention to what everyone else is saying. P65

“There is no democracy in physics. We can’t say that some second rate guy has as much right to an opinion as Fermi” [Luis Alvarez, physicist]… You can’t listen to or read everyone, so you only listen to the best - it has a number of dubious assumptions built into it, including the idea that we automatically know who the second-rate are, even before hearing them, as well as the idea that everything [the expert] had to say was inherently valuable. The obvious peril is that important work will be ignored. P171

“If you can name for me one great discovery or decision that was made by a committee, I will find you the one man in that committee who had the lonely insight that solved the problem and was the basis for the decision.” Former GE Chairman Ralph Cordiner. [Yes, but can you tell me before the meeting who that one person will be?]

Social scientists who study juries often differentiate between 2 approaches. Evidence based juries usually don’t take a vote until after they’ve spent some time talking over the case, sifting the evidence. Verdict based juries see their mission as reaching a decision as quickly as possible. They take a vote before any discussion, and debate after that tends to concentrate on getting those who don’t agree to agree. [You can probably guess which type of jury you would like to have evaluate your next court case.] p178

One of the consistent findings from decades of small group research is that group deliberations are more successful when they have a clear agenda and when leaders take an active role in making sure that everyone gets a chance to speak... That matters because, in small groups, diversity of opinion is the single best guarantee that the group will reap benefits from face to face discussion. Berkely political scientists have shown in mock juries that a presence of a minority viewpoint, all by itself, makes a group’s decisions more nuanced and its decision making process more rigorous. [Always have everyone speak, and have a devil’s advocate] P182

As a general rule, discussions tend to move both the group as a whole and the individuals within it toward more extreme positions than ones they entered the discussion with. Why does polarization occur? One reason is because of people’s reliance on ‘social comparison’… It means that people are constantly comparing themselves to everyone else with an eye toward maintaining their relative position within the group. In other words, if the you start out in the middle of the group, and you believe the group has moved, as it were, to the right, you’re inclinded to shift your position to the right as well, so relative to everyone else you’re standing still. [And that is how groupthink can lead to shocking positions that no individual would ever have come up with eg. think OJ jury] P185

The virtue of decentralization are twofold... The more responsibility they have for their own environments, the more engaged they will be… 2 groups were put in rooms to solve puzzles while loud, random noises recurred in the background. 1 group was left alone. The other was given a button they could press to turn off the sound. The 2nd group solved 5 times as many puzzles… No member of the group ever pressed the button. Knowing it was there was all that mattered. The 2nd thing decentralization makes easier is coordination… Companies can rely on workers to find new, more efficient ways of getting things done. P212

The idea of the wisdom of crowds is not that group will always give you the right answer but that on average it will consistently come up with a better answer than any individual could provide. P235

The problem with the stock market is that there never is a point at which you can say that it’s over… This is one reason why a company’s stock price can easily soar far past any reasonable valuation, because people can always convince themselves that something in the future will happen to make the company worth it… Even if the market does eventually get the price right, it can be wrong for a long time, because there is no objective means to demonstrate it’s wrong… This is what Keynes meant when he said markets can stay wrong longer than you can stay solvent. P237

You don’t see bubbles in the real economy, which is to say the economy where you buy and sell TVs, apples, haircuts, etc. In other words the price of TVs doesn’t suddenly double overnight, only to crash to a few months later… And you never end up with a situation where the fact that prices are rising makes people more interested in buying… [When you buy a stock] you’re buying the right to resell that share of stock to someone else – ideally someone who has a more optimistic view of the company’s future than you do, and will therefore pay you more for the stock. P246

[A Caltech economic experiment to show how easily bubbles form] Everyone was given 2 shares to start and some money to buy more shares. Each share paid a dividend of $.24 at the end of each period [15 periods in the experiment]. If you owned 1 share for the entire experiment you’d get 15x.24=$3.60. So before the game started, if someone asked you how much you’d pay for a share, the correct answer would be no more than $3.60. After the 1st period ended, you’d be willing to pay no more than $3.36. And so on… Yet, when the experiment was run, the price of the shares jumped immediately to $3.50 and stayed there almost until the very end… What were the students thinking? “They’d say ‘Sure I knew that prices were way too high, but I saw other people buying and selling at high prices. I figured I could buy, collect a dividend or 2 and then sell at the same price to some other idiot.” P250

It’s not clear that barrage of news [and information] is necessarily conducive to good decision making. [An MIT experiment let students build a portfolio of stocks of their own choosing]. One group was allowed to see only the changes in the prices of their stocks. They could buy and sell if they wanted, but all they knew was the price… The 2nd group was allowed to see the changes in price, but was also given a constant stream of financial news… Suprisingly the less well informed group did far better… The reason was that news reports by their nature, overplay the importance of any particular piece of information. P254

Studies have shown that ideology does a much better job of predicting attitudes on issues than self interest does. For example, conservatives without health insurance still opposed national health insurance, while liberals who had health insurance favored it. P265 The crowd: A study of the popular mind 1982

With only a few exceptions, the market’s ranking of the horses predicted exactly the order in which horses finished. This was true no matter how many horses were in the face: the favorite finished most often, the 2nd favored horse finished second most often, and so on… Even more impressively is how well the odds predicted the frequency of victory. Take for instance, 312 races in 1 year which 7 horses ran. The favorite was predicted to win 33%. It won 34% of the time. 2nd place horse: 22% predicted, 21% real; 3rd place: 16%/16%; 4th place, 12%/12%, 5th place, 9%/8%; 6th place, 6%, 8%; 7th place, 3%, 2%.