The Income Generation With David J. Scranton
Dan Gardner: I would suggest that there is an entire field of science that suggests you are wrong. And that could be difficult to accept, but if we are going to be as rational about as you claim to be, you have to recognize that when there is a veritable mountain of science, suggesting that human beings actually are influenced by as I say unconscious thought processes. That’ they are not as rational decision makers that they tend to think that they are, that you have to actually respect that science. By the way one of the insights of psychology is something called quite memorably, bias – bias. Which is when you explain to people that there are physiological biases involved in decision making that can skew their decision making, they tend to understand that and except that in regards to other people, but in regard to me oh no, no I uniquely to the human species see things objectively and decide purely rationally. That’s bias – bias and it’s very it’s a very, very difficult thing to overcome. But the best decision makers do overcome it. One of my favorite examples of this is George Soros, of course, he is politically controversial now. But if you look at his record as an investor through the 60s and 70s and 1980s, he had this amazing record and the games to prove it. And when George Soros was asked as he was so often, George why are you so good? He always gave exactly the same answer. He said basically I know that I am fallible, I know that people make mistakes and I know that I will make mistakes and therefore I think more carefully about my decision making, and I’m more likely to catch and correct my mistakes than are others.
David Scranton: So to sum up what sounds like you are saying that just acknowledging this just, just someone understanding that their decisions are made emotionally and then justified logically is the first step toward helping them make better decisions. Is that correct?
Dan Gardner: Absolutely, I’m a big advocate of psychology one on one. Anybody who is making important decisions about their future and that’s pretty much all of us really should understand the basics of human psychology, but there’s a trick here. If you understand psychology one on one, you may conclude. That’s it, I’m bulletproof. You know, I got it all down, I know about the psychological biases therefore; I will not be tripped up by them. That is a danger and it’s a mistake. In fact, the great psychologist, the Nobel Prize-winning psychologist who is the giant in this field Daniel Kahneman he spent a lifetime studying these psychological biases and he frankly admits that he too gets tripped up by them from time to time. You cannot simply say I am aware of the problem. Therefore, the problem doesn’t apply to me. It always applies to you and that’s why you need to constantly examine your decision making, constantly monitor the mistakes.
David Scranton: Now I’m suffering from bias – bias right now because this entire show is about this very topic and I so far agree with 110% of everything that you said. In fact, I even gave a real life example in my own life of how that was a hard one lesson. For our viewers, though. Tell us what… Where do you think this has a greater effect, on decisions to buy certain investments, or on decisions to sell certain investments? If there’s any difference at all.
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