Oops! Despite trying to understand more than 60 cognitive biases by writing about them, I just realized that I have yet to share anything about the “classic”—the Sunk Cost Fallacy. And although I have written about its sister biases Loss and Regret Aversion, they alone leave gaps…
This bias might be at the root of all the other biases that very active traders “enjoy”. Yet, being right has very little to do with making money! The evidence is overwhelming that the more we trade, the worse we would do. That’s because most…
Have you ever wondered why you can become revved up and an exuberant risk taker, when flying high, or hesitant and risk-adverse, when cowering from your losses in the stock market? We have the impression that it is our deliberative mind that makes the most important decisions in…
Chapter 1: You are What You Think “You are today where the thoughts of yesterday have brought you and you will be tomorrow where the thoughts of today take you.” — Blaise Pascal We can’t change other people and our…
Did you know that it is the default settings of our brain that often drive us—despite past experiences—to do things that make no logical sense, though they make perfect emotional sense? That, however, does not make us completely irrational; it…
Let me ask you: “Do you feel the urge to check your latest Facebook friends’ updates, news-feeds or Instagram photos—on the go? And do you succumb to this urge; thereby coincidentally increasing the probability of eliminating yourself—prematurely—from the gene pool?” The…
It’s not so easy to be active in the stock market. Because when people I meet learn that I make my money predominantly from the abundant stock market, they—more often than not—flood me with questions on my prediction of the future trends and…
1) Next Tuesday: Before a purchase, take the time to consider what you’ll be doing, from morning to night, this coming Tuesday. How will this purchase affect you on Tuesday? This simple exercise—thinking about time used on a specific day (you…
Wind extinguishes a candle and energizes fire. Likewise with randomness, uncertainty, chaos: you want to use them, not hide from them. Some things are fragile—they don’t like chaos, while others are robust—they don’t care if things are crazy. Antifragility is beyond…
… the Framing Bias. This is another beautiful mental shortcut that we use to solve common problems. Although this heuristic speeds up processing in our brain, it occasionally makes us think so fast that we miss what is important. When heuristics work, they…