Using Availability to Our Advantage

Marco Rubio has recently been taking a lot of heat for his robot-like performance at the most recent Republican national debate.  In case you somehow missed it, he repeated a stump line verbatim four times, completely out of context, in answering the moderator's questions.  Governor Chris Christie lambasted him on national television, calling Rubio out for being the robotic politician that Washington manufactures.  My initial thought, besides the feeling of embarrassment for him, was:  How can he not know what he is doing?  Why can't he stop himself from regurgitating the same canned line? 

I think it comes down to the availability heuristic.  From Wikipedia:

The availability heuristic is a mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method or decision.

Basically, your brain takes a shortcut and tells your mouth to spew the first thing that comes to mind; that is, the idea that is currently most available in your brain.  While this heuristic typically serves your brain beneficially in most every day cases - who would enjoy conversing with someone who had to put 10 minutes of thought into each carefully chosen sentence? - it has a tendency to choke under pressure. 

Put yourself in Rubio's shoes - or even Rick Perry, who infamously forgot the third government agency he would drop in order to cut federal spending at a debate during his 2012 presidential campaign.  Or, think of when your boss walks in unexpectedly and peppers you with questions on progress or schedule or budget - items that maybe you hadn't thought about yet today as your mind was focused on resolving a more technical issue currently at hand.  You freeze and spout out the first thing that somewhat coherently makes sense, even if it isn't 100% accurate.  You may even repeat yourself a couple of times, using your line as filler material in hopes that a more lucid thought will quickly materialize.

Daniel Kahneman and Amos Tversky discuss this phenomena at depth and provide examples of the biases created from availability in their classic 1974 paper, "Judgment Under Uncertainty:  Heuristics and Biases" (pdf. version of original article here).  One such analogy illustrates how the risks of an expedition may be significantly overvalued if those risks are vivid and come to mind easily.  How many people do you know who are afraid to swim in the ocean because of the possibility of a shark attack - which, based on historical evidence, is highly unlikely to occur?  For whatever reason - be it Hollywood movies or the gruesome picture we imagine in our heads - the image is vivid and easily recallable, forcing us to put much more weight on the likelihood that it will occur than it actually deserves.

And it's not just in what we say and how we react to social situations.  It is also in our private actions and decisions.  Take your finances, for example.  Say you began to invest in 2006 or so and, since then, you casually follow the overall stock market.  You take a diversified, conservative investing approach - maybe a few blue chips, but mostly Vanguard funds, as your financial advisor recommends.  2008 comes along and wipes out 40% or more of your holdings.  You panic, sell out, and lick your wounds.  The market continues to drop and even though you know the market has historically produced positive returns since its inception, you stay on the sidelines, missing out on the eventual massive recovery.  Why?  Because the only thought, the available thought, in your mind is the vivid memory of your losses.  You don't care what the experts say, you're not screwing around with stocks ever again. 

The availability heuristic messes with our rational thought.  Economists like to believe that humans are rational thinkers, but rational thinking is not innate.  Everyone knew the 2008 market was going to correct - and correct it did!  Those on the sidelines missed out on enormous gains.  The rational move would have been to dig deep and invest more.  A killing would've been had.  But our mind isn't innately wired to think like that - but we can train it to. 

Charlie Munger in his revised "Psychology of Human Misjudgment", gives this gem of advice:

The great algorithm to remember in dealing with this tendency is simple: An idea or a feat is not worth more merely because it is easily available to you.

If we force ourselves to undervalue the first idea that pops into our minds, we can enable ourselves to make more rational decisions.  The overwhelming affect of the 2008 crash left vivid memories in investors' brains and overshadowed the last 100 years of positive performance.  Similar reactions took place in those who lived through the 1930's Great Depression.  Story after story can be found of gun shy businessmen, bankers, and investors.  Families put their money under their mattresses or in safes where it could never again be lost in the financial markets.  We need to get beyond that train of thought and force rationality into our minds.

An even more interesting strategy is to force yourself to think rationally when you have time to do so.  Read the thoughts of good decision makers.  Read Warren Buffett's letters to his shareholders to get a sense of how he reaches rational business decisions.  They are intriguing and can be applied to personal finance as well as large scale investment decisions.  Read Benjamin Graham to understand how to rationally value a business or Kahneman to understand the biases your mind subconsciously utilizes.  Rubio and Perry could learn a thing or two from these guys, like don't count on canned answers, for one.  Had they been comfortable within their respective platforms and spent their mental energy on thoroughly fleshing out their political positions, they wouldn't need to bank on recalling over-used speeches that have limited upside but large downside risk.

Your brain can be wired to make rational decisions - not by being an intuitively rational thinking machine - but by trickery; use your brain's instinctive mental shortcuts to your advantage.  The more rationality you constantly feed your brain (via books, education, etc.), the more subconscious, rational decisions will be automatically made. 

Entity and Incremental Learning

From Business Insider

I've been on a bit of a psychological kick lately digging into books like "Bounce" and "Thinking Fast and Slow" - which is quickly becoming one of my favorites and, by far, one of the most informative I've ever come across.  "Bounce" mentions some of the work of Carol Dweck, who was the author of "Mindset", which contains some mind blowing information on how our minds work and how we can condition them to focus on success.

While her book was a great read, I had forgotten - or, more likely, didn't yet understand - how enlightening her concepts really were.  That was until a couple of months ago.  Not only did her writing continue to pop up in a number of books I had been reading, but my son was born.  After seeing how fast little babies pick up new habits and how quickly they learn, I began to think about the best way to raise him from a psychological standpoint to empower him to live the best life he possibly can.  I remembered Dweck and gave myself a refresher of her teachings, which took on an entirely different meaning than the first time I plowed through "Mindset". 

One of the tenets of "Mindset" was the distinction between entity and incremental learning.  Entity learning was the belief that brainpower and intelligence were innate and could not be improved.  It gave the individual a sense of entitlement.  On the opposite end of the spectrum was incremental learning:  the belief that "the novice can become the master" (quoted from "The Art of Learning").  Empowering! 

Financial Freedom - July 2015

I recently (better late than never!) came across a couple of blogs that I really enjoyed on personal finance:  Root of Good and Mr. Money Mustache.  Both blogs focus on early retirement and different techniques to become financially independent - my goal numero uno.  Mr. Money Mustache has a way of conveying to readers the proper mindset one needs to go down this path and the differences between those who achieve this goal and those who do not.  My favorite part of Root of Good is the financial update and transparency he provides into his family's financials with monthly updates. 

After being inspired by these two blogs of men who have successfully obtained financial freedom, it occurred to me that, while it is extremely beneficial to read about the reflections of those who have succeeded, it may be even more beneficial to document the journey as it unfolds.

Personal Goals - Ultimate, Tangible, and Intangible

My Goals:

SUCCESS = FREEDOM

1)  No regrets
2)  Maximize time with family and ensure happiness
3)  Financial Freedom by 1/1/2020
4)  Relocate family and purchase home in Chicago area.  Accomplished 3/31/2015
5)  Purchase/Open Business
6)  Travel as much as possible

*Doing all of this with integrity in a way that would make God proud and with the end result of leaving this world a better place than when I entered it.

As you can see, some of these are more tangible than others.  No regrets?  Maximize time with family?  It is difficult to quantify whether or not these are accomplished.  I'll tell you that I KNOW when I'm NOT spending enough time with family, but how do you really know if you have maximized it? 

Overcoming Weakness

How can you expect to improve in your area of expertise, your chosen field, or as a person in general by focusing solely on your strengths?  Everyone has a weakness; what differentiates those who succeed from those who do not is how those weaknesses are dealt with. 

In "The Art of Learning", Josh Waitzkin discusses the necessity to identify your weaknesses and work on improving them until they no longer hold you back.  In case you are not aware, Josh is the subject of the book and movie "Searching for Bobby Fischer". 

The Power of Silence

-"Brevity is the soul of wit.  If you've got something to say, say it and stop talking.  If you don't have anything to say, you're doing yourself and others a favor by keeping quiet.  If you can't make a contribution, don't slow down the people who can."  -Craig Newmark, Craigslist Founder, "Getting There"

Listen more, talk less.  Try it.  As with any exercise in discipline, it is difficult at first, becomes easier with practice, and, once accomplished, is EXTREMELY empowering and fulfilling.  So many people feel they have to make a statement about all topics that come up in casual conversation.  Why? 

What it boils down to is protection of ego. 

The Problem with Self-Help

It seems everywhere you turn these days, someone is trying to help you help yourself - with either rah-rah infomercials or "You Can Do It" blogs. Here are a few problems I see with these:

How much time and money are you spending on these products?

Think about what you could accomplish in the time you expended constantly reading self-help blogs and ebooks online? Think about what you could do with the money you spent on purchasing products from these gurus. You could save it up and buy some weights, if your goal is go become more fit.

8 Minor Adjustments to Maximize Productivity Towards Your Ultimate Goal

I don't think an entire blog needs to be dedicated to changing your daily life.  I think you can get the point across in a single post or two.  Once you have a handle on it, you should be able to assess your own life and optimize your actions - no further blog reading or research necessary on how to maximize the time in your day.  So . . .

Each morning offers the opportunity to start fresh . . . a new beginning, a clean slate.  Many people wake up and immediately begin to stress and dread about what they have to do that day.  That mentality sets the stage for an unorganized, unproductive day.  Others use the morning to plan out tasks they intend to accomplish that day to help them reach their ultimate goal.  That small difference can have an extraordinary compounding effect and create a drastic advantage for that person over others.  For a quick analysis of how little changes can make a big difference, check out a previous post comparing Al and Joe and the differences in their routines.

Making slight adjustments each day can create the foundation for a healthier, more productive life, set you up to ultimately achieve your goal, and pay dividends in your future.  Below are 8 suggestions for maximizing your time each day:

1. Workout in the morning

Planning to workout in the morning can mean an improved chance that you actually do workout that day. 

A Day in the Life of Ambitious Al . . .

. . . and his friend, Regular Joe.

Ambitious Al and Regular Joe are friends and coworkers at Wilde, Guess & Co. an investment bank in Chicago.  Both are well-educated, intelligent individuals.  In fact, Joe ranked higher in his graduating class than Al.  Joe talks about becoming a VP and hitting it big time, but talk is what he does best.  Al, more reserved, is goal oriented and, after moving as high as he can at WG&C, plans to open his own hedge fund.  Let's take a look at how each spends his day, while tracking the hours each productively works towards their own individual goals:

5:00 a.m. - 6:00 a.m.: 
Al: Wakes up, stretches, and heads to the gym. (1 productive hour - healthy body is the foundation of a healthy mind!; 1 hour cumulative)
Joe:  Sleeping. (0 productive hours; 0 hours cumulative)

6:00 a.m. - 7:00 a.m.
Al:  Heads back from the gym, cools down,

The Roots of Laziness

"All life demands struggle. Those who have everything given to them become lazy, selfish, and insensitive to the real values of life. The very striving and hard work that we so constantly try to avoid is the major building block in the person we are today."

-Pope Paul VI

Laziness is innate; it was a necessary trait for survival from our distant ancient ancestors.  In Jared Diamond’s Pulitzer Prize winning book “Guns, Germs, and Steel”, early hunter-gatherers would constantly – and probably unconsciously - weighed the risk-reward of their expeditions, with the goal of obtaining the most calories for as little effort as possible.