Jun 14, 2019
Last week we got to finally have
the episode on time discounting, which was very exciting for me
because as many of you know, it is my all time favorite concept. As
you learned in
episode 51, I call it
the “I’ll Start Monday Effect” because it is the bias behind all
the times we commit ourselves to do something in the future (like
starting a new exercise program on Monday) and when we wake up…we
feel like a completely different person and hit snooze.
As you have heard me mention on
the show many times before, our brains are lazy, and they like to
take the path of least resistance to get to what they believe to be
a “good enough” answer as quickly as possible. We will get into
that in more detail next week, but today I want to talk about how
that impacts our interactions with numbers and math. Most people
think math is hard and our brains are particularly lazy when it
comes to hard stuff, so we often risk being wrong rather than take
the time to do the numbers. I dive deep in the fascinating whys and
why nots of this phenomena.
- [04:34] Our brains are lazy,
and they like to take the path of least resistance to get to what
they believe to be a “good enough” answer as quickly as
- [05:54] Our brains make lots of
assumptions based on the little bit of information they are looking
at. This combines with our brain’s natural tendency to believe
everything it learns to be TRUE first and ask questions
- [06:27] Because we are
particularly lazy when it comes to math, we rely on the source of
whatever is thrown our way, and the brain would rather risk being
wrong than to take the time to do the numbers in everyday
- [07:27] Because of
unit bias, you may
have assumed the amount you serve yourself matches the intended
- [09:00] Calories are the main
comparison people make when thinking about cereal. Most people
don't take the time to do the actual math involved in the serving
- [09:54] Due to the
less is better effect, our preferences change when we evaluate
things alone versus comparing them against others (this is
relativity in action).
- [11:16] Great quote from
Thinking Fast and
Slow, (which was
actually a quote from Paul Rozen, an expert in disgust) “a single
cockroach will completely wreck the appeal of a bowl of cherries,
but a cherry will do nothing at all for a bowl of
- [11:48] MONEY AND VALUE Due to
the money illusion, we tend to concentrate on the nominal or face
value of our money, instead of thinking of it in terms of how much
it can get for us.
- [12:09] Due to the
denomination effect we are more likely to spend money in smaller
denominations than when it is in bigger ones.
- [12:53] We still do a lot
of mental accounting. This is where we think money in different
places or accounts is not all accessible in the same
- [13:33] Why is $1000 not the
same everywhere? Consider all the ways this is good and
- [14:37] Due to the
IKEA effect (yes,
that is its actual name) people will value things more that they
made themselves or partially assembled.
- [15:13] The
endowment effect is where we value things we own more than
things we do not.
- [15:43] For your business,
remember that making people feel like they came up with the idea
makes them more likely to support it.
- [16:11] Due to the
Zeigarnik effect we will remember the tasks we did not complete
– or where we were interrupted – better than the tasks we did
- [16:43] Due to the
disposition effect we humans will tend to sell assets that have
accumulated in value and hold onto those that have declined in
- [17:29] Because of our
time saving bias,
when going at a relatively low speed, we underestimate the amount
of time we could save by speeding up or lose by slowing
- [18:14] Perspective can make a
huge difference for good and bad.
- [18:40] Duration
neglect. This likely
combines with the IKEA effect where we forget the 8 hours it took
to put together that simple bookshelf and just see the glorious
thing we have created.
Well-traveled road effect. We underestimate how long it will take us to go
on roads or routes we have taken a lot, and overestimate how long
it will take to go on less familiar ones.
- [21:37] GAMES AND PROBABILITIES
The hot hand fallacy. It's a myth that “hot hands” are going to
continue to defy the odds.
- [22:18] The
clustering illusion is where we see phantom patterns and
overestimate the importance of small streaks.
- [22:40] This is a lot like
the gambler’s fallacy. This is where we think the past has any
impact on the future probability.
- [23:50] We are biased toward
having zero risk if we can. This is much like
ambiguity aversion, or uncertainty
aversion, people are more
likely to prefer the things we know.
Neglected probability territory is when we are uncertain about the
options or outcomes and need to make a decision we completely
disregard everything we do know about probabilities.
Berkson's paradox is where someone will misinterpret statistical
experiments when the probabilities are conditional.
- [27:11] Due to the
subadditivity effect, we judge the probability of the whole to be
less than the probability of its individual parts.
Insensitivity to sample size, which is where we don’t properly anticipate the
variation that will show up in small samples.
- [28:04] Weber
Fechner Law which is when
we find it difficult to compare and see small differences among
- [29:38] Melina shares a story
Thinking Fast and
- [33:31] Everything we know to
be true is not necessarily true. We need to step back, flex, and
relax. Try to take an objective look at your business
Thanks for listening. Don’t
forget to subscribe on
Android. If you like
what you heard, please leave a
review on iTunes
and share what you liked about the
Links and Resources: