Every Single Cognitive Bias In One Infographic

The human brain is capable of incredible things, but it’s also extremely flawed at times.

Science has shown that we tend to make all sorts of mental mistakes, called “cognitive biases”, that can affect both our thinking and actions. These biases, as Visual Capitalist"s Jeff Desjardins points out, can lead to us extrapolating information from the wrong sources, seeking to confirm existing beliefs, or failing to remember events the way they actually happened!

To be sure, this is all part of being human – but such cognitive biases can also have a profound effect on our endeavors, investments, and life in general. For this reason, today’s infographic from DesignHacks.co is particularly handy. It shows and groups each of the 188 known confirmation biases in existence.

WHAT IS A COGNITIVE BIAS?

Humans tend to think in certain ways that can lead to systematic deviations from making rational judgments.

These tendencies usually arise from:

• Information processing shortcuts


• The limited processing ability of the brain


• Emotional and moral motivations


• Distortions in storing and retrieving memories


• Social influence

Cognitive biases have been studied for decades by academics in the fields of cognitive science, social psychology, and behavioral economics, but they are especially relevant in today’s information-packed world. They influence the way we think and act, and such irrational mental shortcuts can lead to all kinds of problems in entrepreneurship, investing, or management.

COGNITIVE BIAS EXAMPLES

Here are four examples of how these types of biases can affect people in the business world:

Familiarity Bias: An investor puts her money in “what she knows”, rather than seeking the obvious benefits from portfolio diversification. Just because a certain type of industry or security is familiar doesn’t make it the logical selection.

Self-Attribution Bias: An entrepreneur overly attributes his company’s success to himself, rather than other factors (team, luck, industry trends). When things go bad, he blames these external factors for derailing his progress.

Anchoring Bias: An employee in a salary negotiation is too dependent on the first number mentioned in the negotiations, rather than rationally examining a range of options.

Survivorship Bias: Entrepreneurship looks easy, because there are so many successful entrepreneurs out there. However, this is a cognitive bias: the successful entrepreneurs are the ones still around, while the millions who failed went and did other things.

Trumpocalypse: Liberal Ivory Tower of Academia collapsing

Universities in America have typically been dominated by a liberal
bias.  Why is that?  Because, working for a University is sort of
like working for the Government.  There is reason for the expression,
those who can"t do - teach.  Grow a 2nd brain - understand why by reading THIS BOOK. 

The mindset of employees at such insitutions is quite different
than one might think.  We"re not going to name any names in this essay; this
isn"t about a person or individual University.  It"s about the
intellectual class, really the only public intellectual class in America with
any respect; the Ivory Tower.  If you haven"t heard this expression
before, it refers to the high brow raised lip attitude class of University
Professors and their associates.  They have influence on every aspect of
society.  They are like Adam Smith"s hidden hand - the subtle advisors who
are secretly directing politics, big business, technology, and culture.
 Fortunately however, they don"t have any power, and don"t really control
society, like the Illuminati do.  Their influence however should be noted;
they"ve influenced Presidents of the United States, Bankers, the Media (most
notably) and literally every aspect of human life in America.  I mean, who
doesn"t trust and respect a University Professor?  They know what they"re
doing - right?

From Google:

a state of privileged seclusion or separation from the facts and
practicalities of the real world.

"the ivory tower of academia"

Now to be fair, not all University Professors are alike, we shant
"profile" them, as they profile individuals who have ideas they don"t like.
 There"s do-ers out there, especially around Silicon Valley where many
have left their Ivory Tower positions to join startups or start them
themselves.  But the Ivory Tower class remains; and it remained until the
Trump victory in November - a major influence on society and hallmark of
American culture.  But all that"s been shattered.  Their hidden
influence on the media, should be noted by readers of Zero Hedge and other
sites, people "in the know".  Because they shape public opinion, possibly
more than the CIA with all of it"s domestic mind-control operations.
 Venues like "NPR" and even "The Simpsons" are
carefully crafted with leftist messages, agendas for open expansion of foreign
affairs, expansion of government, anti-male value systems, and other
"progressive" ideas are implanted like seeds, waiting to grow like weeds when
the next rain comes.  

Here"s one example, how Academia helped the Media with their war
against Trump.  Have you been hearing recently "Studies show
that.." .. "Obamacare is more popular after the election"
 or some such nonsense.  Who are they polling?  They claim their
polls aren"t biased, they are scientific.  But these are the polls and methods that had
Trump losing by a landslide!

What does this all mean?  We"re experiencing a
major paradigm shift, (this is an Ivory Tower word, from Thomas Kuhn"s "The
Structure of Scientific Revolutions - a must read for investors).

As a bright example take
a look at what Brian Nosek is doing to crack the glass bubble surrounding the Ivory Tower:

Sometimes it seems surprising that science functions at all. In
2005, medical science was shaken by a paper with the provocative title “Why most published research findings are false.” Written by John Ioannidis, a professor of medicine at Stanford
University, it didn’t actually show that any particular result was wrong.
Instead, it showed that the statistics of reported positive
findings was not consistent with how often one should expect to find them. As Ioannidis concluded more recently, “many published research findings are false or exaggerated, and an
estimated 85 percent of research resources are wasted.”  It’s likely that
some researchers are consciously cherry-picking data to get their work
published. And some of the problems surely lie with journal publication
policies. But the problems of false findings often begin with researchers
unwittingly fooling themselves: they fall prey to cognitive biases, common
modes of thinking that lure us toward wrong but convenient or attractive
conclusions. “Seeing the reproducibility rates in psychology and other
empirical science, we can safely say that something is not working out the way
it should,” says Susann Fiedler, a behavioral economist at the Max Planck
Institute for Research on Collective Goods in Bonn, Germany. “Cognitive biases
might be one reason for that.”  Psychologist
Brian Nosek of the University of Virginia says that the most common and
problematic bias in science is “motivated reasoning”: We interpret observations
to fit a particular idea. Psychologists have shown that “most of our reasoning
is in fact rationalization,” he says. In other words, we have already made the
decision about what to do or to think, and our “explanation” of our reasoning
is really a justification for doing what we wanted to do—or to believe—anyway.
Science is of course meant to be more objective and skeptical than everyday
thought—but how much is it, really?  I
was aware of biases in humans at large, but when I first “learned” that they
also apply to scientists, I was somewhat amazed, even though it is so obvious.  Whereas the falsification model of the
scientific method championed by philosopher Karl Popper posits that the
scientist looks for ways to test and falsify her theories—to ask “How am I
wrong?”—Nosek says that scientists usually ask instead “How am I right?” (or
equally, to ask “How are you wrong?”). When facts come up that suggest we
might, in fact, not be right after all, we are inclined to dismiss them as
irrelevant, if not indeed mistaken. The now infamous “cold fusion” episode in
the late 1980s, instigated by the electrochemists Martin Fleischmann and
Stanley Pons, was full of such ad hoc brush-offs. For example, when it was
pointed out to Fleischmann and Pons that their energy spectrum of the gamma
rays from their claimed fusion reaction had its spike at the wrong energy, they
simply moved it, muttering something ambiguous about calibration.

The implications for politics and the broader economy are huge.
 Studies, focus groups, corporate funded research retreats, are one of the
Establishment"s, and the Ivory Tower"s biggest tools.  The election was a
crack in the dam - it"s a proof that you can"t manipulate public opinion to fit
your own.  But it"s far from the only crack, just the most obvious one.  What"s
happening is a major system-wide Ivory Tower Psychosis, the most basic form of
mental illness - but it"s happening at a class level, as a group.
 Emotionally injured leftists are fleeing to Canada, or promoting
secession for California (which is really a good idea by itself, who needs a
Federal government).  Reality is crashing down on them, as it doesn"t fit
with "their reality" - but "their reality" was artificially created for
decades, depending on how you calculate.. For decades, Establishment leaders like
George Bush created their own reality with their power, and even called it the "Reality Based Community" that is, people who live in
the bubble of the Ivory Tower:

The aide said that guys like me were "in what we call the
reality-based community," which he defined as people who "believe
that solutions emerge from your judicious study of discernible reality."
... "That"s not the way the world really works anymore," he
continued. "We"re an empire now, and when we act, we create our own
reality. And while you"re studying that reality—judiciously, as you will—we"ll
act again, creating other new realities, which you can study too, and that"s
how things will sort out. We"re history"s actors…and you, all of you, will be
left to just study what we do."

It"s like the Media"s recent admission that it"s the media"s job
to control what people think.  Well, not exactly.

The Ivory Tower Bubble has popped; and we"re seeing the casualties
on a daily basis.  It"s certainly not the last establishment-class that
we"re going to see crack from the pressure of reality.

To
learn how the Elite manipulate the news which in turn manipulates markets,
checkout Splitting Pennies - Understanding Forex for only $6.11 on Amazon, also
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the "real" world works.

A Biased 2017 Forecast, Part 1

Submitted by Jim Quinn via The Burning Platform blog,

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.” – Daniel Kahneman, Thinking, Fast and Slow

 

A couple weeks ago I was lucky enough to see a live one hour interview with Michael Lewis at the Annenberg Center about his new book The Undoing Project. Everyone attending the lecture received a complimentary copy of the book. Being a huge fan of Lewis after reading Liar’s Poker, Boomerang, The Big Short, Flash Boys, and Moneyball, I was interested to hear about his new project. This was a completely new direction from his financial crisis books. I wasn’t sure whether it would keep my interest, but the story of Daniel Kahneman and Amos Tversky and their research into the psychology of judgement and decision making, creating a cognitive basis for common human errors that arise from heuristics and biases, was an eye opener.

In psychology, heuristics are simple, efficient rules which people often use to form judgments and make decisions. They are mental shortcuts that usually involve focusing on one aspect of a complex problem and ignoring others. These rules work well under most circumstances, but they can lead to systematic deviations from logic, probability or rational choice theory. The resulting errors are called “cognitive biases” and many different types have been documented.

Heuristics usually govern automatic, intuitive judgments but can also be used as deliberate mental strategies when working from limited information. Kahneman and Tversky created the heuristics and biases research program, which studies how people make real-world judgments and the conditions under which those judgments are unreliable. Their research challenged the idea that human beings are rational actors, but provided a theory of information processing to explain how people make estimates or choices. Kahneman won a Nobel Prize in economics for his work in behavioral economics.

To put their research into terms the common person can understand, human decision making is extremely flawed due to our biases, feelings, irrational thought processes and beliefs in falsehoods. It’s over-confidence in our decision making ability that causes us the most problems. For the average person this can result in financial hardship, frustration or a premature death.

When high level government officials, bankers or corporate executives make flawed decisions due to their biases, it can mean war, financial disasters, depressions, or disastrous legislation like Obamacare. Hubris, egotism and faulty reasoning, as noted by Mark Twain one hundred and fifty years ago, can kill you and in some cases lead to war and unthinkable levels of death and destruction.

“It’s not what you don’t know that kills you, it’s what you know for sure that ain’t true.”  – Mark Twain

In the seven weeks since the election of Donald Trump as our next president, I’ve witnessed the largest case of hindsight bias in world history. Hindsight bias, also known as the knew-it-all-along effect or creeping determinism, is the inclination, after an event has occurred, to see the event as having been predictable, despite there having been little or no objective basis for predicting it.

On November 7 the “expert” pollsters like Nate Silver; every corporate mainstream media network, newspaper, and website; along with elitist economists, professors, Hollywood movie stars, Wall Street bankers, and billionaire oligarchs; were 100% sure Hillary Clinton was going to be elected president. Only the deplorables thought otherwise – and they spoke loudly. Putin had nothing to do with the result.

These very same “experts” and “deep thinkers” now act as if Trump’s election was foreseeable, predictable and the likely outcome. They bloviate about how and why he won as if they knew it was going to happen. When 99% of all establishment “experts” were sure Trump was going to be crushed in a Clinton landslide, why should anyone listen to a word they say?

The same people who didn’t see even the faintest possibility of a Trump victory now expect the ignorant masses to believe their analysis of what will happen next. I would like to attribute their obtuseness to cognitive biases, but I believe it is more insidious. The Deep State propaganda machine is hard at work spreading falsehoods.

“A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. Authoritarian institutions and marketers have always known this fact.” – Daniel Kahneman, Thinking, Fast and Slow

The onslaught of 2017 predictions from a myriad of Wall Street “experts” talking their book, highly educated economists demonstrating their lack of prescience, mainstream media pundits peddling propaganda and cheerleaders cheering for their home teams, has already begun. I haven’t written an annual forecast article in a few years because I was tired of being wrong. Since I have no newsletters or books to sell, no investments to peddle, and no agenda to push, an annual forecast will just be my best guess at what will happen in 2017.

The two biases most likely to color my analysis are confirmation bias (The tendency to focus on information in a way that confirms my preconceptions) and pessimism bias (The tendency to overestimate the likelihood of negative things happening). My family and friends think I’m a pessimist. I think I’m a realist. I try to use data to back-up my conclusions, but as George Dvorsky points out, our brains often lead us astray.

“The human brain is capable of 10¹⁶ processes per second, which makes it far more powerful than any computer currently in existence. But that doesn’t mean our brains don’t have major limitations. The lowly calculator can do math thousands of times better than we can, and our memories are often less than useless — plus, we’re subject to cognitive biases, those annoying glitches in our thinking that cause us to make questionable decisions and reach erroneous conclusions.” – George Dvorsky

My predictions will be framed by my belief we are midway through a Fourth Turning era of crisis. The three catalysts framing this Fourth Turning are debt, civic decay, and global disorder. No amount of normalcy bias, optimism bias, over-confidence, or desire for the status quo, will take precedence over the uncontrollable mechanisms propelling this Fourth Turning.

We are in the midst of a once in a lifetime crisis and there is only one thing more frightening than not knowing what is coming next, and that is living in a world run by “experts” who think they know exactly what is going to happen next. These are the same “experts” who didn’t see the 2005 housing bubble, the 2008 financial collapse, the EU implosion, Brexit, or the Trump presidency.

“It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what is going on.” –  Amos Tversky

I try to understand the world around me every day, but the hyper-complexity, noise, Deep State propaganda, and volume of data points is overwhelming to our easily distracted brains. I have constructed a story in my mind of how things will develop over the next five to ten years based upon the generational theory put forth by Strauss & Howe in their book The Fourth Turning. It is not a story with a happy ending.

I don’t have high confidence that I understand how it will play out and what specific events will propel history in the making. I can admit my deficiencies, while people in power with the ability to blow up the world overestimate their understanding of the world and ignore the role of chance in events.

“We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events.” – Daniel Kahneman, Thinking, Fast and Slow

Knowing what I don’t know about the unknowns, I’ll try and use what I do know to make some prognostications about 2017:

Debt Forecast

It is fascinating to me no one seems all that worried about the systematically dangerous levels of global debt supporting essentially bankrupt governments, banks and consumers. Global debt stood at $142 trillion at the end of 2007, just prior to a worldwide financial meltdown, caused by too much bad debt in the financial system.

To “fix” this problem, central bankers around the globe ramped up their electronic printing presses to hyper-drive and created another $57 trillion of debt by mid-2014. They haven’t taken their foot off the gas since. Today, global debt most certainly exceeds $225 trillion and has surpassed 300% of global GDP. Rogoff and Reinhart made a pretty strong case that when debt to GDP exceeds 90%, disaster will follow.

Global debt issuance reached a record $6.6 trillion in 2016, with corporations accounting for $3.6 trillion – most of which was used to buy back their stock at all-time highs. What could possibly go wrong? The level of normalcy bias amongst financial “experts”, the intelligentsia, and the common man is breathtaking to behold. We are in the midst of the mother of all bubbles, never witnessed in the history of mankind, and we pretend everything is normal, with no consequences for our reckless disregard for honesty, rational thinking, or simple math.

The 2000 dot.com bubble and the 2008 housing bubble were one dimensional. This mother of all bubbles required the global coordination and unprecedented irresponsible intervention of the US Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BOJ), the Bank of England (BOE) and the Swiss National Bank (SNB) to lead the world to the brink of monetary disaster. The highly educated theorists running these central banks have created tens of trillions in unpayable debt while suppressing interest rates to zero or below at the behest of their Deep State masters.

The result is simultaneous bubbles in stocks, bonds and real estate. The pin destined to pop all the bubbles is slightly higher interest rates. The 1% increase in the 10 Year Treasury is already causing havoc in the housing market, the bond market and is hammering pension funds. With the hundreds of trillions in globally interconnected derivatives primed to detonate, 2017 could be an explosive year.

Here are a few things I think could happen in 2017 on the economic front:

• The national debt stands at $19.9 trillion and will reach $20 trillion before Obama departs. With spending on automatic pilot and tax revenue in decline, the national debt will reach $21 trillion in 2017. With most of the debt financed short-term, the increase in rates will ratchet the interest on the debt from $433 billion to over $550 billion.


• With the CPI increasing by over 3% in the first few months of the year, the Fed will continue to raise rates, and the 10 Year Treasury will breach the 3% level.


• Home prices have surpassed the 2006 peak, even though existing home sales are still 20% below 2006 levels and housing starts are 50% below 2006 levels. The entire “recovery” has been engineered by the Fed and Wall Street at the high end of the market. With mortgage rates up 1% already, the further increase will result in existing home sales and housing starts falling by 20% in 2017 and home prices falling by 5% to 10%.

• The short-term OPEC agreement will allow oil prices to move back to $60 per barrel, further eating into consumer discretionary spending. Desperate fracking companies needing cash flow to service their debt will ramp up. Bankrupt or near bankrupt countries like Venezuela, Mexico, and Iran will also increase production. With a slowing global economy and surging supply, prices will collapse again into the $40s in the second half of the year.


• Holiday sales for the bricks and mortar retailers will be reported in January as lukewarm at best. By February, the store closing announcements will reach into the hundreds. Sears will finally declare bankruptcy and shutter at least 50% of their stores. Mall developers will begin to declare bankruptcy as vacancies and rising interest rates create a perfect storm.


• Consumer debt will reach the previous high of $1 trillion, as subprime student loan and auto debt continues to accumulate at an astounding pace. The spigot for student loans is likely to be tightened under Trump, with over 25% of the loans effectively in default. Auto sales (if you can call six year financing and 40% leases, sales) peaked in 2016. Millions of auto buyers are underwater on their loans, subprime auto loans are going into default quicker than you can say Cadillac Escalade, and higher interest rates will price out more potential suckers.


• The faux jobs recovery is running out of steam. With non-existent wage growth, surging costs for rent, health care, energy, and credit cards tapped out, American families will hunker down and reduce spending further. With consumer spending accounting for 68% of GDP, this will lead to an official recession by the middle of 2017.


• All the recent surveys showing consumer confidence soaring and optimism for 2017 are based on nothing but hope. The promises of a Trump administration will not come to fruition until 2018 at the earliest. He will meet resistance from Democrats across the board and resistance amongst his own party. His grand plans for massive tax cuts and spending increases will run into the reality of $1 trillion annual deficits. As reality sets in, and recession arrives, the unwarranted optimism will fade rapidly. Tax cuts will be tempered by reduced spending plans.


• The USD hitting fourteen year highs against the basket of worldwide currencies does not bode well for bringing manufacturing jobs back to make America great again. The reason for the strong dollar is because we are the best looking horse in the glue factory. With Europe and Japan promoting negative interest rates and the Fed slowly raising rates, the dollar will continue to rise. This will hurt our manufacturing businesses, increase our $500 billion annual trade deficit further, and depress the profits of our global corporations.


• With rising inflation, rising interest rates, stagnant wages, falling corporate profits, stock valuations at all-time highs, and corporations no longer able to finance stock buy backs at no cost, the stock market will finally hit the wall after a seven year bull market. This last surge of euphoria, based on nothing but Trumpmania sweeping Wall Street, will constitute the final blow-off. The market is currently valued to provide nominal returns of less than 1% over the next twelve years and is likely to experience an abrupt sell-off of 50% in the near future. I believe the near future will be 2017. I think the powers that be will be testing Trump’s mettle in his first year to see if he’ll play ball and do their bidding.

“The illusion that we understand the past fosters overconfidence in our ability to predict the future.”  – Daniel Kahneman, Thinking, Fast and Slow

In Part Two of this article I will ponder how much further our civic decay and global disorder will advance in 2017. Over-confidence, hubris and arrogance of our leaders will be the driving factors.