The one-sentence summary
You can make better choices by understanding the cognitive biases to which we all succumb.
WHAT THE BOOK SAYS
· Cognitive biases cause simple errors in most of our day-to-day thinking.
· Understanding these can help when dealing with personal problems, negotiating in business, trying to save or make money.
· There are 99 examples here – too many to summarise – so here are some examples:
Social proof: if lots of other people do something foolish, so do we.
Sunk cost fallacy: investment or ownership warps our estimate of value.
Confirmation bias: we use as evidence what we want to see.
Story bias: a good narrative makes us fall for things.
Illusion of control: you control less than you think.
Paradox of choice: the more choice we have, the less we make a decision.
Coincidence: there is an inevitably about unlikely events.
Gambler’s fallacy: there is no balancing force of the universe.
Winner’s curse: curb your enthusiasm because your ‘luck’ will change.
Loss aversion: bad events strike harder than good ones.
Hedonic treadmill: be careful what you wish for – it’s never that satisfying when you get there.
Affect heuristic: you are a slave to your emotions and always make shortcuts.
Sleeper effect: propaganda works because over time we forget where we heard something.
WHAT’S GOOD ABOUT IT
· This is an excellent synthesis of all matters relating to behavioural economics – arguably all in one place for the first time.
· 99 concepts are covered in bite size chunks of no greater than 1,000 words, so you can get the gist fast.
· They are all cross-referenced, so you can interlink theories and ideas.
WHAT YOU HAVE TO WATCH
· The examples can get a bit repetitive, with a large number drawn from finance.
· As ever, even recognising these things may not allow you to ride against your instincts – something the author freely admits.