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Why Smart People Are Actually Dumb
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Why Smart People Are Actually Dumb

  #1 (permalink)
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Why Smart People Are Actually Dumb

interesting article that i stumbled upon.. i think it happens to apply to trading decisions..

Why Smart People Are Actually Dumb

Why Smart People Are Actually Dumb

BY JAMIE CONDLIFFE

The human brain is a weird old thing. When confronted with a new, uncertain situation, it virtually always abandons careful analysis, and instead resorts to a host of mental shortcuts—that almost always lead to the wrong answer. Turns out, the smarter you are, the more likely you are to make such mistakes.

A new study, published in the Journal of Personality and Social Psychology, suggests that you can be insanely intelligent, and still fall foul when it comes simple problems because of deviations in judgment—which are known as "cognitive bias".

To work all this out, a team of researchers form the University of Toronto gave 482 students a questionnaire of classic bias problems to complete. An example question runs along the lines of:

A bat and ball cost a dollar and ten cents. The bat costs a dollar more than the ball. How much does the ball cost?

If you're rushing, you might blurt out that the ball costs ten cents. It doesn't: it costs five. If you got it wrong, your brain made some shortcuts if thought made sense, but abandoned math along the way. (If you're sat there incredulously assuming that anyone getting that wrong is a dumb-ass, hear this: more than 50 percent of students at Harvard, Princeton, and M.I.T. give the incorrect answer.)

The researchers also measured a phenomenon called "anchoring bias", but what they were really interested in assessing was how the biases correlated with intelligence. So, they interspersed tests with with cognitive measures, like S.A.T. and Need for Cognition Scale questions.

The results are unnerving. Firstly, awareness of bias in one's thinking doesn't help. As the researchers explain: "people who were aware of their own biases were not better able to overcome them." Dammit.

Turns out that intelligence makes things worse, too. Writing in the Journal of Personality and Social Psychology they explain that "more cognitively sophisticated participants showed larger bias blind spots." In fact, that finding held across many different biases, and individuals who deliberated longer seemed to be even more susceptible to making mistakes. Double dammit.

So what's going on? Why are smart people seemingly so dumb some of the time? Sadly, nobody really knows. The best hypothesis yet suggests that it's tied up with the way we perceive ourselves and others. Basically, the way we process information, so some researchers suggest, makes it far easier for us to spot biases in other people than it is for us to notice ourselves making the exact same mistakes.

As a result, it's not clear whether there's anything that can be done about shaking off the problem. I'd suggest a drink to take the edge off your intelligence, but then, I can't guarantee that would make things any better.

dont believe anything you hear and only half of what you see

¯\_(ツ)_/¯

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  #3 (permalink)
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Thanks for the article. I was looking to see more posts and then realized it was only an hour ago.
So mad lyfe what following on thoughts did it spark for you?

Keep your mind in the future, in the now.
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  #4 (permalink)
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Research is a little like the old "lies, damned lies and statistics." When you measure something there are always issues in the measurement. And conclusions. Which is why peer review and the whole process of challenge in science is so useful. Its made much worse when we just get Journo's interpretations of abstracts on articles they may well have never read. Like the TV news its about watchers/hits and entertainment first, science a distant second.

Not being willing to access the original article and thus spend the time working through the actual research I'm not sure how valid it is likely to be. I suspect that the conclusions are much weaker than suggested over at gizmodo.

If, however, you want to use your intelligence to improve your performance with biases I would recommend two books:

"What makes your brain happy and why you should do the opposite" by DiSalvo; and
"The Willpower Instinct: How Self-Control Works, Why It Matters, and What You Can Do To Get More of It" by McGonigal.

You can use your intelligence to recognize situations that will generate distortions and minimize their impact. Which of course is why most of us trade with rules not gut feel.


Last edited by cusp; June 18th, 2012 at 04:38 AM.
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Sometimes your stomach is your best tool. If it feels right, make the trade, if not, get out of the way!

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  #6 (permalink)
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I was thinking about the idea of blind spots in our thinking (one of the take-aways of the article for me).

If we look at other peoples behavior patterns we can sometimes review them more objectively than they can and see potentials remedies.

Let's say we have a friend who is not able to get a enterprise completed before starting a new one and complains that they are not making any money. They may not be able to indentify why they are not making any money. Yet if we asked them to review their last 5 business ventures we can see commonalities that are generating failure and when we ask them they might reply "I don't know they are all good ideas" and then continue to re-hash how good each idea was.

The flaw wasn't in the business idea itself. Each of the five were good. We can see that the person had two major flaws - not enough time in the preparation and research stage and a poor ability to asses how much time and work each of the steps in building the business would take.

Five people could all listen and all spot the same causes for failure and yet the person telling the story can't see it.

Keep your mind in the future, in the now.
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  #7 (permalink)
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Context may be important. I got the bat/ball question right, but because I knew it was a test question in the context of biases. If only glancing at it, our brains may take short-cuts because we're not all that interested.

Smart CEO's probably pick other execs who will view things differently as a challenge to their own biases. Probably not too many of those (more Yes-men instead) because that can make your job pretty rough at times. But then, I suppose that's why they would be deserving of "the big bucks". (Trying to think of who actually runs their company that way...no one comes to mind offhand.)

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Rules vs. stomach


Bison42 View Post
Sometimes your stomach is your best tool. If it feels right, make the trade, if not, get out of the way!

It seems to me I must stick to rules 'cause my stomach is not advanced.

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aquarian1 View Post
Thanks for the article. I was looking to see more posts and then realized it was only an hour ago.
So mad lyfe what following on thoughts did it spark for you?

i pretty much agreed that this happens all the time during life.. and is not an overall judge of smartness.. the question is tricky in the sense of wordage.. kinda like slight of hand and magic. im generally glad our brains make short cuts especially on things with repetition.. the question once figured out correctly, all other like questions will be answered(brain using its 'short cuts') correctly.. the problem is that it was the first, and in this case, the only question.


cusp View Post
Research is a little like the old "lies, damned lies and statistics." When you measure something there are always issues in the measurement. And conclusions. Which is why peer review and the whole process of challenge in science is so useful. Its made much worse when we just get Journo's interpretations of abstracts on articles they may well have never read. Like the TV news its about watchers/hits and entertainment first, science a distant second.

Not being willing to access the original article and thus spend the time working through the actual research I'm not sure how valid it is likely to be. I suspect that the conclusions are much weaker than suggested over at gizmodo.

If, however, you want to use your intelligence to improve your performance with biases I would recommend two books:

"What makes your brain happy and why you should do the opposite" by DiSalvo; and
"The Willpower Instinct: How Self-Control Works, Why It Matters, and What You Can Do To Get More of It" by McGonigal.

You can use your intelligence to recognize situations that will generate distortions and minimize their impact. Which of course is why most of us trade with rules not gut feel.

yes i can agree with you, but i do think after reading you are able to get the gist of what the article/research was getting at.


Bison42 View Post
Sometimes your stomach is your best tool. If it feels right, make the trade, if not, get out of the way!

ya ppl really can over think themselves into trouble.. i think i posted another article about the gut feeling over here: https://futures.io/psychology-money-management/20931-your-head-your-gut-how-know-trust-when.html


Tarkus11 View Post
Context may be important. I got the bat/ball question right, but because I knew it was a test question in the context of biases. If only glancing at it, our brains may take short-cuts because we're not all that interested.

Smart CEO's probably pick other execs who will view things differently as a challenge to their own biases. Probably not too many of those (more Yes-men instead) because that can make your job pretty rough at times. But then, I suppose that's why they would be deserving of "the big bucks". (Trying to think of who actually runs their company that way...no one comes to mind offhand.)

this is along the lines of what i replied to in the top quote ^^.. ppl are also smart in diff ways.. some ppl might not know which end of a hammer to pick up or put things together but might be able to solve complex mathematics like they know the back of their hand.. i like the saying, 'when someone thinks they are smart remind them that we were all learning at one time to not shit our pants..'

dont believe anything you hear and only half of what you see

¯\_(ツ)_/¯

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  #10 (permalink)
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One thing that came to mind with the bat and ball question was the idea of checking back.

For example if a person says bat $1 ball $0.10 and has a form we he puts those answers and then the form has him subtract them
Bat price ----
Ball price ----
Difference ----
Is difference = $1.00 ? Y / N

so the form brings him around to check his decision/answer against a confirming criteria.

So in trading if he is going long and a rule for him was the trend must be up (equivalent to the bat must be $1 more than the ball),

And he has a form
SMA 35 level 30 minutes ago :1368
SMA 35 level now : 1365 Difference : -5
SMA 7 level now :1362 Difference : -3

Are both differences positive? y /n

So he may have said the trend was up but the form shows him he is wrong.

Keep your mind in the future, in the now.
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