by Frank Muller
The topic is on decision making and how it is affected by ourselves and by others. As social creatures we have predictable influencers or drivers for our decision making.
From a distance almost all people will agree that there is selection bias and weighting bias. The problem is we think that bias applies to everyone but ourselves.
This behavioral issue has real consequences to every aspect of our lives.
Influence: The Psychology of Persuasion, Revised Edition: Robert B. Cialdini: Amazon.com: Books
This is a book that shows the factors that drive decision making and once known can help one “persuade” other people.
To Dr. Cialdini’s credit he exhorts the ethical use of this pattern in human decision making to help people become more successful but more importantly to use that knowledge for good.
Within investment management circles this book has been widely circulated for another purpose.
That purpose being understanding how portfolio management teams make decisions and how can a Firm manage that process to avoid the bias traps.
This book illustrates why certain people are successful at persuading. What this book does not illustrate is whether that “influencer” is actually right or more importantly is the suggestion actually a good.
Therefore, the answers contained are important to know about how groups are “persuaded” but even more critically is to figure out how to form groups that create better decision making knowing our weaknesses in being persuaded and discerning right action and standards.
Further, when we understand the tactics of “influencers” we can then defend ourselves (and those we love) better by seeing the tactic for what it is and piercing more accurately the voracity of the argument and whether the suggestion is an actual moral and ethical good.
These types of techniques that at one time where only applied within small groups can now be supercharged through technology and the hurdle for successfully influencing has been dramatically lowered as humanity’s focus is being diminished and thus our capacity for rational decision making.
As individual investors it is vital that we understand our own weaknesses in decision making and our own selection bias in whom we listen to and then act.
So, my recommendation this week is to take the time to read and mediate upon what Dr. Cialdini suggests and consider carefully how you form ourselves and our communities starting with the family in a way that increases the odds of better decision making in terms of outcomes and most importantly how those decisions correspond to doing the right thing.
Peace be with us all.
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