The Image

 “The thing about this guy,” my young colleague continued, “is that he just will not let you talk.  He is so full of himself and everything you say is interrupted to let you know that you are wrong and he knows better.”
He was speaking of a medical professional in his 60s, known in his circles as an expert bird photographer, with his images being widely admired when he displays them.  Yet, he is an unpopular man.  
“Sir, he is extremely possessive.  As an example, if there is a great location to observe and photograph birds that he has stumbled upon, he will keep that secret.  On one occasion, when he received information that a rare migratory bird was spotted in a grassland, he did all the photography he could and then let everyone know about the location after the bird had left!  He disturbed the bird repeatedly to improve his images, which is a wrong thing to do and he knows it.  Can you believe that he now brags about how he did that; just look at his gumption!”

We drive on in the car and this description of the man gets me thinking.  How did he become like this?  The insecurity, possessiveness, desperate need for exclusivity, the superiority that seeks to prove others wrong (a syndrome I have, in jest, labelled ‘I no more!’) that borders on arrogance and vanity, the belief that everything should revolve around him…..

It is a long car drive, long enough for the answer to unravel slowly, for revisiting a person’s imagined history defines where he is now.  A childhood spent in insecurity with possibly unrelenting parents who believed that praise would spoil the child, an adolescence that felt the scarcity of warmth and received conditional praise instead when academic performance met parental expectations.  A youth spent in proving oneself, yet in remaining unproven, or with a circle of friends where each one lived to tell a self-absorbed tale and he needed to belong.  So when money - lots of it - reached him, that insecurity, possessiveness, attention-seeking behaviour and obsession with himself did not go away but only accelerated, for he could afford equipment and exclusivity that was designed to exclude and inflict to feed an inner seeker of solace.

Beneath all that bravado, I suggested to my colleague, this man was deeply unhappy and troubled, wanting affirmation and status.  Perhaps he knew that the praise he received was qualified and designed to flatter, yet he needed - and still needs - it to look in the mirror and say, “I matter”.  Those flashes of brag and I-me-myself are conversations with himself.

Once we recognise the vulnerability beneath the bravado and display, dislike may change its form to one of empathy.  Perhaps sympathy as well. 

And the whole truth is that each of us knows someone like that photographer of images, who has been trapped in one of his own. 

A Learning from Chess

 It is the mark of a fine chess player to tip over his own king when he sees that defeat is inevitable, no matter how many moves remain in the game.

- quoted in A Gentleman in Moscow

Why Amazon doesn't need manners to win you over

 A mildly interesting facet of behavioural economics was on display over this weekend when Amazon launched a sale.  A food product that I wished to buy had a condition attached: only 3 units per customer (Amazon did not say, please.  Manners were never their strong point).  That’s artificial scarcity, isn’t it?

Here’s what research on shopping behaviour tells us: when there is a limit (like the one above), shoppers tend to buy more - that’s right, more - than when there isn’t one.  That phrase - limit of three - acts as an anchor in our (generally muddled) heads.

Which, of course, brings me to my gurus Dan Kanhemann and Amos Tversky and a story.  They once rigged a wheel of fortune.  It was marked from 0 to 100, but they had it built so that it would stop only at 10 and 65.  They then got students of the Univ of Oregon as participants in this experiment.  The wheel would be spun and the students would write down the number on which the wheel stopped, which, of course, was either 10 or 65.

This was followed by two questions:

• Is the percentage of African nations among UN members larger or smaller than the number you just wrote?

• What is your best guess of the percentage of African nations at the UN?

You can guess what the students did, right?  

Those who saw 10 estimated that 25% of African nations were represented at the UN.  Those who saw 65?  

Their guess was around 45%. 

Anchoring is a pervasive bias.  The Decision Lab has this to say:

The anchoring bias is a cognitive bias that causes us to rely heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor instead of seeing it objectively. This can skew our judgement and prevent us from updating our plans or predictions as much as we should.

https://thedecisionlab.com/biases/anchoring-bias

Here’s just one example of this bias ( in taking investment decisions) and why we need to learn about it and our propensity to be influenced by it:

https://www.financialexpress.com/money/equity-investing-how-to-avoid-anchoring-bias-when-investing-2223428/

…and a great piece on how to deal with it:

https://hbr.org/2022/08/dont-let-anchoring-bias-weigh-down-your-judgment

Are your gut bacteria asking for Vaseline?

This post is remarkable, isn't it? 

 
Can you guess which bias - a bias in each one of us (which we may not want to admit) - gets triggered by posts such as these?

Some options for you to pick from:
- The Confirmation Bias
- The Sunk Cost Bias
- The Survivorship Bias
- The Halo Effect
- The Conformity Bias
- None of the above (now I sound like an exam paper, albeit one that hasn't leaked out) 
If none of the above, then what is it?

Happy Tuesday and keep that frown upside down 🙂
Scroll down for the answer......…

No, some more down.......

Yuppp, some more down.......

Well, it is the Survivorship bias that might be triggered by posts like these: someone lived to be 96, after eating vaseline every day, so.....
...so should I do that too?

It's a false correlation, of course.  If it were true and endorsed by medical science, all of us would have vaseline stocked in the kitchen, alongside Chawanprash.  

Ok, so what if - just if - there is a correlation?

Nope, even if there were to be correlation, it does not mean causation - that one causes the other: One person has vaseline, lives long, does not mean it's the mandatory dietary reco for a long life.  He could have lived long because he brushed his teeth with pumpkin paste or walked on walnuts or (as is more likely) had a good set of genes (moral: choose your parents wisely).

Back to Survivorship Bias:  
Have you been getting carried away by it and justifying it to yourself (and others)?  Learning more about this can save you a lot of money (and time and other equally useful stuff).  

Lives too, as Abraham Wald will tell you.

To learn more about survivorship bias, here's the place to go to:
https://thedecisionlab.com/biases/survivorship-bias
And don't miss the story of Abraham Wald in this article, if you haven't heard it before - it's just brilliant!

A Stock Market Rally, A Graph That Got Nowhere And....Your Prediction

Something curious happened on June 3^rd 2024, the day before the results of the Indian election were announced: the stock market shot up by over three percent.  This was on the back of a bunch of exit polls that predicted that the Government of the day would return to power with a glorious mandate.  

These exit polls, it was widely understood, were – ahem – not exactly the results of robust analysis and were largely the predictions of those who have some form of alignment, however tenuous, with the Government.  

Yet the markets shot up as a result of a flimsy set of reports that seemed to contradict all the trends on the ground.  Why?
 
To understand this, let me ask a question: do you consider yourself to be rational? 
Yes?
Somewhat yes?
 
Let us do an experiment, a simple one.  Imagine you are a farmer planning to grow wheat on your large farm, for the seeds of which you have just paid an advance of Rs Ten thousand.  I come over and show you a graph with the market price of wheat rising and falling over the last three years; it is a fluctuating line, with no clear trend that seems visible.  I now ask you to make a forecast of where the price would move next this season. 

As a farmer, of course, you will receive extra money if wheat prices go up.  And I go one step further: I offer you a reward if your forecast is correct. 

What will be your prediction, up or down?  Will the price increase or will it fall?  Note that you are not allowed to be an economist and say It Depends.
 
Read on after you have made your prediction….
Now, let me do this experiment with forty-nine others.  

And then.... I pick yet another random set of fifty people and tell them the same story, but put them into a different role: they run bakeries and wheat is their primary ingredient, so a drop in the price of wheat would yield a bonus. 

What is their forecast?  And I offer them too a reward if their forecast is correct.

 
In 2011, Guy Mayraz, a prof at the University of Oxford, conducted a variation of this experiment and here is what he found: the farmers hoped that the price of wheat would rise; as a consequence, they also predicted that the price of wheat would rise.  The bakers hoped for – and predicted – the opposite.
 
There is a name for this behaviour, isn’t it?  Wishful thinking.

So, were you - hand-on-heart - rational? 

Now, if what was seen in the markets on June 3^rd wasn’t wishful thinking, what was it?

Here is what happened on June 4th:

 
 
 
 
 
 
 

When Less is More

A lovely lovely piece on persuasion, with an excellent message.  The summary of it is:

Bumper message: to convince someone (of something) build an argument with less, but qualitatively powerful, points.

When you add a point B and a C and, well, D and end with the 26th argument at Z, the impact is less and folks snatch at the weaker points to not be convinced.  This is, in essence, the argument dilution effect.

(Now, I need to use to persuade that idiot of a neighbour to not turn on his genset at 2 am...)

https://smith.queensu.ca/insight/content/The-Simple-Way-to-Be-More-Persuasive.php

Smart People, Red Balls, Uncertainty and The Most Dangerous Man in America (and Why Stock Market Forecasts Are Nonsense)

Daniel Ellsberg, an economist in the mid-20th century, posed this problem:

Suppose there are two boxes: box A holds 50 red and 50 black balls; box B also contains a total of one hundred red and black balls, but in a ratio which is unknown.  A ball is to be drawn at random from one box, but you can choose the box.  You win $100 if the ball is red.

Which box do you choose?

If you are like me and like most other normal people (which is a insidious way to pay myself a compliment), you are going to say, "Of course, I will choose box A.  Because it's predictable (and because I am human)."

Lemme complicate it for you.  Ellsberg now asks you this:

Now suppose you win $100 if the ball drawn is black, but the boxes are left unchanged; will you change your choice of box?

Assuming that you are (still) normal, here's what I think you are thinking: "Well, nothing really has changed.  So, why should I change my choice?  I will stick to box A."  Unless, of course, you cannot make up your mind and choose to flip a coin and it shows up box B (in which case, stop reading this blog immediately and meditate till you are hungry).  

Do you know that this problem (the balls problem, not meditation, which isn't that big a problem) is called the Ellsberg Paradox?  That is an unusual label: it just does not make sense to call it a paradox because there is nothing paradoxical about it.  Which, in good turn, brings me to a sub-species of humans that I abhor above all others: homo economicus.  Economists, those greasy Orthodox types 

who go around saying Humans Are Rational Decision Makers, despite all evidence pointing in the opposite direction.  

It's they who called it a paradox, because they could not understand why humans (normal ones, Homo sapiens normalicus) did not change their option.  

According to these Orthodox Economists with their focal length (and cerebellum) detached from reality, if someone chose box A first, then she did so with good reason; her  belief is that it contains more red balls than box B - in other words, in her view, the probability of a red ball being drawn is higher.  That view, they said, is, for her, a fact, something she believes to be true, else why should a Rational Human choose A over B?  

Do you see how silly this is?

Therefore, these economists continued, in the follow-up question, she should change her choice of box, in the belief that box B will have more black balls.  

This is entirely segregated from common sense, isn't it?  One school of economists - again,the Orthodox types (bet you did not guess that) - believe that, even when we have no basis to do so, we should always think in terms of probabilities (even if we have to invent them. I am serious!).  The net result of decades of such thinking and academic acknowledgement of such thought is that we take decisions assigning probabilities to future events about which we know, well, zilch.  

I am always astonished at how the extraordinarily bright people I know spend most of their time doing useless things like forecasting stock prices or market movements or 2023 annual sales or economic growth, and then pretend that these numbers are sacrosanct, when not one of these bright, enthu cutlets can even forecast if their domestic help will take a day off tomorrow.  

Sometimes, if there are enough people to conjure up numbers that seem to be alike, it becomes - for a while - a self-fulfilling prophecy (example: the private equity investment insanity of the last few years).  It's only, Warren Buffett once said, when the tide goes out that you discover who's been swimming naked.

Lesson: Measure what you can.  For everything else, there's Mastercard.

(this is an aside.  I tend to connect random things).

Back to Daniel Ellsberg.  He was once called The Most Dangerous Man in America by Henry Kissinger, which is a museum Exhibit A for a pot calling the kettle black.  

If you want to know why, here it is

https://theconversation.com/how-richard-nixons-obsession-with-daniel-ellsberg-and-the-pentagon-papers-sowed-the-seeds-for-the-presidents-downfall-159113

And, finally (I promise), if you want to know why ol' Henry Kissinger was (and is) the most dangerous man in America, just check online and read till the tomatoes that you'd like to throw at him rot - there's heaps of stuff (to read, not tomatoes).

More later (blogs, not tomatoes. Can you stop your food obsession please?)