On staying within your circle of competence

In his far from mediocre book Risk Intelligence, Dylan Evans describes a professional backgammon player by the name of J.P. “He would make a few deliberate mistakes to see how well his opponent would exploit them. If the other guy played well, J.P. would stop playing. That way, he wouldn’t throw good money after bad. In other words, J.P. know something that most gamblers don’t: he knew when not to bet.” He knew which opponents would force him out of his circle of competence, and he learned to avoid them.

Excerpt from: The Art of the Good Life: Clear Thinking for Business and a Better Life by Rolf Dobelli.

On the Knowledge Illusion

How does a zipper work? Rate your understanding on a scale from 0 (no clue) to 10 (easy-peasy). Write the number down. Now sketch out on a piece of paper how a zipper actually works. Add a brief description, as through you were trying to explain it very precisely to someone who’d never seen a zipper before. Give yourself a couple of minutes. Finished? Now reassess your understanding of zippers on the same scale.

Leonid Rozenblit and Frank Keil, researchers at Yale University confronted hundreds of people with equally simple questions. How does a toilet work? How does a battery work? The results are always the same: we think we understand these things reasonably well until we’re force to explain them. Only then do we appreciate how many gaps there are in our knowledge You’re probably similar. You were convinced you understood more than you actually did. That’s the knowledge illusion.

Excerpt from: The Art of the Good Life: Clear Thinking for Business and a Better Life by Rolf Dobelli

On how higher prices increase joy but not happiness

How much pleasure do you get from your car? Put it on a scale from 0 to 10. If you don’t own a car, then do the same for your house, your flat, your laptop, anything like that. Psychologists Norbert Schwarz, Daniel Kahneman and Jing Xu asked motorists this question and compared their responses with the monetary value of the vehicle. The result? The more luxurious the car, the more pleasure it gave the owner. A BMW 7 Series generates about fifty percent more pleasure than a Ford Escort. So far, so good: when somebody sinks a load f money in a vehicle, at least they felt a good return on their investment in the form of joy.

Now, let’s ask a slightly different question: how happy were you during your last car trip? The researchers posed the question too, and again compared the motorists’ answers with values of their cars. The result? No correlation. No matter how luxurious or how shabby the vehicle, the owners’ happiness ratings were all equally rock bottom.

Excerpt from: The Art of the Good Life: Clear Thinking for Business and a Better Life by Rolf Dobelli