The World's Best Book Summaries
What is narrative fallacy? When and why do you make this fallacy, and how can you avoid it? The narrative fallacy is the tendency to create a story with cause-and-effect explanations out of random details and events. We fall victim to the narrative fallacy because our brains want to make sense of a random world. Learn why your brain is so prone to falling for the narrative fallacy and how to counter it.
What is the endowment effect? Am I affected by it? How does it function in my everyday life? The endowment effect is the theory that people keep an object and value it more highly once they own it. In essence, the endowment effect causes people to overvalue their belongings. We’ll look at three examples of the endowment effect and how you’re susceptible to it.
What is hindsight bias? How does it work, and how can you avoid it? Hindsight bias is the tendency to believe you have predicted events or outcomes that were unpredictable. Hindsight bias is a problem because it inflates our confidence about predicting the future. We’ll look at hindsight bias examples that make the above definition clearer. Learn why the hindsight bias in psychology is an issue and how to overcome it.
What is “fast thinking?” When should you use it, and when should you slow down? Fast thinking is thinking that is automatic and quick. It uses little or no effort, and no sense of voluntary control. Learn when to trust your fast thinking and why formulas usually beat intuitions.
What is outcome bias? How does it manifest in your everyday life, and how can you avoid it? Outcome bias is the tendency to evaluate the quality of a decision when the outcome is already known. People who succeeded are assumed to have made better decisions than people who failed. We’ll look at outcome bias examples and why we’re so vulnerable to outcome bias.
What is “slow thinking?” How can you use it to become a better thinker and make better decisions? Slow thinking is when you allocate attention to the effortful mental activities that demand it, including complex computations. It’s often associated with the subjective experience of agency, choice and concentration. We’ll cover what slow thinking is and how to use it to make better decisions.
Who is Wing Chau of The Big Short fame? What was his role in the 2008 financial crisis, and why was it controversial? And how did he make an estimated $26 million shuffling papers? Wing Chau is an investment advisor and bond manager whose role as a CDO manager was depicted in The Big Short. Wing Chau wasn’t happy with the way he came across in the book and movie. Learn why his position as a “CDO manager” was, and is, controversial and how he contributed to the 2008 financial crisis.
How were the credit rating agencies involved in the financial crisis of 2007-2008? Why did they fail so miserably in their role rating subprime? We’ll cover how credit rating agencies contributed to the financial crisis and why their failures were the result of both incompetence and greed.
The movie The Big Short, starring Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt, among others, is based on the 2010 book The Big Short: Inside the Doomsday Machine by Michael Lewis. Do you know the real story behind the movie? The Big Short explores the origins of and fallout from the 2007-2008 financial crisis through the eyes of a handful of eccentric and oddball investors who saw that the U.S. housing market—and, by extension, the entire financial system—was built on a foundation of sand.
What is the planning fallacy? How can I avoid it? And what are some examples of the planning fallacy? The planning fallacy is the phenomenon of habitually underestimating the amount of time and resources required to finish a project. When estimating for a project, you tend to give “best-case scenario,” which rarely happens. We’ll look at a planning fallacy example that fleshes out the above definition, and cover how the planning fallacy works and how to avoid it.