Here is a useful and engaging book that you will never tire of reading. The author examines the faulty reasoning which leads us to make mistakes and shows us how to avoid them. “The Art of Thinking Clearly” is a compendium of very short chapters, conceived like articles which are full of punch, pizzazz and brimming with good sense.
You can begin with the first article or choose one at random. I found one of the most interesting articles in the middle of the book. It focuses on the subject of information or to be more precise, it highlights the danger of being overloaded with information.
We live in a period in time where we are literally saturated with information thanks to smart phones, the Internet as well as nonstop television channels. Furthermore, many professions like managers, economists, bankers, analysts and scientists are either commissioning studies or writing reports.
Rolf Dobelli believes that additional information is a waste of time and money and it can also put you at a disadvantage. To prove his point he tells us that Gerd Gigerenzer of the Max Planck Institute in Germany asked students in the University of Chicago and in the University of Munich which city has more inhabitants, San Diego or San Antonio? Sixty two percent of Chicago students guessed right hence: San Diego has more. But incredibly every single German student replied correctly. The reason is that all of them had heard of San Diego but not necessarily of San Antonio, so they chose the more familiar city. But for the Chicagoans both cities were household names. The American students had more information and it misled them.
In another story, the author reminds us that all the articles, interviews and reports made by economists, financial analysts, consultants and experts working in banks, hedge funds, universities and governments, did not prevent the financial crisis from affecting the global markets. Therefore the author warns us against hoarding useless data.
“Do your best to get by with the bare facts. It will help you make better decisions. Superfluous knowledge is worthless, whether you know it or not. The historian Daniel J. Boorstin rightly said: “The greatest obstacle to discovery is not ignorance, it is the illusion of knowledge”.
Dobelli also warns us against overestimating our knowledge and abilities. This overconfidence effect is more pronounced in men as women tend not to overestimate their knowledge and abilities. He enjoins us to be skeptical of predictions made by experts and to give preference to the pessimistic scenario. This way of looking at things gives you a better chance of judging the situation.
The Art of Thinking Clearly abounds with regal stories like the one related by Charlie Munger about the German scientist Max Planck. After he was awarded the Nobel Prize in Physics in 1918 , Professor Planck gave numerous conferences. But he always delivered the same lecture on new quantum mechanics. Over time, his chauffeur got to know it off by heart. So one day, he suggested that he would deliver the lecture while Professor Plank would sit in the first row wearing the chauffeur’s cap. Plank agreed to the idea and that same evening, he listened to a long lecture given by his driver in front of a distinguished audience. Later, a physics professor stood up with a question. The driver replied: “Never would I have thought that someone from such an advanced city as Munich would ask such a simple question! My chauffeur will answer it”
This story implies that there are two types of knowledge: the real knowledge that we see in people who have dedicated the time and effort to study and master a topic. The second kind of knowledge is the pseudo knowledge embodied by Professor Planck’s driver. Such people give the impression they know but in fact their knowledge is not real.
To guard against this false knowledge, Warren Buffet’s business partner, Munger, came up with the expression “circle of competence”. His best advice is:
“You have to stick within what I call your circle of competence. You have to know what you understand and what you don’t understand…So you have to figure out what your aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose … You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence”.
In other words, true experts recognize the limit of what they know and what they do not know. When they find themselves outside their circle of competence, they will admit that they do not have the answer.
Another story deals with envy which is so common nowadays. Many things spark envy: status, wealth, youth, talent, popularity, beauty and luck. We tend to envy the people who are similar to us in age and career and we don’t envy rich people from another century. As Aristotle rightly said: “Potters envy potters”
So how can you curb envy? First, you need to stop comparing yourself to others. Second, you must find your “circle of competence and create a niche where you are the best. It doesn’t matter how small your mastery is. The main thing is that you are king of the castle.
“In today’s world envy is no longer vital. If my neighbor buys himself a Porsche, it doesn’t mean that he has taken anything from me.
When I find myself suffering pangs of envy, my wife reminds me it’s okay to be envious but only of the person you aspire to be” says Dobelli.
The author also asks us to reflect on the reasons behind success.
The truth is that there are very few businesspeople capable of setting up successful companies one after the other. Most business people sell their shares within ten years. Yet we assume that they are blessed with talent and are able to create other start-ups. So why do they stop? The answer is simple: because they failed at succeeding. Luck plays a greater role than skill does.
Skill and hard work are not the only keys to success. “They are necessary but not sufficient ” explains Dobelli:
“When a person is successful for a long time, more than that, when they enjoy more success in the long run compared to less qualified people, then and only then is talent the essential element. This is not the case with company founders, otherwise, the majority of successful entrepreneurs would, after the first achievement, continue to found and grow second, third, and fourth start-ups.”
Incidentally, researchers have also determined that in 40 percent of cases the world’s best companies are managed by weak CEOs whose performances are due to luck especially with the financial markets where chance is the deciding factor.
Warren Buffet famously said that “A good managerial record is far more a function of what business boat you get into than it is of how effectively you row.”
And unsurprisingly, in the last chapter, the author enjoins us not to read or listen to the news. We tend to react disproportionately to different types of information. Scandalous, shocking and people-based news stimulate us whereas abstract, and complex information sedates us. News is also irrelevant and a waste of time says the author who concludes that one should kick the habit of reading or watching the news completely: “Instead, read long background articles and books. Nothing beats books for understanding the world” concludes Rolf Dobelli.
“The Art of Thinking Clearly” is a wonderful book, informative and entertaining. It shows us how to avoid the errors we make in everyday life and on the contrary helps us to be very smart.
You can begin with the first article or choose one at random. I found one of the most interesting articles in the middle of the book. It focuses on the subject of information or to be more precise, it highlights the danger of being overloaded with information.
We live in a period in time where we are literally saturated with information thanks to smart phones, the Internet as well as nonstop television channels. Furthermore, many professions like managers, economists, bankers, analysts and scientists are either commissioning studies or writing reports.
Rolf Dobelli believes that additional information is a waste of time and money and it can also put you at a disadvantage. To prove his point he tells us that Gerd Gigerenzer of the Max Planck Institute in Germany asked students in the University of Chicago and in the University of Munich which city has more inhabitants, San Diego or San Antonio? Sixty two percent of Chicago students guessed right hence: San Diego has more. But incredibly every single German student replied correctly. The reason is that all of them had heard of San Diego but not necessarily of San Antonio, so they chose the more familiar city. But for the Chicagoans both cities were household names. The American students had more information and it misled them.
In another story, the author reminds us that all the articles, interviews and reports made by economists, financial analysts, consultants and experts working in banks, hedge funds, universities and governments, did not prevent the financial crisis from affecting the global markets. Therefore the author warns us against hoarding useless data.
“Do your best to get by with the bare facts. It will help you make better decisions. Superfluous knowledge is worthless, whether you know it or not. The historian Daniel J. Boorstin rightly said: “The greatest obstacle to discovery is not ignorance, it is the illusion of knowledge”.
Dobelli also warns us against overestimating our knowledge and abilities. This overconfidence effect is more pronounced in men as women tend not to overestimate their knowledge and abilities. He enjoins us to be skeptical of predictions made by experts and to give preference to the pessimistic scenario. This way of looking at things gives you a better chance of judging the situation.
The Art of Thinking Clearly abounds with regal stories like the one related by Charlie Munger about the German scientist Max Planck. After he was awarded the Nobel Prize in Physics in 1918 , Professor Planck gave numerous conferences. But he always delivered the same lecture on new quantum mechanics. Over time, his chauffeur got to know it off by heart. So one day, he suggested that he would deliver the lecture while Professor Plank would sit in the first row wearing the chauffeur’s cap. Plank agreed to the idea and that same evening, he listened to a long lecture given by his driver in front of a distinguished audience. Later, a physics professor stood up with a question. The driver replied: “Never would I have thought that someone from such an advanced city as Munich would ask such a simple question! My chauffeur will answer it”
This story implies that there are two types of knowledge: the real knowledge that we see in people who have dedicated the time and effort to study and master a topic. The second kind of knowledge is the pseudo knowledge embodied by Professor Planck’s driver. Such people give the impression they know but in fact their knowledge is not real.
To guard against this false knowledge, Warren Buffet’s business partner, Munger, came up with the expression “circle of competence”. His best advice is:
“You have to stick within what I call your circle of competence. You have to know what you understand and what you don’t understand…So you have to figure out what your aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose … You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence”.
In other words, true experts recognize the limit of what they know and what they do not know. When they find themselves outside their circle of competence, they will admit that they do not have the answer.
Another story deals with envy which is so common nowadays. Many things spark envy: status, wealth, youth, talent, popularity, beauty and luck. We tend to envy the people who are similar to us in age and career and we don’t envy rich people from another century. As Aristotle rightly said: “Potters envy potters”
So how can you curb envy? First, you need to stop comparing yourself to others. Second, you must find your “circle of competence and create a niche where you are the best. It doesn’t matter how small your mastery is. The main thing is that you are king of the castle.
“In today’s world envy is no longer vital. If my neighbor buys himself a Porsche, it doesn’t mean that he has taken anything from me.
When I find myself suffering pangs of envy, my wife reminds me it’s okay to be envious but only of the person you aspire to be” says Dobelli.
The author also asks us to reflect on the reasons behind success.
The truth is that there are very few businesspeople capable of setting up successful companies one after the other. Most business people sell their shares within ten years. Yet we assume that they are blessed with talent and are able to create other start-ups. So why do they stop? The answer is simple: because they failed at succeeding. Luck plays a greater role than skill does.
Skill and hard work are not the only keys to success. “They are necessary but not sufficient ” explains Dobelli:
“When a person is successful for a long time, more than that, when they enjoy more success in the long run compared to less qualified people, then and only then is talent the essential element. This is not the case with company founders, otherwise, the majority of successful entrepreneurs would, after the first achievement, continue to found and grow second, third, and fourth start-ups.”
Incidentally, researchers have also determined that in 40 percent of cases the world’s best companies are managed by weak CEOs whose performances are due to luck especially with the financial markets where chance is the deciding factor.
Warren Buffet famously said that “A good managerial record is far more a function of what business boat you get into than it is of how effectively you row.”
And unsurprisingly, in the last chapter, the author enjoins us not to read or listen to the news. We tend to react disproportionately to different types of information. Scandalous, shocking and people-based news stimulate us whereas abstract, and complex information sedates us. News is also irrelevant and a waste of time says the author who concludes that one should kick the habit of reading or watching the news completely: “Instead, read long background articles and books. Nothing beats books for understanding the world” concludes Rolf Dobelli.
“The Art of Thinking Clearly” is a wonderful book, informative and entertaining. It shows us how to avoid the errors we make in everyday life and on the contrary helps us to be very smart.
