Tuesday, June 19, 2018

Scarcity/Abundance

Definitions

Scarcity principle can be defined as ”You put more value to the things that are limited.” Abundance principle is basically the inverse of scarcity and can be defined as ”You put less value to the things that are in excess.”

Basics of scarcity and abundance

When the availability of something is limited, it becomes more valuable. When things are the least available, they are the most desirable. If a thing is scarce or it becomes scarcer, it has more value to people. For example, sometimes a mild defect makes some collectibles more valuable compared to original ones. Large amounts of similar collectibles make all of them a lot less valuable or desired. Scarcity principle is not just about material things. It relates to information, knowledge, and communication. Same works with abundance too. They also relate to each other. When things are abundant and they become scarce the reaction to scarcity is even stronger than scarcity working by itself. People who have nothing are not likely to revolt against the government. People who have something that is taken away, because of the government, are more likely to revolt.

The power of the scarcity principle comes from the two major sources. First, people have a tendency to try to find short-cuts. Saving energy is the most important task of your brains and body. You know that things are typically better when they are harder to acquire. You associate scarcity with quality. And you are most likely to be right, but not always. The other main source of power within the principle is that when a thing becomes less available, your lose freedom to make choices. The power of this source is the strongest, when you have lost your freedom to choose. Then, you start finding a way to get your freedom to choose back. Banning something or censorship both increases a desire to have something. When something is prohibited, its desirability increases via losing a freedom to choose. When it comes to the abundance, the first source is the same, the desire for short-cuts and the second source, is a bit different. It is too easy to choose.

Combination of rarity and competition drives our desires for something to new levels. Lots of people and scarce items create unwanted consequences. Advertisers can sell their products by showing how many other people are interested in their items. If you really want to sell something, try to sell it by having all the people who are interested in it at the sample place at the same time. You definitely do not want to create an image that you have plentiful of those items to sell and no competition.

How to use/avoid effects of scarcity and abundance

It is better to have scarce resources up to some point, when you want to achieve something. Whether it is about time, money, physical labor or some other type of resource. Putting a deadline that is tight is better than having unlimited amount of time to do something. The most probable thing that happens is that you start doing things later. You should put enough time that it is possible to do something rather than waiting for a very likely failure. When it comes to money or physical labor, most solutions are focused on adding resources, instead of doing things better. This is especially typical for politicians. Coping with scarcity do not belong to their vocabularies. It is easy to use other people´s money as a leverage to get what you or your financier want and think they are abundant.

According to Robert Cialdini, a typical reaction to scarcity is a physical agitation. When you see something become less available, your ability to think diminishes. Physical agitation is a sign that you need to think why you want to have it. Most often you just want to own it. You want to use it. If this is the reason, you should remember that limited availability does not really make it better. You should always be reflecting on how you feel about things. There should be an emotional arousal as a first sign. You should calm yourself and pursue a rational state of mind. After calming down, you should ask yourself why do you want to have it? In case of an abundance, you will feel indifference. You do not really care if you use some item or lose it. The speed of getting rid of things increases. For example, you will use toilet paper faster, when you have bought a large amount of it.

All in all, optimizing the amount of resources is hard. Having enough scarcity, but not too much is not easy. There has to be some slack. Everything cannot have maximum efficiency, because whe things go wrong at that point, shit hits the fan and big failures happen.

Sources:

Influence, Robert B. Cialdini
Pre-Suasion, Robert B. Cialdini

There will be a last text before my vacation next week

-TT

Tuesday, June 5, 2018

Authority misinfluence tendency

Definitions

An authority can be defined as ”The power or right to give orders, make decisions, and enforce obedience.” or as ”A person or organization having political or administrative power and control.”

Titles, appearances and status symbols

Authorities can their appearance can be divided into three different groups: titles, outer appearance, and status items. One person can be an authority through all the combinations of these groups or with just one of them. Would you believe someone with a bachelor of science in some discipline or a PhD of the same subject? It is harder to dispute someone with a big and fancy title even though he can be wrong as well. Clothes, looks, and other aspects of appearance are effective too. Uniforms, expensive clothes, and handsome or beautiful people look more like authorities than ugly people with old and torn clothes have more authorative power. The latter people are actually more likely to be the ones who are not listened to. Some items can be associated for authoritative items. For example, expensive watches, cars, and other luxury items help people to deliver their messages. There is no guarantee that any of the three characteristics mean that a person is a believable authority.

Real authorities and pseudoexperts

It is not easy to distinguish all the pseudoexperts from the real authorities you should listen to. You can simplify things by putting experts to two different categories. Things that move and require knowledge and are uncertain normally do not have experts. And things that do not move tend to have some experts. You can put the next professions into category in which there are no experts according to psychologist James Shanteau: stockbrokers, clinical psychologists, college admission officers, personnel, court judges, counsilors, intelligence analysts, financial forecasters, finance professors, etc. You can put the next professions into category in which there are some experts: livestock judges, astronomers, test pilots, soil judges, chess masters, physicists, mathematicians who do not work with empirical problems, accountants, and insurance analysts.

The best way to separate real authorities and fools with fancy titles is to check personal track record. You should find out that these real authorities have managed to deliver better results than others for decades. They are not one hit wonders. All this personal success should be measurable with concrete terms. For example, investors who have managed to beat indices cumulatively for a clear margin for decades or venture capitalists who have helped many companies to achieve huge successes. You also have to remember that these people are experts only in their prospective domains. They are not experts in other things.

There are many pseudoexperts that disguise themselves as experts. They have many usual characteristics. They focus more on appearance than substance, they use professional jargon to explain things instead of using the language everybody can understand, they do not only talk jargon, but they complicate things too much or they explain big results with a single factor, they transfer risks to their clients and take big part of the results for themselves without having any skin in the game, and they are cherished or rewarded by the fools like themselves.

Being an authority figure

Most adults are some kind of authority figures to some kids. If you are a teacher, a parent, a police, or a priest you are likely to be an authority figure to some child. And there is a responsibility to act like one. Actions speak lot louder than words. All the people have mirror neurons in their brains. They fire when a person acts and when the same person observes the action performed by another. They are constantly working. When you do something, child´s mirror neurons observe your behavior and can learn from it. When you decide to give an order your child to do something or stop doing something, the frequency is not enough to teach him/her so much. You shouldn´t tell them anything without showing an example. If you want to teach your child to use their smartphones less, you should use less yourself. It is the most effective way of doing it. Giving an order to stop doing something is not that effective. Your child wants to be like you, you should behave they you want them to behave. If you want your children to be better persons, you should be a better person too.

Sources:

The Black Swan, Nassim Taleb
Influence The Psychology of Persuasion, Robert Cialdini
Poor Charlie´s Almanack, Peter Kaufman

Next text will be published abou 19th of June,

-TT 


Tuesday, May 29, 2018

Communication systems

Definitions

Communication system or a process can be defined as ”The transmission of information from the source of information to the user of information.” or as ”The facility consisting of the physical plants and equipment for disseminating information.”

Main components of the communication system

A communication system has five main components:

  1. An information source. It provides a message or many of them.
  2. A transmitter. It transforms the message to a signal.
  3. A communication channel. It is the medium that is used to move the signal from transmitter to a receiver.
  4. A receiver. It reconstructs the signal back into a message.
  5. The destination. It is the person for whom the message was intended to send.

In addition to these five components there are many less important ones like filters and amplifiers. There can also be many components such as transmitters, channels and receivers between the original information source and the destination. Communications systems are not perfect. There can be noise that creates distortions at any point between the source and the destination. You should never assume that there are no distortions. Transmitter can incorrectly change the message, communication channel can create noise by having too many signals moving through it at the same time, and receiver can incorrectly process the signal, which can lead to errors at the destination. The more components there are between the original source and the last destination, the more probable are the errors. This is one reason why you need some filtering for the message. Filters can be put anywhere in the system.

My writings as a communication system

Lets start from the sources. Most of the sources are the authors of the books I have read or their sources. Sometimes they are interviews of the experts in some other mediums like Youtube. You can also see it otherwise. For example, you can think about the authors as transmitters and their books as the communication channel. And then my mind is the receiver and my laptop is the destination. I create notes from the books of the authors and put them in my laptop. Now my notes are the source, I am the transmitter, and the communication channel is this blog. Your mind is the receiver and you are the final destination who decides what to do with the information I produce. You can see this communication systems having two subsystems with five main components in each as a whole single system.

As you can see, this system is not optimal for understanding mental models. It has too many components. And all of them can create more noise to the system. You could go through all the sources I use by yourself. This would eliminate many unnecessary components. It is not this simple of course. You have to consider the opportunity costs too. Going through all the sources take lots of time. And your time can be more valuable to you than learning more about each of the models. One source of errors is the language. I am not a native English speaker and I cannot copy my sources. This creates some unintended consequences. I can interpret differently things that I am reading and publish something that is not 100% right. The probability of this happening is very close to 100% in the long run. I would appreciate if somebody would tell me, when this happened and give me a reason for it. It would also help other readers.

A communication system is a topic that would require a lot more explaining. But to keep things simple, this text is enough for now. Putting much more details about the different components wouldn´t be useful for introducing this model.

Have a nice end of the week!

-TT

Tuesday, May 22, 2018

Leverage

Definition

The leverage can be defined as ”The increased force resulting from the action of a lever.”

Levers are everywhere

Levers are very common. You can probably find many of them in your immediate surroundings, or from your body. For example, think about your hands from your shoulders to your fingers. Think about your shoulder and imagine a tennis ball on it. How far you think you can move it by using your shoulder? Not very far I presume. Now, think about having this same ball on your hand. How many times farther you think you can move the ball? I haven´t measured, but probably your hand is about 10x longer than your shoulder. I am sure you can move the ball more than 10x farther with your hand. This one of the simplest levers.

If you are an employee, you are a one type of lever for your employer. One person cannot deliver all the business for all the clients. The better you are in your job, the bigger the leverage you offer for your employer. And you can ask more money from your services to the employer. The bigger the demand of your skills, the better leverage you have in wage negotiations. To be more exact, the more the employer associates your abilities to value you offer for him, the more money you can ask. All the employees are not paid by their real skills. Getting a feedback while you are practicing is a form of leverage too. A feedback from a coach is the best way to accelerate your development.

And you can also use leverage with things related to money. Your mortgage is a lever for buying a house. Without a bank, you couldn´t buy a house that costs much compared to your income. All the credit cards you use are levers as well. These are not the best ways of using leverage in financial situations. Investing in a business should be a better way of using leverage. Using other people´s money or other resources are good ways of using leverage into your own advantage.

Using leverage is dangerous

Levers can be wonderful tools. But you need to know what you are doing or you will create mostly destruction. For example, using too much dynamite to blow up something, will probably kill the user. To keep things simple, the bigger the leverage, the more dangerous it is to use it. And the bigger the leverage, the more skilled you need to be to use it properly. And sometimes too much leverage destroys everyone, no matter how skilled they are. Be aware about the delays. Sometimes, the effects of using leverage wait in hiding. Systems with self-reinforcing feedback loops and leverage can be lethal. For example, the last financial crash happened very quickly after the negative effects of too much leverage had grown enough. After this point, self-reinforcing feedback loops destroyed many banks and other financial institutes. And their owners and executives had no ways of solving problems.

Leverage points

First, I would like to say that leverage point may not be the best way to define a thing I am introducing. There are situations where using the leverage for pushing something forward gives a lot bigger outcome than the effort. Failure to choose the right point of using leverage gives the opposite result. First, imagine a big rock on a flat ground and a lever to move it. The result is irrelevant. Now imagine a big rock on a big hill on the edge of the major fall and a lever. Most leverage points are not this obvious. Some points you will not notice until you have seen their full effects. And some effects of the leverage points are not understood at all, because you haven´t noticed the point at all. This is the most probable situation.

The more skilled you are in something the better the chance you have to notice these points. Linear effects can be transformed to compounded effects by using the leverage at the right point. When this point of critical mass is reached, things start taking care of themselves. For example, you can buy more ads to sell a product, when it is on the brink of coming popular enough, and getting a massive amount of social proof. You should also try to figure out those leverage points that are producing the biggest negative effects for yourself. If you are in a competitive environment like athletes, you need to be aware of them. Your opponents will surely use them against you if they notice them.

That is all for leverage, for now.
Have a nice end of the week!

-TT

Tuesday, May 15, 2018

Flow

Definitions

Flow-state can be defined as ”The mental state of operation in which a person performing an activity is fully immersed in a feeling of energized focus, full involvement, and enjoyment in the process of the activity.” or as ”An optimized state of consciousness where you feel your best and perform your best.”

Why flow-state is important?

During flow you are in an optimal state of performance. Your creativity, productivity, and feeling of happiness is the greatest. According to Temple University sports psychologist Michael Sachs, all the olympic gold medals have been achieved during flow-states. Or are achieved at least partly by having a flow state. Fast problem solving occurs during flow. Your focus is the highest, when you are in it. You are more aware about your environment, your time flies, and your self disappears. All this helps you to move you fluidly from one decision or action to another. The level of performance is much higher than without it. It is not achievable without enough challenges. Flow state is not achievable while you are performing routine tasks.

Basic properties and components of the flow-state

In flow, you have a profound mental clarity, you are emotionally unattached and everything works completely automatically. Your thinking parts of the brain are shut down during flow, especially, your prefrontal cortex that performs executive functions. Mihaly Csikszentmihalyi, the ”father” of flow has identified ten components for flow:

  1. You have clear goals. You know what you are going to do and what is needed to achieve it. You are also skilled enough to perform it. Your task is challenging and your skill level is high.
  2. Your focus is on a limited field of attention.
  3. Your action and awareness are merged.
  4. You have lost a sense of time.
  5. You will get a direct and immediate feedback from your action. The boundaries of success and failure are clear. Learning occurs, or high level of risk damages the performer.
  6. Flow is most probable, when the challenge is a little bit harder than your skill level. Some flow researchers talk about 4 per cent.
  7. Your control of the situation feels complete.
  8. Your motivation is very high and intrinsic.
  9. You do not feel hunger, exhaustion, or any other bodily needs.
  10. You are not aware of your surroundings. The activity itself is the only thing that matters.
Out of these ten components, the right challenge/skill ratio, direct and immediate feedback and clear goals are demanded for flow. Rest of the components are not always present. They exist only at some point of the flow cycle.

A flow cycle

Flow can be divided into a four part cycle. First stage is called a struggle. You fill your brain with information. You may focus on problem analysis or fact gathering. Stress hormones flood to your body and brain. At this point, you have no idea how to proceed. You are also conscious of your surroundings and you are identifying and repeating patterns until they become tiny, clear goals. Getting through the struggle leads you to the second stage called release. You start relaxing and your mind wanders off the problem. Stress hormones diminish and the levels of feel-good neurochemicals start rising. After the release, the third stage in flow cycle begins, the flow-state itself. The final stage of the cycle is recovery. Most people will feel totally exhausted after the flow-state, at least mentally. Flow-state requires lots of energy. Recovery takes time. Starting the cycle again is hard work and some people never get back into flow. Recovery feels more like struggle than release of the flow-state itself. If you want to get back into flow, you need to recharge completely in recovery.

Flow has a dark side.

The state itself is very consuming, demanding, and unpredictable. Your brain and body are full with highly addictive hormones and neurotransmitters during flow cycle. It is not hard to go too far in a flow-state. And once you go too far, consequences can be terrible. Some people in extreme sports went too far. Because you have to get better all the time to achieve a flow-state, you have to take bigger risks and sometimes those risks are lethal. Your ability to realize those risks decreases and fear becomes less touchable. You may evaluate your life differently. Flow may become a personal need or an addiction, rather than something your mind and body wanders occasionally.

This is all about flow-state, for now.


-TT

Tuesday, May 8, 2018

Disruption

Definitions

Disruption can be defined as ”A radical change” or as ”Disturbance or problems which interrupt an event, activity, or process” or as ”To break apart or alter so as to prevent normal or expected functioning.”

Sources of disruption

You live in a world where disruption happens all the time and fast compared to even hundred years ago. Most of the disruption comes from technological change. There are many examples. For example steam engine launched the industrial revolution. Today, internet, artificial intelligence, many biological breakthroughs and other disruptive technologies change the world faster than anyone could have thought even thirty years ago. And the speed of change is accelerating. It is very hard to imagine what the world looks like thirty years from now. Environment brings you some of the disruptive events. Earthquakes, big storms and other ways of nature can radically change your environment and disrupt millions of lifes during their life times. Diseases can disrupt your life too. And so can changes in politics.

Disruption and evolution

Evolution happens mostly gradually during a very long time. Random mutations happen and some of them survive. When the environment suddenly changes, disruption happens. The species that survived in the environment in the past, fail to reproduce after the change. There is a theory that dinosaurs died, because of a big meteorite hit on the surface of the earth, creating a whole new environment. And different species were better adjusted to the new environment. Humans wouldn´t probably live on this planet without the results of many disruptions. And we probably wouldn´t have consciousness. Sometimes disruption starts slowly and erupts violently. For example, many new technologies are adopted slowly at first. They evolve from the first version. It may take years before a disruptive technology is good enough to displace an old technology. After the critical mass of users have been reached, an exponential growth starts.

Disruption and personal change

Change is one of the constant truths about life. Real disruption changes things forever. Change can be gradual or sudden. Which one should you prefer? There is not a single right answer to this question. I am sorry to say this, but it depends on the circumstances. Gradual change is easier. It should be a preferred way of doing things, when there is no need to disrupt your thoughts, emotions and actions. I have succeeded better, when I have tried to change gradually. It may not be the best way for you. You should figure out yourself which is a way to change.

Disruption is sometimes the only way to do things. If you have unhealthy habits like drinking or smoking, or eating too much unhealthy food, you cannot change your habits slowly. Another dose of alcohol may create severe health problems for persons that have destroyed their liver. They have to disrupt their drinking habits and avoid alcohol at all cost. You can be a person whose way of doing things is change things completely and fast. I know some people like this. They are not in majority. Most people prefer fast results, but what you prefer and what is best for you is not the same thing. Fast results is what you see in different medias. What you don´t see is how many people fail doing the same thing.

You should think about your core beliefs, the environments you associate with and the most important actions you take. Think deeper and try to figure out if you should disrupt some of them. There are some questions you can ask yourself. For example, do you use most of your time to get you where you want to be or are you just wandering around waiting for some random event that changes your life for good? Could you change your environment to get you where you want to be? Do you hang around with people who can help you be a better version of yourself or should you move to another neigborhood or another country? There are many other questions you can ask. Figure out more of them yourself.

Sources:


Have a nice week!

-TT

Tuesday, April 24, 2018

Mental models and new habits

I have now introduced you to the most important mental models. You have to know basic models before you can apply them in your life. They are all connected somehow. These connections are hard to understand, when they are applied separately in a more artificial context than real life. This post is about habits and how mental models are related with them. Habits are important, because depending on the research, habits take 40-90% of your daily actions.

What is a habit?

A habit is a chain reaction with three parts: A trigger, a routine and a prize. You first receive a stimulus which is the trigger, then you have a routine, which is an action to get the prize you are aiming for. Habits do not exist without all the three parts. You do not have a routine without associating trigger with the routine and the prize. And you cannot get the prize without completing the routine. The trigger is a stimulus like a sound, smell, emotion, etc. Routine is the whole action you are working on. Prize is the least understood from these parts. Most people think the prize is something concrete like having a protein shake after tough workout. The prize is actually the emotion or a hormone you get from the prize. If the prize is not tempting enough, you will not have enough motivation to strengthen the habit.

Creating new habits

Your brain has a limited bandwith. Evolution has created many ways to save energy by limiting bandwith in use. These ways are your paths of least resistance. Habits are one of them. Every time you repeat the chain reaction with three parts, you are strengthening a reinforcing feedback loop. After completing this loop, your brain needs less energy to repeat the habit. This energy saving effect is always compounding. It also has a negative effect if you are trying to change it by changing an existing habit. Habits need lots of repetitions, changing them even more. You need to achieve a critical mass of repetitions before habit becomes automatic. Depending on the habit, this can take months. If you want to create a habit, you need lots of conscious effort before it is programmed into your brain. You will probably need to use your rational decision making system and use enormous amount of your willpower before your unconscious system takes control. When the habit is formed and you no longer have to think about the routine, you will keep moving into same direction.

When you want to create a habit, you have to think about the trigger and the prize. The routine itself is easier to develop. Whatever the habit is, the prize is the most important thing about it. You really have to want the prize. Even though the prize itself can be an emotion or some physical change in your body, like a hormone, the symbol for it has to be something you want. For example, some healthy food that looks good. Trigger for a good habit should be made as easily available as possible. If you want to exercise in the morning, you probably should keep all the necessary equipment close to your bed. They should be presented in a way that you cannot miss them, when you wake up. Depending on how often you need to perform the habit, you should have your trigger available as often as performing the habit. If you want to exercise twice a day, you should have your trigger available twice a day.

It is hard to stay motivated, when the habit is something you are not excited about. For example, it is hard to eat healthier food, when you have a desire to eat lots of sugar and bad fat. All the habits start with the first step. You shouldn´t expect big and fast development in this case. If you really want to stay motivated, you should start with one healthier food like putting something green onto your plate while eating your normal foods. Keep it as simple and easy as possible. Small gradual changes give you better probability for success. You should also invert the question: ”How I am going to succeed?” and ask instead, ”How will I fail?” Expecting failure is not a bad idea, because there will be setbacks. Only few people will succeed in the first time. You need to be able to continue the process after setbacks. You cannot remove your habits, you can only change them. I will return to write about it later.

Habits and the latticework of mental models

As you can see, there are many mental models that are related to habits. I didn´t go through all of them. I tried to keep the post as simple as possible. You may think that I made it too hard to understand new habits by using all these models. I agree with you to some extent. It would be enough to understand what triggers, routines, and prizes, and their interactions are all about. These three parts and their interactions are actually a small latticework of mental models of the habits. If you only understand special latticeworks about different things in your life, the need for information is much larger. And you have no capacity to do it.

I am not saying that you don´t need these specialized latticeworks. I am trying to say that you need both, the specialized latticeworks and the general latticework of the most important models. When you understand the most important models and their interactions, specialized latticeworks become easier to learn, because everything is related. Most of the big consequences happen, because there are many big forces moving into the same direction. Charlie Munger calls them Lollapalooza-effects. When you see some world famous expert explaining these big consequences with a single reason, you should see that they do not really understand the whole picture. Understanding the general latticework helps you to understand the world and the behavior of other people better. It also helps you to understand your own domain or discipline better.

Sources:

The Power of Habit, Charles Duhigg
Poor Charlie´s Almanack, Peter Kaufman

I will be going for a short trip next week, I will return in two weeks.

Have a nice fortnight!

-TT