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

Social Proof

Definition

Social proof can be defined as "Youe may determine what is correct by finding out what other people think is correct.” It can also be defined as: ”Making assumptions from the actions of others by trying to reflect correct behavior in a given situation.”

It is everywhere

Social proof can be found anywhere. Humans have inner needs to stay connected with others. Without these needs human race would probably be extinct. We have mirror neurons. They are constantly following behavior of other people. They are essential for your ability to imitate others. They help you to learn from others too. You only need two persons to have social proof. You need a source of impulse and the receiver. Everybody observing an event is likely to be looking for social evidence. There is safety in numbers. The more people are behaving like others, the more social proof there is for the receiver of impulses. It is probable that bigger groups of people are reacting to social proof itself. They have created a self-reinforcing feedback loop which strengthens the effects. Social proof is not consisted of only impulses people receive, it also involves ignoring them.

Our networks and social proof

Social proof can be divided into two different components. The influence of the people who are some way connected pretty close to you and the influence of the people without connection to you. The latter people just happen to be in the situation where they have influence into your behavior. The simplest social network is two people connected to each other. You have many networks. You can also think these networks as a one big network.

People in this network has strong and weak connections. Normally, stronger connections belong to people who are close to each other. For example, close relatives, or people working together, etc. In the modern world, everyone has weak ties for most people. Some networking experts talk about six degrees of connections are enough to connect anyone in the world to any other person. Besides connections, social networks have another fundamental aspect, contagion. It tells you what, if anything, flows through these connections. Each of these flows have individual characteristics. You have to understand at least some of the rules of connection and contagion.

You can choose the structure of your network in three ways. First, you decide how many people you are connected to intimately. Second, you decide how tightly these people are interconnected. And, third, you control how central is your position in the network. You have your most intimate network. Contagion is the strongest in it. Things flowing through your connections are also important. Contagion happens, because people have tendency to copy each other as a definition of social proof states. You do not copy only your friends. You also copy your friends´ friends and their friends´friends. The influence of your network to you diminishes gradually until third degree of connection. Then it vanishes.

Conditions for groups being right

Most often it is enough to follow the herd. You will not get into trouble by finding out what others are doing and just copying others. If you want to get maximum value out of social proof, you need to understand, when groups of people are very intelligent. It comes to four conditions. First, each person in the group should have some private information. Second, their opinions are not determined by others around them. Third, each person is able to specialize and have local and unattached knowledge. And, finally, there is a way to turn individual judgments into a collective decision.

First condition is about diversity. There should be different kinds of people in the group, like old and young, black and white, or smart and stupid. You need different perspectives. They take away or at least weaken some of the worst characteristics of group decisions. Some biased individuals can otherwise move decisions from the collective power into the direction of the significant few with lots of influence. The probability of a homogenous group reaching into a good decision is low. Diversity do not only add different perspectives, it also helps people to say what they really think.

When all people in the group rely on private information and are able to include their intuition, interpretation and analysis to the decision making, a good outcome is likely. There are two reasons why they are important. First, mistakes that people make during the process do not become correlated. Second, new information are more likely found. The more influence the people have on each other, the more likely they make the same mistakes.

Local and unattached knowledge means also decentralized power structures. Many important decisions are made by individuals based on their local and unattached specific knowledge. Central planners are not effective as sole decision makers. Decentralization encourages individuals to work the same problem by their own means and ways of doing things. This way individuals can specialize and find local knowledge. They can transform their private efforts into the help of a collective whole.

Decentralized system works only, when it can produce results by having means of aggregating everybody´s knowledge into the system. A group needs to find the right balance between necessities: making individuals collectively useful while allowing them to stay specialized and local. A good group decision requires people to take into account what others are doing. When all these four conditions apply, you should definitely follow the herd. To be honest, it is really hard to know, when all these conditions are actualized.

How to avoid social proof

Sometimes you need to protect yourself from social proof. These situations are less likely than others. When you are stressed of puzzled, you will more likely be influenced by the social proof. Avoiding disreputable sells organizations or people who are willing to increase your stress levels by giving you a fast deadline to make a decision helps you to diminish the effect of social proof. Avoid also other people who you know are willing to push your limits by asking you to behave in ways you do not want to. In other words, avoid all the people you associate with bad behavior. You should also avoid unnecesessary marketing impulses that you can relate to social proof like ads with groups of people having a good time or ads that have words like ”fastest-growing” or ”most popular”.

Sources: 

Connected the Surprising Power of our Networks, Nicholas Christakis, James Fowler

The Wisdom of Crowds James Surowiecki

Influence the Psychology of Persuasion Robert Cialdini

Have a nice end of the week!

-TT

Tendency to make associations

Definition

An association bias can be defined as: ”A tendency to connect an idea, feeling, or sensation with something other than itself.”

Different associations

There are some ways of associating ideas, feelings or sensations with other things. Causes are connected to their effects. For example, injuries are connected to fouls in sports. Things or people are connected with their properties. For example, bananas are connected to yellow. Items or people are connected to the category which they belong. For example, people are connected to stereotypes. Most often, these connections are right, but sometimes associations are completely wrong. Worst judgments come from the misunderstood cause-effect relationships.

Cause and effect associations

One of the biggest mistakes you can make is associate a success as skill, instead of luck, when you have done wrong things and still succeeded. Randomness of life creates some lucky events for all of us. This applies especially in all the games in which you make bets, for example, poker, investing, etc. There are some antidotes. You should carefully figure out why you were successful by trying to find random factors associated with success that mislead you to estimate your odds too high and to look for the dangerous aspects of the game that didn´t occur when you succeeded. You should be able to see continuity in your successes. For example, to be a good money manager, you should have significantly better than average investment returns at least from five to ten years of investing. And you should have achieved this by having invested to many different securities.

You can also associate people who give you bad news not as likeable as people who give you good news. You will probably like people who tell you what you want to hear. The people who are willing to give you bad news and explain their reasoning should be rewarded, not ridiculed or not paid attention to. You should develop a habit for listening to people who are willing to give you bad news. You should probably tell your best valued ideas for your critics.

Associations with things and their properties

Associating high price with quality of the product or service is maybe the best example. For example, luxury brands are not created without high prices. And everything about the product, the way it is sold, packaged, or designed should be consistent with a high price. Paying more doesn´t only boost buyer´s ego, it also increases his status. All the ads are designed for creating pleasant associations for the products and services. For example, you don´t normally see any people not having a good time, unless the purpose of the ad is to sell something that prevents unpleasant events.

Associations with categories

You can categorize any item, person, or service. You can create some expectations concerning on them. For example, you can think that men cannot take care of children or women cannot be company executives. Stereotypes are the most common associations of this type. You can associate people to certain stereotypes by their appearance, the language they use, or how they behave. And by inversion, you can expect people to appear, speak or behave in certain ways that are consistent with your associations. These associations with categories do not come from nowhere. They are fairly accurate, when they are related to averages in groups of items or people. Categorizing is most easily avoided by creating a habit of thinking everyone and everything as individuals.

You should design your environment in a way that the availability of the things that help you to avoid or minimize wrong associations is as easy as possible. Gather people that are willing to give you bad news or ready to give you constructive criticism. You need them. There is no way to avoid all the associations. Try to keep open mind all the time, when you have prejudices about the people or items you encounter.

Have a nice end of the week!

Sources:

Thinking Fast and Slow Daniel Kahneman
Poor Charlie´s Almanack Peter Kaufman

-TT

Availability bias

Definitions

Availability bias can be defines as: ”The more easily people can call some scenario to mind, the more available it is to them, the more probable they find it to be. Any fact or incident that is especially vivid, or recent, or common, or anything that happened to preoccupy the person, was likely to be recalled with special ease, and so be disproportionately weighed in any judgment.” This is what psychologists call availability bias.

Any available impulse can matter

Many impulses have an effect on you every day. Your senses receive inputs all the time. You are not reacting to all of them. It is just more probable that you react, when things are more available. You can get impulses from the media, friends, colleagues and even from your neighborhood, etc. Your brains are saving energy all the time. Using what is available takes less energy than putting missing pieces together. Sometimes you overestimate what is important, because some impulses are more available than others. These impulses can have an effect later on. You can retreive them from your memory. The more memorable some event has been, the more probable is it´s effect on you.

Events that have occurred to you are more easily available than events you have read from the paper or seen in TV. For example, if you have seen a traffic accident, you will retrieve it from your memory more easily compared to an accident you have read from the paper. Frequency of the event matters too. For example, when you are working in a company, some of your colleagues give you available clues of how to behave. The ways your closest colleagues behave, give the most available clues for your behavior.

Focusing too much on the present and recent events, instead of thinking about the future

It is easier to focus on the events that have happened recently or happening right now. For example, when the airplanes crashed into twin towers in 2001, people started to travel more by car. They overestimated a probability of terrorist attacks done with airplanes. This lead to more deaths in traffic after the 9/11, because going by car is more dangerous. Present events are available more easily than recent events.

You can also think that something has more value now than in the future. For example, most people would rather get 100$s today than wait six months to get 150$s. When you are making a decision, you are mostly thinking about the first order effects. They are more available in your mind than the second or third order effects. For example, buying something can feel like a no-brainer, because you only think about the price you pay now. Using a credit card can make you forget about the interests you have to pay later.

Anchoring

You have a tendency to anchor yourself too heavily on the first piece of offered information, when you are making decisions. Different starting points yield different estimates. These estimates are biased toward the initial values. For example, you are represented two different sentences before asking a question. First sentence says ”There are approximately two hundred members in United Nations.” Second sentence says ”There are two countries in north America.” Then you get a question: ”How many countries are in Africa?” Unless you know the right answer, the first sentence anchors your guess to a bigger number than the second sentence. In my own experience, anchoring can have an effect in almost anything. For example, after you buy some item first time, the properties of the first item are the anchors for buying same items in the future. This my own view and I don´t really know if it applies in reality or it is a result of my imagination. You should think about this yourself.

Using/avoiding availability bias

First and foremost available impulses work most often as triggers for some other psychological tendencies, or behavior. They are not so significant by themselves. You should design your environment in a way that available triggers are good for you. You should also avoid an environment in which available triggers are bad for you. Latter option is not always available, because you cannot control everything. For example, if you are on a diet and you have no forbidden foods at home, you cannot control what other people eat with you. Designing your environment in a way that bad triggers are not available is not always worth the effort. If the opportunity cost is bigger than the benefit, you should forget it. You should probably focus on getting the biggest benefits and avoiding biggest damages. 

Sources: 

The Undoing Project, Michael Lewis

Thinking Fast and Slow, Daniel Kahneman

Poor Charlie´s Almanack, Peter Kaufman

-TT