STREET DOGS

From the Evening Standard, some dos and don’ts from Daniel Kahneman:

Do keep natural impulse in check. Kahneman says we have two systems of thought: fast, based on intuition and impulse, and slow, based on calculation. We naturally lean to fast, but need to know when to distrust it.

Do teach yourself to think long term. The “focusing illusion” makes the here and now appear the most pressing concern but that can lead to skewed results.

Do co-operate. “Bias blindness” means it’s easier to recognise the errors of others than our own, so ask for constructive criticism and be prepared to call out others on what they could improve.

Do present totals rather than losses for more rational reactions. People focus on differences rather than stand-alone objects. So investors are more affected by changes in wealth than by wealth itself. Counteract this by telling them how much they have rather than how much they have lost.

Do keep things in perspective. “Experienced” well-being is different to “remembered” wellbeing. The remembering self does not care about the duration of a good or bad experience but rates it by the highest or lowest point and the way it ends.

Do learn to recognise situations in which mistakes are likely and try harder to avoid significant mistakes when stakes are high.

Don’t let failure bring you down. However much you plan, random chance has a powerful influence, and failure of any kind is statistically followed by success.

Don’t put your faith in fund managers and accountants. Analysis reveals it is not skill but luck that is responsible for their successes. Don’t succumb to “the illusion of validity”. Repetition and clarity can make “facts” appear true when actually we must continue to question them.