Welcome to part 7 of a 10 part series:

How to get smarter: A guide to critical thinking, cognitive biases, and logical fallacies

In this article we’re talking:

  • Occam’s razor
  • Looking where the finger is pointing
  • Sunk costs
  • Framing
  • Anchoring

Let’s begin…

20. Occam’s razor

Let’s talk about Ockham’s razor (also known as the the law of parsimony)…

“Occam’s razor is the problem-solving principle that, when presented with competing hypothetical answers to a problem, one should select the one that makes the fewest assumptions.” – Wikipedia

Ockam’s razor is named after the philosopher William of Ockham (c. 1287–1347) who favored a form of problem solving which contained the fewest assumptions.

The “razor” refers to removing as many unnecessary assumptions from a hypothesis as possible, because the more assumptions there are – the more possibilities there are for error.

Ockham’s razor in a nutshell: The simplest explanation is usually the correct one.

For example, which is more likely to be true:

A UFO in the sky is:

a) Aliens from another galaxy

b) A type of aircraft or drone you haven’t seen before, maybe an aircraft or drone that the air force is flight testing

Paleontologists have discovered dinosaur bones in the earth because:

a) Dinosaurs once lived on the earth

b) God (or Satan) put the dinosaur bones in the earth to test the faith of Christians

A woman drowned her five children in the bathtub because:

a) God told her too

b) She is insane or schizophrenic and is hearing voices in her head

Yep, the simplest explanation is usually – but not always – the correct one.

Ockham’s razor states that not only should you start with the simplest and most likely explanation, you also shouldn’t overcomplicate, or add any unnecessary extra layers to your explanation.

“Entities should not be multiplied beyond necessity.” – William of Ockham

E.g. You don’t need to say that gravity works because of the laws of physics – and invisible men – if just the laws of physics will do.

“If a thing can be done adequately by means of one, it is superfluous to do it by means of several; for we observe that nature does not employ two instruments [if] one suffices.” – Thomas Aquinas

It’s important to note that Ockham’s razor is not an unbreakable law or rule – the simplest explanation is not always the correct one – but it usually is, therefore you should always start by asking:

“What is the simplest and most likely explanation?”

Instead of with complex or far fetched theories which are less likely.

Occam’s razor doesn’t mean you eliminate complex or far fetched theories completely, it just means you start with the simplest, most likely ones. If someone has a pounding in their head, it could be brain cancer, but let’s start off by assuming it’s a headache.

“If you have two theories that both explain the observed facts, then you should use the simplest until more evidence comes along”

Ockham’s razor is also not about oversimplifying theories or excluding data or evidence, so if the simplest explanation doesn’t account for all of the available data and evidence, then it’s not the best explanation.

“Everything should be made as simple as possible, but not simpler.” – Albert Einstein

In summary: Occam’s razor is simply a good rule of thumb for thinking and problem solving for when two explanations are equally explanatory, which turns out to be right more often than not.

A good 8 1/2 minute video on Occam’s razor:

19. Look to where the finger is pointing 

“When a wise man points at the moon the foolish man examines the finger.” – Confucius

I’m constantly amazed at how many “smart” (and stupid) people are quick to get into silly arguments over semantics, and the most minute, insignificant of details, whilst completely missing the main point of the speaker.

This is stupid – and it is far too common.

Yes, sometimes people say exactly what they mean, and use just the right words and examples to perfectly articulate their thoughts, but most of the time they don’t.

Most people are poor communicators and struggle to find just the right words to express themselves.

Anyone who has listened to people speak for more than 5 minutes should know that.

My advice:

The next time you hear someone state a belief or premise, instead of taking everything they say literally and getting into an argument over semantics, look to where the finger is pointing, and think about what they’re trying to say.

They may not be using the right words, or even the most logical of arguments, but what is it they’re trying to communicate?

What questions could you ask to clarify?

Of course if you’re really seeking to understand, instead of listening to argue, contradict, find fault, one-up etc. this shouldn’t be too difficult.

Again, instead of asking:

“Do I agree with everything this person has said?” (Probably not)

“Are there any errors or mistakes in what they have said?”  (Most likely)

“Am I able to give counterexamples to contradict or disprove what they have said?” (Probably)  

Ask yourself:

“What is the speaker trying to say?”

“What are they trying to communicate?” 

“Do I agree with the general premise?”

Don’t be a dumb ass and get caught up in the words and miss the main point of what is being expressed (don’t “miss the forest for the trees”)

18. Sunk costs

“The most important thing to do if you find yourself in a hole is to stop digging.” – Warren Buffett

The “sunk costs” bias is when you continue to do something that isn’t working out the way you thought it would, simply because you’ve already put so much money, time, and energy into it, and you don’t want to see it all “go to waste”.

Examples of the sunk costs bias:

  • Staying in a crappy job or business for years longer than you should simply because you’ve already invested so much time and effort into it
  • Staying in a bad marriage or unhealthy relationship for years longer than you should simply because you’ve been together for years
  • Continuing to sit through a crappy movie you hate, just because you’ve already paid $20 to see it, and you’ve already sat through an hour of it
  • Continuing to wait in line for something that isn’t important, just because you’ve already been waiting for over an hour
  • Going to a concert even though the weather sucks, you’re feeling sick, and you’d rather stay at home – because you’ve already paid $100 for the ticket
  • Continuing to gamble when you’re on a losing streak even after you’ve lost hundreds (or even thousands) of dollars, in an effort to get your money back and break even (but instead of winning your money back you just lose even more, and dig yourself into an even deeper and worse hole)

Why do we have a bias towards “sunk costs”?

Simple.

We have a desire to defend and protect our earlier decisions – even the bad ones.

No one wants to feel like they’ve made a mistake or spent years going down the wrong path, or that all of their money, time, energy etc. has been “wasted” for no reason.

And sometimes people don’t want to give up on something that isn’t working, simply because they don’t want to admit they’ve made a mistake, or because they don’t want to think of themselves as a “quitter”.

But giving up on something that isn’t working doesn’t make you a “quitter”. Nor does it mean that the money, time, and energy you’ve already spent has been “wasted”. It means that you’re smart because you’re learning from your mistakes.

Why you shouldn’t factor “sunk costs” into your decision making

The money, time, energy etc. you’ve already spent on something is already gone. It’s spent. You can’t get it back. It’s “sunk costs”. Therefore it’s irrelevant, and shouldn’t be factored into your future decision making.

The real question is:

Given everything you know now…

What would you invest your money, time, and energy into?

What business would you start?

What career would you pursue?

Would you work in the same job?

Would you get into the same relationship?

If not, do something different. If you know better – do better.

What’s the point of wasting even more money, time, and energy on something that clearly isn’t working?!

Look, it’s OK to make mistakes and it’s OK to be wrong. Sometimes mistakes are unavoidable. Sometimes we made the best decision we could given the information that we had at the time.

But if better information comes to hand, or something just isn’t paying off the way you thought it would, isn’t it better to cut your losses, move on, and try something else, instead of persisting in your error needlessly like a dumb ass?

There is also a little thing called “opportunity cost”, which means that if you do one thing, you cannot do another (e.g. you cannot pursue a career in Silicon Valley and on Wall Street at the same time)

What is the opportunity cost of your commitment to continuing to go down the path of a prior bad decision?

What is this decision costing you?

What is it causing you to miss out on?

Remember: The same amount of time you’re spending doing something that isn’t working, could be spent doing something that will work.

How to avoid the sunk costs bias: Review the decisions you’ve already committed to and ask yourself if they’re really paying off the way you thought they would.

If not – do something different.

If you know better – do better.

“Every gambler knows,
That the secret to survivin’
Is knowin’ what to throw away,
And knowin’ what to keep.

You got to know when to hold ’em,
Know when to fold ’em,
Know when to walk away,
And know when to run.”

Kenny Rogers, the Gambler

17. Framing

We need to talk about the framing effect, what it is, and how it works.

The framing effect in a nutshell: The way information is presented, strongly influences how you perceive and feel about it, and how you react to it.

We answer questions differently depending on how they’re asked.

We perceive information differently depending on how it’s presented.

For example: What sounds better?

  • 90% fat free or 10% fat?
  • 90% employment or 10% unemployment?
  • 90% survival rate or 10% mortality rate?

Same information, different framing.

A good way to familiarize yourself with the framing effect and the way it’s used to manipulate you is by reading and watching the news from different sources.

For example: see how the next major Trump story is framed from the FOX news perspective (Conservative pro-Trump), and then see how it’s framed from CNN, ABC, MSNBC, the late shows Stephen Colbert, Jimmy Kimmel, Seth Meyers, Trevor Noah, and 95%+ of all news media outlets worldwide (Liberal anti-Trump).

On FOX:

  • Trumps achievements are likely to be focused on – but not his failures
  • Trumps supporters are likely to be interviewed – but not his critics
  • Questions are likely to be asked that focus on Trumps positives – not his negatives

On CNN, MSNBC, ABC, the late shows etc. it’s the exact opposite:

  • Trump failures are likely to be focused on – but not his achievements
  • Trump critics are likely to be interviewed – but not his supporters
  • Questions are likely to be asked that focus on Trumps negatives – not his positives

I don’t care if you agree or disagree with whatever narrative the media is presenting you with. I just want you to realize that there is always a frame.

That’s an important point: News isn’t given to you literally – “just the facts”. Nope. Information is always presented to you in a very strategic way, with some things focused on and emphasized, and other things ignored or minimized, in order for you to come to certain conclusions that suit the agenda of the news network you’re watching.

That’s why:

  • Certain stories are talked about and not others
  • Certain people are interviewed and not others
  • Certain questions are asked and not others

It’s important to see frames for what they are (just one possible interpretation or perspective among many), and to remember that the way information is presented to you by the media (or anyone else) isn’t the only ‘correct’ or ‘right’ way to interpret it.

In fact, there are an almost infinite number of ways you can frame anything.

For example:

A man who hits on a lot of women could be framed as:

A “ladies man” or a “sexual predator.”

Genghis Khan could be framed as:

A “great conqueror” or a “blood thirsty mass murderer”

Donald Trump could be framed as:

  • Arrogant/confident
  • An egomaniac/high self-esteem
  • Decisive/impulsive

Notes on framing

  • You don’t have to accept other people’s frames or buy into anyone else’s reality. Other people’s perspectives – especially the media’s – don’t need to be yours. Please do yourself a favor and think for yourself and always question the interpretation or perspective being presented to you.
  • You can counter any frame presented with your own frame – you can reframe
    • e.g. Smoking was rightly reframed from being cool and sexy, to causing cancer and heart disease
    • Did you “make a mistake” or “learn a lesson”?
    • Are you facing a “crisis”, a “challenge”, or a potential “opportunity”?
  • Information can be framed (and reframed) in an infinite number of ways (because there are a seemingly infinite number of interpretations or perspectives one could take on almost anything)
  • You can frame information in terms of the positive or the negative, what’s wrong or what’s right, the obvious or the obscure, how it affects one person or another
  • Remember: A frame is only one of a possible infinite number of interpretations or perspectives. It is not the only way to interpret or perceive the information. You can reject the frame/interpretation/perspective if you don’t like it.
  • Advertisers frame information in terms of what you could gain by buying their products, or in terms of what you could lose or miss out on by not taking action
    • If a gym membership sounds too expensive at $1, 000 a year, how about $2.73 a day? That’s “less than a cup of coffee!”
    • Instead of focusing talking about how much something costs, advertisers often reframe by talking about how much you’ll “save” by shopping with them
    • Advertisers use language to encourage frames. Instead of being “expensive” it’s “high-end” and “luxurious”
    • L’Oréal: Instead of asking do you want it? They framed it: “because you’re worth it!” (smart marketing)

Advertisers try to manipulate men not by asking “do you want it?” but by asking:

“Are you man enough?!”

“Are you good enough?!”

“Do you have what it takes?!” 

  • The media ALWAYS frames information in such a way that encourages a certain interpretation from the reader/listener/viewer. It does this by specifically focusing on people, stories, and angles that promote it’s agenda (which is generally the liberal agenda since 95% of the media is liberal), or by focusing on the negative (since people are attracted to bad news and negativity) or by exaggerating some trivial aspect of an interview, quote, or person and blowing it way out of proportion
  • We are biased towards loss aversion (the tendency to want to avoid a loss more than we want to acquire an equivalent gain), so if a choice is presented to us in a frame that emphasizes the ability to avoid losses, penalties, late fees etc. we are more likely to agree with it (studies have shown that more people will pay early to avoid a penalty for late payment, then will pay early to obtain a discount)

16. Anchoring

Finally, let’s talk about the “anchoring effect”.

The anchoring effect is a cognitive bias that describes the tendency for people to be biased too heavily towards the first piece of information offered (the “anchor”) when making decisions.

For example:

If I asked you: Is the population of Indonesia more or less than 25 million?

If you don’t know the answer, it’s highly likely that you’ll assume that the figure of 25 million is somehow significant, that it’s some kind of guide to the truth (even if it isn’t) and you’ll guess around it (say 15 million to 30 million)

However if I increased the anchor and presented you with an even higher figure, that would also influence you.

E.g. If I asked you: Is the population of Indonesia more or less than 250 million?

Now you’re likely to think that the figure of 250 million is significant, that it’s some kind of guide to the truth, and guess around it (say 200 million to 300 million)

The problem is that I could present you with almost any number, even a completely irrelevant number pulled out of thin air, and that would also influence you.

Why is this important?

It’s important for several reasons:

If the first figure presented to you/first piece of information you receive on a topic (the “anchor”) is grossly inaccurate, it’s still highly likely to influence your thinking and decision making, and you’re still likely to treat it as if it were some kind of guide or reference point to the truth – even when it isn’t.

Advertisers, marketers, salespeople etc. know this and they all take advantage of the anchoring effect by marking up prices and then offering you “25-50% off”. Why do they do this? Because they know that a $50 item looks much more attractive to you if it’s “on sale” from the $100 price they’ve first anchored in your mind than the regular $50 price tag.

Used car dealerships always display sticker prices on the cars even though everyone knows you never pay the sticker price. So why is it there? Simple. To anchor you. The sticker price on the car acts as an anchor on your subconscious mind which means that all negotiation is likely to take place from there.

Here are some other examples of anchors:

  • Advertised salaries
  • All prices on Amazon
  • Marked down prices in retail stores
  • Minimum payments on credit card bills
  • Sticker prices on cars

The anchoring effect is hard to resist, because it seems like the first figure we’re presented with really means something, that it’s an accurate representation of something – even when it isn’t.

For example:

In a salary negotiation – there is a tendency for most people to negotiate around the first figure mentioned.

This is good to know the next time you’re in a salary negotiation or any other kind of other negotiation by the way. If you speak first and offer a figure (which I know is contrary to popular wisdom), the negotiation is likely to take place around the anchor.

In the stock market – people might buy a stock for $50 thinking it’s a great deal if it used to trade at $150, and the $150 figure is anchored in their mind. However in reality, the new $50 price might reflect a change in the stocks underlying fundamentals.

How to overcome the anchoring effect:

  • Don’t trust the first piece of information/number presented to you (the “anchor”)
  • Do your homework. Seek information from a wide variety of sources, and educate yourself to understand what something should cost, how long it should take etc.
  • Argue against the anchor presented to you, think of all of the reasons it isn’t right
  • When shopping: Don’t trust the first price you see. Shop around. Look online and do your homework to find out what something should cost.
  • In a negotiation: Don’t trust the first price you’re offered. Offer up the first figure and set a high anchor.

The bottom line: The more educated and knowledgeable you are on a subject, the less effect the anchoring effect is likely to have upon you.

However, the less you know about a subject, the easier it will be for others to mislead you with irrelevant facts and figures.

PS: You should use the anchoring effect to your advantage in order to manage expectations with people.

E.g. If you’re giving a customer a quote or time frame, it’s always best to overestimate how much it will cost, or how long it will take, in order to create an anchor in the other person’s mind that gives you some breathing room, rather than underestimating the cost or duration and frustrate the person you’re dealing with because they were expecting it to be done cheaper and faster.

I know I’d much rather be told that something is going to cost $150 and take 10 days, if it’s going to cost $100 and take 5 days, than to be told that it’s going to cost $50 and take 2 days.

Unfortunately most people are absolutely shit at managing expectations. Most people constantly underestimate both time and costs, and have a very bad habit of over promising and under delivering. This is either because they’re inexperienced and don’t really know what something costs/how long it will take, or because they’re lying in order to win new business and beat out competitors.

As a rule of thumb (and I know this sounds extreme), an old bosses advice to me was spot on when it comes to estimating project duration: “Always take the maximum amount of time you think something will take – and triple it.”

I thought that was ridiculous when I first heard it. But it turned out to be exactly right.

There are always so many unexpected things that come up.

Summary 

This is part 7 of a 10 part series:

How to get smarter: A guide to critical thinking, cognitive biases, and logical fallacies

Let’s do a quick recap of this weeks points:

20. Occam’s razor

19. Look to where the finger is pointing

18. Sunk costs

17. Framing

16. Anchoring

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If you would like to read the other parts in this series here they are:

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 1

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 2

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 3 

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 4

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 5

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 6

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 8

How to get Smarter: A guide to critical thinking, cognitive biases, and logical fallacies – Part 9

Or if you would like to read my other articles: Life Lessons All Articles