You are not so Smart

“You are not so smart” my colleague Amit told me.

“What ?!” was all I could say while getting ready to deliver a ferocious speech to defend my intellect (and any other virtue that needed defending).

“You are not so Smart. It’s a book. You will love it.” said Amit.

He was spot on.

David McRaney’s book is a light and yet comprehensive guide on one of the most human qualities of them all — Biases

Reading a book which covers a seemingly infinite number of biases that each of us face every day has a powerful disarming effect (Can you really trust your judgement any more ?).

But it can be really enlightening (and fun!) to see just how much sway biases have over our thoughts and decisions.



(Image Source)

For example, what was going through your mind when you read the title of this post ?

Did you feel like your own intelligence was being challenged (The self-as-target bias) ?

For those of you who have made New Year Resolutions ( The Procrastination bias), did you start thinking more seriously about them ?

Those of you who have not made New Year Resolutions, did you start thinking about one after reading the previous question (Priming-induced bias)?

You may think you are not as easily susceptible to biases as everyone else (The third person effect), and are capable of steering clear of any fallacies that can cloud your judgement ( The self-serving bias).

But then,

You are not so Smart

One of the most common questions every Venture Capital (VC) investor has to answer (or dodge) is :

“Whats your thesis for <Insert any market / sector / business model/ tech innovation> space ?”

Sometimes, I have an answer (which, in spite of all my embellishments, is nothing more than an opinion).

Most times though, I have no choice but to acknowledge that I don’t have a thesis (or anything that is even passable as a point of view).

This is a difficult thing to admit. After all, in the world of startups, investors are often looked up to for advice, and for strong opinions that can be used to predict the future. Admitting that you do not have or follow a thesis-driven approach can make an investor look not so smart.

For an investor, a structured and thesis-driven investing approach comes with obvious merits, such as focus and greater depth of knowledge and understanding in sectors of interest.

Might there be a benefit to not actually following a thesis-driven approach to investing ?

You are not so Smart (the book) describes an interesting experiment conducted by Tim Wilson at the University of Virginia in 1990.

He brought a group of students into a room and showed them a series of posters. The students were told they could take any one they wanted as a gift and keep it. He then brought in another group and told them the same thing, but this time they had to explain why they wanted the poster they had picked.

The first group, the grab-and-go people, usually picked a nice, fancy painting. The second group, the ones who had to explain their choice, usually picked an inspirational poster with a cat clinging to a rope.

Wilson then waited six months and asked the two groups what they thought of their choices. The first group, the ones who just got to grab a poster and leave, all loved their choice. The second group, the ones who had to write out why they were choosing one over the others, hated theirs.

Might VC investors be denying themselves the best choices simply because of the obligation to conform to a (pseudo)intellectual framework ?

For its many virtues, focus can also lead to surprisingly debilitating effects.

For example, the video below demonstrates one of the most popular experiments on this phenomenon. Give it a go yourself !



(Video Source)

If you didn’t already know of this test, did it surprise you ?

It certainly caused me to think about all the obvious investments I might have completely missed out on because I was looking for something else.

The book also argued that a pre-conceived belief in the validity of information or a certain approach leads to confirmation and subjective validation bias. For example, if one chooses to believe in the validity of horoscopes, you will ignore obvious facts that undermine them.

I decided to put this to the test. So, on a recent flight, I decided to compare what the horoscope in the in-flight magazine had to say about the future.

For Gemini :
‘Focus will be on love. You will manage to impress someone. Someone may take you to meet an old friend. Praise comes in plenty for professionals. Better opportunities await those considering a job switch.’

For Cancer :
‘Professionally, there will be no stopping you. Financial front will be strong. A friendship may blossom into romance. You can expect support of your well wishers. Spiritual endeavours will help bring peace.’

For Capricorn :
‘Chances are you get into the good books of a senior. A little praise will be enough to raise your spirits on professional front. Some will focus at the larger picture on social front. Love will come knocking at your door.’

For Sagittarius :
‘You will enjoy family time this month. Financial problems end through your efforts. You will find things moving in a positive direction at work. You will enjoy some romantic moments with lover.’

For Aquarius :
‘Love relationship gets strengthened. Don’t neglect health. Financial condition improves substantially so expect to have a good time. Chart out a fresh course of action on romantic front.’

Do these predictions describe the same future for 5 different zodiac signs ? You decide.

Would you know if you missed a gorilla in plain sight or bought into the validity of a horoscope ?

Or would you claiming to know merely prove that you are also vulnerable to the hindsight bias?

(Main Image: Pinterest)