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jerryking : human_errors   7

Heed the human factor before judging leaders' achievements | Evernote Web
14 January/15 January 2017 | Financial Times | Gillian Tett.

Pointing out mistakes is a legitimate part of healthy journalism and civic debate. But as blaming and fingerpointing start to mount, it's worth remembering that people tend to freeze in a crisis, especially when there is a shortage of information. Hindsight is a wonderful thing for an econometric model or history book, but it downplays the human factor. There is a danger in criticizing others' decisions until you've walked in their shoes.
Gillian_Tett  human_factor  empathy  mistakes  human_errors  criticism  blaming_fingerpointing  hindsight  crisis  information_gaps  immobilize  paralyze  psychology  stress_response 
january 2017 by jerryking
What a 94-year-old track star can teach us about aging - The Globe and Mail
BRUCE GRIERSON
Special to The Globe and Mail
Published Saturday, Jan. 11 2014

four tips for staying mentally sharp:

Play games

The brain isn’t a muscle, but it works like one in its use-it-or-lose-it dimension. Our brains are way more plastic than we used to think, and a challenged brain can grow new neural connections quite deep into old age. Olga is crazy for Sudoku, the Japanese number game, and she does the hard ones. In pen.

Learn another language

Olga’s Ukranian is a little rusty but it’s there – so she discovered when global interest in her grew and Ukrainian news teams came knocking. A 2013 study by the Institute of Medical Sciences in Hyderabad, India – the largest of its kind to date – found that having a second language delays the onset of dementia by around four-and-a-half years, on average.

Make a mistake, then take notes

To speed up learning, of any skill or subject, we need immediate and specific feedback on our performance. Champion chess and backgammon players promptly review the game they just lost, just as top students promptly review and correct errors. Olga actually happens to have a gene linked to learning from your mistakes. But it’s likely her habits, more than her genes, that are driving the bus here. Very little she does escapes her own immediate and systematic appraisal. In her bowling league, for example, “When I get a strike, I take note of where I was standing and how hard did I throw it,” she says, “and then try to duplicate those conditions.”

Exercise

Better even than mental activity is exercise combined with it. Exercise comprehensively it beats back cognitive decline as we age. Exercise grows the hippocampus, the brain region associated with making and consolidating memories; it’s what you want to lean on when you start misplacing your glasses, or worse.
aging  howto  cognitive_skills  decline  error_correction  human_errors  journaling  lessons_learned  mistakes  postmortems  systematic_approaches 
september 2014 by jerryking
The need for an analytical approach to life
November 3, 2013 | FT.com | By Rebecca Knight.

Risk analysis is not about predicting events; it’s about understanding the probability of possible scenarios, according to Elisabeth Paté-Cornell, professor at the Stanford School of Engineering.
In her latest research, she argues that expressions such as “black swan” and “perfect storm”, which have become journalistic shorthand when describing catastrophes, are just excuses for poor planning. Managers, should “think like engineers” and take a systematic approach to risk analysis. They should figure out how a system works and then identify the probable ways in which it could fail.
So does a black swan event exist?
The only one that I can think of is the Aids epidemic. In the case of a true black swan, you cannot anticipate it.
And what about ‘perfect storms’?
A combination of rare events is often referred to as a perfect storm. I think people underestimate the probability of them because they wrongly assume that the elements of a perfect storm are independent. If something happened in the past – even though it may not have happened at the same time as something else – it is likely to happen again in the future.
Why should managers take an engineering approach to analysing the probability of perfect storms?
Engineering risk analysts think in terms of systems – their functional components and their dependencies. If you’re in charge of risk management for your business, you need to see the interdependencies of any of the risks you’re managing: how the markets that you operate in are interrelated, for example.
You also need imagination. Several bad things can happen at once. Some of these are human errors and once you make a mistake, others are more likely to happen. This is because of the sequence of human error. When something bad happens or you make a mistake, you get distracted which means you’re more likely to make another mistake, which could lead to another bad event. When you make an error, stop and think. Anticipate and protect yourself.
How can you compute the likelihood of human error?
There are lots of ways to use systems analysis to calculate the probability of human error. Human errors are often rooted in the way an organisation is managed: either people are not skilled enough to do their jobs well; they do not have enough information; or they have the wrong incentives. If you’re paid for maximum production you’re going to take risks.
So in the case of a financial company I’d say monitor your traders, and maybe especially those that make a lot of money. There are a lot of ways you can make a lot of money: skill, luck, or through imprudent choices that sooner or later are going to catch up with you.
So you can do risk analysis even without reliable statistics?
We generally do a system-based risk analysis because we do not have reliable statistics. The goal is to look ahead and use the information we have to assess the chances that things might go wrong.
The upshot is that business schools ought to do a better job of teaching MBAs about probability.
+++++++++++++++++++++++++++++++++
“Numbers make intangibles tangible,” said Jonah Lehrer, a journalist and
author of “How We Decide,” (Houghton Mifflin Harcourt, 2009). “They
give the illusion of control. [Add "sense of control" to tags]
engineering  sense_of_control  black_swan  warning_signs  9/11  HIV  Aids  business_schools  MBAs  attitudes  interconnections  interdependence  mindsets  Stanford  imagination  systems_thinking  anticipating  probabilities  pretense_of_knowledge  risk-management  thinking_tragically  complexity  catastrophes  shorthand  incentives  quantified_self  multiple_stressors  compounded  human_errors  risks  risk-analysis  synchronicity  cumulative  self-protection  systematic_approaches 
november 2013 by jerryking
Five mental mistakes that sabotage investors
Oct. 11 2013 | The Globe and Mail | John Heinzl.

Trying to break even

You buy a stock for $50 and it falls to $45 – and stays there. “I’ll just wait until it gets back to $50 and then I’ll sell it,” you tell yourself. The technical term for this behaviour is “anchoring,” and it’s a problem because the psychological desire to break even could cause you to hang on when there may be better opportunities elsewhere. What you paid for the stock is actually irrelevant; the only thing that matters now are the future prospects for the investment. If the outlook is lousy, you might be better off taking your lumps and moving on. If you still like the company’s prospects, then holding on may indeed make sense.

Focusing on your cost base

This is a closely related concept. You buy a stock for $50, and it rises to $60. Because you have an unrealized capital gain or “cushion” of $10, you feel good about holding on to the stock because a lot has to go wrong before you lose all of your paper profit. But as with the first example, the original price you paid for the stock is irrelevant. It’s history. What matters is where the stock goes from its current price of $60, not whether it stays above your original purchase price.

Recency bias

This is one of the most common traps. You see a stock chart that goes straight up, and you assume the stock will keep rising. Conversely, you see a chart that goes down and assume the losses will continue. Humans are wired to expect things that happened in the past to happen again, but investing is not that simple. In fact, mutual fund studies indicate that many investors underperform the market because they tend to buy near the top and sell near the bottom in the mistaken belief that the recent trend will continue, which it often doesn’t.

Mental accounting

Some investors compartmentalize their money based on its source or its purpose. ...When we use mental accounting, we ignore the fact that a dollar is a dollar; where the money came from shouldn’t influence how we spend it.

Refusing to put dividend stocks inside an RRSP
biases  personal_finance  investors  mistakes  recency_bias  anchoring  psychology  human_errors 
october 2013 by jerryking
Investing Ideas That Stand Test of Time
April 25, 2000 | WSJ | Jonathan Clements

These days I find I am left with just three core investment ideas:
(1) Financial Success is a Sense of Control
If you ask folks about their financial goals, they will likely offer a laundry list of goods they want to buy or announce they want to accumulate as much money as possible. But in reality,
both goals are a prescription for unhappiness.
Sure it might be nice to purchase everything that catches your fancy. But nobody has unlimited wealth, so a focus on endless consumption inevitably results not in happiness, but in frustration and financial stress. Yeah, it would also be great to have heaps of money. But if all you want is an even bigger pile of cash, you will never be satisfied, because you will never reach your goal. So what should you
shoot for? A far more worthy goal, I believe, is eliminating the anxiety that comes with managing money. You want to reach that sweet spot where you feel your finances are under control, no matter what your standard of living and level of wealth.

(2)Investing is Simple
No doubts about it, there are lots of investments and investment strategies that are mighty complicated. But complexity usually means investors are running the risk of rotten results and Wall Street is getting the chance to charge fat fees. Investing is best when it is simple. In fact, if you want to accumulate a healthy nest egg, there
isn’t much to it. First, you have to save a goodly amount, preferably at least ten percent of your pre-tax annual income. Second, you should consider investing at least half of your portfolio in stocks, even if you are approaching retirement. Third, you should diversify broadly, owning a decent mix of large, small and foreign stocks. Fourth, you should hold down investment costs, including
brokerage commissions, annual fund expenses and taxes. Finally, you should give it time. A little humility also helps. Don’t waste effort — and risk havoc — by trying to pick the next hot stock, identify the next superstar fund manager or guess the market’s next move. Instead, your best bet is to buy and hold a few well-run mutual funds.

(3) We are the enemy
If successful investing is so simple, why do so many people mess up? It isn’t the markets that are the problem, it is the investors.
We make all sorts of mistakes. We fret about the performance of each investment that we own, so we don’t enjoy the benefits of diversification. We are often overly self-confident, which
prompts us to trade too much and bet too heavily on a single stock or market sector. We
extrapolate recent results, leading to excessive exuberance when stocks are rising and unjustified
pessimism when markets decline. We lack self-control, so we don’t save enough.

[All the points made immediately above are analogous to Jason Zweig's article on personal finance & investing. From Benjamin Graham --investing is often portrayed as a battle between you and the markets. Instead, “the investor’s chief problem — and even his worst enemy — is likely to be himself.”

Similarly, Nobel Laureate Daniel Kahneman wrote in his book Thinking, Fast and Slow. [that]evaluating yourself honestly is at least as important as evaluating your investments accurately. If you don’t force yourself to learn your limits as an investor, then it doesn’t matter how much you learn about the markets: Your emotions will be your undoing.... ]

If you are going to truly be a successful and happy investor, it isn’t enough simply to devise
strategies that allow you to meet your investment goals. Your strategies also must give you a
sense of financial control and fit with your risk tolerance, so that you stick with them through the
inevitable market turmoil.
That may mean keeping more of your money in bonds and money-market funds. It could mean
paying for an investment advisor. It might mean scaling back your financial goals and accepting
that the kids won’t be heading to Harvard and that you won’t be able to retire early.
These sorts of choices aren’t foolish. What’s foolish is settling on investment strategies without
considering whether you can see them through.
personal_finance  investing  howto  ideas  goal-setting  Nobel_Prizes  money_management  Jonathan_Clements  financial_literacy  biases  humility  mistakes  self-awareness  self-control  proclivities  overconfidence  financial_planning  delusions  self-delusions  emotions  human_frailties  Jason_Zweig  extrapolations  risk-tolerance  recency  unhappiness  human_errors  bear_markets  sense_of_control  superstars  Daniel_Kahneman 
may 2012 by jerryking
How to Be a Billionaire: Worry!
Monday, Feb. 05, 2001| TIME | By JOSHUA COOPER RAMO. For
George Soros, the problem is not how to make money. That's easy, he
believes. You do that by spotting mistakes. The problem is the mistakes
themselves. Soros thinks that our history, especially economic history,
is sculpted by blunders. It's a radical proposition, as if you suggested
that Botticelli's best art was the result of paint splatters. But Soros
is insistent: mistakes make history. They also make--and
destroy--fortunes. Soros, who made a fortune looking for and finding
mistakes, worries we are making one now. He picks up on these errors by
listening to his money. These days he doesn't like what he
hears..."George is signal," says a Fed adviser, referring to the high
noise-signal ratio among advice givers to Alan Greenspan.

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From Farhad Manjoo
Step 1: Worry. If you're an investor, employee, founder, tech journalist or in some other way connected to the tech business, worrying about the bubble is your best defense against the bubble. Worrying keeps you sharp. Worrying keeps magical thinking (i.e. happy talk) at bay. As in the 1990s, the tech industry is pushing grand, society-transforming novelties on the rest of the world. If you're not worried that some of these claims are crazy, you're not paying attention.
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George_Soros  Joshua_Cooper_Ramo  financial_history  wishful_thinking  Kissinger_Associates  pattern_recognition  patterns  moguls  lessons_learned  mistakes  Bank_of_England  financiers  negative_space  investors  signals  worrying  paranoia  human_errors  economic_history  happy_talk  pay_attention 
october 2009 by jerryking

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