Why You Are an Idiot - When it Comes to Investing.
From the Cheating: Billable Hours : Settle It Now Negotiation Blog, we learn that evolutionary psychology argues
"In other words, our modern skulls house a stone age mind. The key to understanding how the modern mind works is to realize that its circuits were not designed to solve the day-to-day problems of a modern American -- they were designed to solve the day-to-day problems of our hunter-gatherer ancestors. These stone age priorities produced a brain far better at solving some problems than others.For example, it is easier for us to deal with small, hunter-gatherer-band sized groups of people than with crowds of thousands; it is easier for us to learn to fear snakes than electric sockets, even though electric sockets pose a larger threat than snakes do in most American communities
.In many cases, our brains are better at solving the kinds of problems our ancestors faced on the African savannahs than they are at solving the more familiar tasks we face in a college classroom or a modern city.
In saying that our modern skulls house a stone age mind, we do not mean to imply that our minds are unsophisticated. Quite the contrary: they are very sophisticated computers, whose circuits are elegantly designed to solve the kinds of problems our ancestors routinely faced.
A necessary (though not sufficient) component of any explanation of behavior -- modern or otherwise -- is a description of the design of the computational machinery that generates it. Behavior in the present is generated by information-processing mechanisms that exist because they solved adaptive problems in the past -- in the ancestral environments in which the human line evolved."
There is very little surplus cash on the Savannah, we didn't have the time to worry about base rates, confirmation bias, or the logic of covariation tables - all of which is needed to properly engage in modern decision making.
The authors Leda Cosmides & John Tooby, of the above paper, suggest an neat demonstration of how to defeat the confirmation bias, despite our stone age mind. Recall the problem John Wason discovered, we tend to seek confirming evidence for conditional statements. (They come to a different conclusion than I do about their experiment.)
Such analyses provided a principled basis for generating detailed hypotheses about reasoning procedures that, because of their domain-specialized structure, would be well-designed for detecting social conditionals, interpreting their meaning, and successfully solving the inference problems they pose. In the case of social exchange, for example, they led us to hypothesize that the evolved architecture of the human mind would include inference procedures that are specialized for detecting cheaters.
To test this hypothesis, we used an experimental paradigm called the Wason selection task (Wason, 1966; Wason & Johnson-Laird, 1972). For about 20 years, psychologists had been using this paradigm (which was originally developed as a test of logical reasoning) to probe the structure of human reasoning mechanisms. In this task, the subject is asked to look for violations of a conditional rule of the form If P then Q. Consider the Wason selection task presented in Figure 3.
Figure 3.
Part of your new job for the City of Cambridge is to study the demographics of transportation. You read a previously done report on the habits of Cambridge residents that says: "If a person goes into Boston, then that person takes the subway."
The cards below have information about four Cambridge residents. Each card represents one person. One side of a card tells where a person went, and the other side of the card tells how that person got there. Indicate only those card(s) you definitely need to turn over to see if any of these people violate this rule.
Boston
Arlington
subway
cab
From a logical point of view, the rule has been violated whenever someone goes to Boston without taking the subway. Hence the logically correct answer is to turn over the Boston card (to see if this person took the subway) and the cab card (to see if the person taking the cab went to Boston). More generally, for a rule of the form If P then Q, one should turn over the cards that represent the values P and not-Q.
For example, to show that people who ordinarily cannot detect violations of conditional rules can do so when that violation represents cheating on a social contract would constitute initial support for the view that people have cognitive adaptations specialized for detecting cheaters in situations of social exchange. To find that violations of conditional rules are spontaneously detected when they represent bluffing on a threat would, for similar reasons, support the view that people have reasoning procedures specialized for analyzing threats. Our general research plan has been to use subjects' inability to spontaneously detect violations of conditionals expressing a wide variety of contents as a comparative baseline against which to detect the presence of performance-boosting reasoning specializations. By seeing what content-manipulations switch on or off high performance, the boundaries of the domains within which reasoning specializations successfully operate can be mapped.
The results of these investigations were striking. People who ordinarily cannot detect violations of if-then rules can do so easily and accurately when that violation represents cheating in a situation of social exchange (Cosmides, 1985, 1989; Cosmides & Tooby, 1989; 1992). This is a situation in which one is entitled to a benefit only if one has fulfilled a requirement (e.g., "If you are to eat those cookies, then you must first fix your bed"; "If a man eats cassava root, then he must have a tattoo on his chest"; or, more generally, "If you take benefit B, then you must satisfy requirement R"). Cheating is accepting the benefit specified without satisfying the condition that provision of that benefit was made contingent upon (e.g., eating the cookies without having first fixed your bed).
When asked to look for violations of social contracts of this kind, the adaptively correct answer is immediately obvious to almost all subjects, who commonly experience a "pop out" effect. No formal training is needed. Whenever the content of a problem asks subjects to look for cheaters in a social exchange -- even when the situation described is culturally unfamiliar and even bizarre -- subjects experience the problem as simple to solve, and their performance jumps dramatically. In general, 65-80% of subjects get it right, the highest performance ever found for a task of this kind. They choose the "benefit accepted" card (e.g., "ate cassava root") and the "cost not paid" card (e.g., "no tattoo"), for any social conditional that can be interpreted as a social contract, and in which looking for violations can be interpreted as looking for cheaters.
I doubt that we have the ability to spot cheaters, but I do think that when the costs of being wrong are in the conditional or if/then we are lead to the right conclusion.
