Chapter 8 - A Strategy for your Life Flashcards
Have a strategy for your life steps
- target setting
- decisions + bias
- habits
- implementation
Target setting - key learnings
- balance future and present
- money won‘t make you happy
- takes times + effort to define clear targets
- nothing comes for free
- be the „true yourself“ if stay 100% to your principles
Biases
- sunk cost biases
- Anchoring bias
- status quo bias
- cognitive dissonance
Sunk cost bias
- justify the choices we made in the past
- people do not admit they made a mistake
- it seems psychologically safer to insist on the past decision
Sunk cost bias - strategy relevance
- Change the course of action if your target was wrong
Sunk cost bias - what to do
Be honest at least to yourself
Anchoring bias
individual depend too heavily on an initial piece of information offered (considered to be the “anchor”) when making decisions.
Anchoring bias - strategy relevance
- limits your thoughts
- limits your range of options
- you may limit other people by anchoring them
Anchoring bias - what to do
- change perspective by using alternative starting points
- seek information from a wide array of sources
Status quo bias
Current situation is taken as a reference point and any change is considered as a loss
Status quo bias - strategy relevance
- relationship
- employers
- friends
- real estate
- investments
Status quo bias - what to do
- remind yourself of your objectives and examined how they would be served by status quo
- would you pick the SO if you were free
- force yourself to choose from alternatives
Cognitive dissonance
People have an inner need to ensure that their cognitions and behaviors are consistent
Cognitive dissonance - strategy relevance
Cognitive dissonances let you:
- not include all relevant information
- scale down risks
- focus only on supportive information
Cognitive dissonance - what to do
- get all the information ( factfullness)
- be aware of your beliefs
- accept to be not perfect
