Love that early on in the podcast Michael explains that a great decision maker is always aware of and mitigating his cognitive limitations just as a trader is always focusing on reducing risk. Doesn't matter if its financial or mental capital, always know the downside!
one of the best you should set up amazon links to your interviewers books so you can have a mutual relationship may help bring more high quality people in
🎯 Key Takeaways for quick navigation: 00:58 *🎙️ Introduction to Michael Mauboussin* - Introducing Michael Mauboussin, Managing Director at Credit Suisse and professor at Columbia Business School. - Discussion on decision-making, process over outcome, and skill versus luck. 03:16 *📚 Michael Mauboussin's Background and Role* - Michael's background, from a liberal arts major to Wall Street. - His role as Head of Global Financial Strategies at Credit Suisse and teaching experience at Columbia Business School. 05:49 *🧠 Understanding Decision-Making* - Insights into decision-making, emphasizing cognitive limitations and biases. - Highlighting the importance of auditing decision quality based on process rather than outcome. 07:39 *📉 Examples of Cognitive Biases* - Discussing specific biases like overconfidence, confirmation bias, and recency bias. - Illustrating how biases can impact decision-making in various domains, including investing. 10:14 *🔄 Overcoming Confirmation Bias* - Strategies for overcoming confirmation bias, emphasizing the importance of maintaining an open mind. - Introducing the concept of Bayes' theorem for updating beliefs based on new information. 13:15 *🎭 Emotion and Bias in Decision-Making* - Addressing the role of emotion in decision-making and strategies for reducing its influence. - Discussing the relevance of checklists and different checklist types in managing emotional arousal. 19:03 *🤔 Counterintuitive Thinking* - Explanation of counterintuitive thinking and its significance in challenging natural inclinations for better solutions. - Referencing Michael Mauboussin's book "Think Twice" and the exploration of counterintuitive concepts. 19:30 *🤔 Understanding Decision Making Biases* - Decision-making biases can lead to suboptimal outcomes, - The "inside-outside view" concept highlights the importance of integrating personal insights with broader historical data for better predictions. 21:19 *📊 The Paradox of Information in Decision Making* - More information doesn't always lead to better decisions; it can inflate confidence without improving accuracy, - Psychological experiments, like those conducted by Paul Slovic, reveal that incremental information doesn't significantly enhance decision accuracy but boosts confidence, - Overloading with information can lead to analysis paralysis, hindering effective decision-making. 23:24 *🤷 Dealing with Indecisiveness* - Indecisiveness can be addressed by prioritizing decisions based on relevance and significance, - Techniques like creating a plus/minus column for decision factors can facilitate clearer choices, - Domain-specific strategies, such as surfacing alternatives in group settings or using pre-mortem exercises, can aid decision-making. 31:38 *🧠 Understanding Cognitive Biases in Decision Making* - Cognitive neuroscience studies, like those on hyperbolic discounting, reveal how human minds prioritize immediate gratification over future benefits, - The brain's interpreter module seeks narratives to establish cause and effect, making stories more influential than statistical arguments in decision-making, - Resources like Michael Gazzaniga's book "Tales from Both Sides of the Brain" offer insights into cognitive biases and decision-making processes. 37:57 *🔄 Learning from Mistakes in Decision Making* - Reflecting on past decisions, particularly poor ones, can help identify recurring patterns and avoid repeating them, - Leveraging insights from behavioral economics, such as Kahneman's research on decision-making biases, can inform better decision-making practices, - Continuous learning, exposure to diverse viewpoints, and critical thinking are essential for improving decision-making skills over time. 38:11 *📓 Keeping a Decision Journal* - Keeping a journal of your decisions helps to mitigate hindsight bias and creeping determinism. - Write down the decision, rationale, expected outcomes, and emotional/physical feelings. - Regularly reviewing your decision log helps audit the quality of your decisions. 39:21 *🔄 Process versus Outcome* - In skill-dominant domains like chess, outcomes directly reflect skill, while in probabilistic domains, focusing on process is crucial. - Celebrating good outcomes without evaluating the process can be detrimental in probabilistic realms. - Emphasizing a good process increases the likelihood of favorable outcomes over time. 42:29 *📊 Trust in Process* - Building trust in a process requires transparency, repeatability, and economic/mathematical soundness. - Process fidelity is essential, especially in dynamic environments like investing or executive decision-making. - Ensuring efficiency, repeatability, and soundness enhances confidence in the process. 44:57 *🎲 Understanding Skill and Luck* - Skill and luck are fundamental concepts influenced by various factors across different domains. - Luck tends to dominate in the short term due to the variance in outcomes, while skill shines through over longer periods. - Quantifying skill versus luck often involves statistical analysis and understanding their contributions to outcomes. 52:06 *🏆 Skills of Great Investors* - Great investors possess probabilistic thinking, discipline in maintaining positive expected value, and understanding the role of time. - They focus on maintaining edge, effective money management, and self-awareness to manage psychological biases. - Key attributes include probabilistic reasoning, disciplined decision-making, and recognizing the importance of time. Made with HARPA AI
Too much psychology. But I guess some need it. Trading psychology seems very repetitive to me. Different words to describe don't exit to early, don't trade too big size and don't doubt your decision making.
Full show notes for this episode, available here: chatwithtraders.com/ep-121-michael-mauboussin/
'Beliefs are hypothesis to be tested, not treasures to be protected.' - great line, great interview. Thanks again, @chatwithtraders
With all the meme stocks and crypto meme stocks this quote is legit
I could listen to Michael Mauboussin all day long.
Love that early on in the podcast Michael explains that a great decision maker is always aware of and mitigating his cognitive limitations just as a trader is always focusing on reducing risk.
Doesn't matter if its financial or mental capital, always know the downside!
great interview ... This is very helpful in all facets of life ..not just trading ...
Great
General
1. Decision Making: Heuristics or Cognitive Biases
2. Tips; Journaling
shot out to credit suisse been there 8 years best company in the planet earth!!!!!! changed my life!!!!!
why did u left then?
I didn't think I will enjoy this one as much as I did. Will be listening to it again for sure, this time I will be ready to take notes!
This is just an amazing discussion.
Very fruitful
@Chat With Traders amazing interview, thank you for always bringing great interviews to your viewership.
great work Aaron.So much of wisdom in a single session.
one of the best you should set up amazon links to your interviewers books so you can have a mutual relationship may help bring more high quality people in
Like michael
great idea. I actually look for some of those books after I hear the interviews
15 min in and I'm loving it I hear NLP in this interview.
Another brilliant podcast. Thank You Aaron and Michael.
6:36 16:27 25:46 37:50 39:21
thanks.
This man is brilliant Aaron.
🎯 Key Takeaways for quick navigation:
00:58 *🎙️ Introduction to Michael Mauboussin*
- Introducing Michael Mauboussin, Managing Director at Credit Suisse and professor at Columbia Business School.
- Discussion on decision-making, process over outcome, and skill versus luck.
03:16 *📚 Michael Mauboussin's Background and Role*
- Michael's background, from a liberal arts major to Wall Street.
- His role as Head of Global Financial Strategies at Credit Suisse and teaching experience at Columbia Business School.
05:49 *🧠 Understanding Decision-Making*
- Insights into decision-making, emphasizing cognitive limitations and biases.
- Highlighting the importance of auditing decision quality based on process rather than outcome.
07:39 *📉 Examples of Cognitive Biases*
- Discussing specific biases like overconfidence, confirmation bias, and recency bias.
- Illustrating how biases can impact decision-making in various domains, including investing.
10:14 *🔄 Overcoming Confirmation Bias*
- Strategies for overcoming confirmation bias, emphasizing the importance of maintaining an open mind.
- Introducing the concept of Bayes' theorem for updating beliefs based on new information.
13:15 *🎭 Emotion and Bias in Decision-Making*
- Addressing the role of emotion in decision-making and strategies for reducing its influence.
- Discussing the relevance of checklists and different checklist types in managing emotional arousal.
19:03 *🤔 Counterintuitive Thinking*
- Explanation of counterintuitive thinking and its significance in challenging natural inclinations for better solutions.
- Referencing Michael Mauboussin's book "Think Twice" and the exploration of counterintuitive concepts.
19:30 *🤔 Understanding Decision Making Biases*
- Decision-making biases can lead to suboptimal outcomes,
- The "inside-outside view" concept highlights the importance of integrating personal insights with broader historical data for better predictions.
21:19 *📊 The Paradox of Information in Decision Making*
- More information doesn't always lead to better decisions; it can inflate confidence without improving accuracy,
- Psychological experiments, like those conducted by Paul Slovic, reveal that incremental information doesn't significantly enhance decision accuracy but boosts confidence,
- Overloading with information can lead to analysis paralysis, hindering effective decision-making.
23:24 *🤷 Dealing with Indecisiveness*
- Indecisiveness can be addressed by prioritizing decisions based on relevance and significance,
- Techniques like creating a plus/minus column for decision factors can facilitate clearer choices,
- Domain-specific strategies, such as surfacing alternatives in group settings or using pre-mortem exercises, can aid decision-making.
31:38 *🧠 Understanding Cognitive Biases in Decision Making*
- Cognitive neuroscience studies, like those on hyperbolic discounting, reveal how human minds prioritize immediate gratification over future benefits,
- The brain's interpreter module seeks narratives to establish cause and effect, making stories more influential than statistical arguments in decision-making,
- Resources like Michael Gazzaniga's book "Tales from Both Sides of the Brain" offer insights into cognitive biases and decision-making processes.
37:57 *🔄 Learning from Mistakes in Decision Making*
- Reflecting on past decisions, particularly poor ones, can help identify recurring patterns and avoid repeating them,
- Leveraging insights from behavioral economics, such as Kahneman's research on decision-making biases, can inform better decision-making practices,
- Continuous learning, exposure to diverse viewpoints, and critical thinking are essential for improving decision-making skills over time.
38:11 *📓 Keeping a Decision Journal*
- Keeping a journal of your decisions helps to mitigate hindsight bias and creeping determinism.
- Write down the decision, rationale, expected outcomes, and emotional/physical feelings.
- Regularly reviewing your decision log helps audit the quality of your decisions.
39:21 *🔄 Process versus Outcome*
- In skill-dominant domains like chess, outcomes directly reflect skill, while in probabilistic domains, focusing on process is crucial.
- Celebrating good outcomes without evaluating the process can be detrimental in probabilistic realms.
- Emphasizing a good process increases the likelihood of favorable outcomes over time.
42:29 *📊 Trust in Process*
- Building trust in a process requires transparency, repeatability, and economic/mathematical soundness.
- Process fidelity is essential, especially in dynamic environments like investing or executive decision-making.
- Ensuring efficiency, repeatability, and soundness enhances confidence in the process.
44:57 *🎲 Understanding Skill and Luck*
- Skill and luck are fundamental concepts influenced by various factors across different domains.
- Luck tends to dominate in the short term due to the variance in outcomes, while skill shines through over longer periods.
- Quantifying skill versus luck often involves statistical analysis and understanding their contributions to outcomes.
52:06 *🏆 Skills of Great Investors*
- Great investors possess probabilistic thinking, discipline in maintaining positive expected value, and understanding the role of time.
- They focus on maintaining edge, effective money management, and self-awareness to manage psychological biases.
- Key attributes include probabilistic reasoning, disciplined decision-making, and recognizing the importance of time.
Made with HARPA AI
Amazing content. Thanks much!
I hope a high probability to be a top trader
@chat with traders Been listening for a month. Great stuff on a macro view of how to approach trading :) Legit.
Always listening to this podcast, very great work your doing. Was curious if you're able to get Dr. David Paul on the the cast?
Another great interview!
Really good discussion..
Too much psychology. But I guess some need it. Trading psychology seems very repetitive to me. Different words to describe don't exit to early, don't trade too big size and don't doubt your decision making.
Hi Aaron. Thank you so much for helping us out. Subbed and liked each video Ive'd watched so far.
Hey bro i hope you're doing great, what about your trading now, if you would like to tell?
Thanks 4 reminding me to be aware. Also, the more skill I have the more luck comes my way.
Losing is like smoking. It's habit forming.
Puggy Pearson
16:15
I dont bother correcting ppl on how to pronounce my first name anymore.
confirmation bias #facts based theorum 👍😉 look for more vital solidified information
Too much advertising pissed of dude