We just listened to a great podcast with Dan Ariely being interviewed by Shane Parrish at The Knowledge Project. During the interview Ariely provides investors with three tricks that can help overcome internal biases and change subconscious defaults to more of a conscious state of mind which in turn lead to better financial decisions.
Here is an excerpt from that interview:
Shane Parrish: Is there anything that you do specifically that allows you to step inside your ego a little bit [when it comes to making better decisions] that we can walk away with?
1. One simple recommendation is to think about yourself as an advisor, not about your own interest [decision]. What would you advise somebody like you to do? When you advise somebody external then you’re not as influenced by your own biases. You can do better!
2. Another one is to think about something in the long-term. What would happen if you had to make a decision about a thousand of those things. What decision would you make? It’s sometimes easy to say, “Oh I’m making this [decision] just for one time”. But what if this was the standard decision that you would make.
3. The third one is – what would happen if this was a larger decision? Would you still make the same one?
By both thinking about it not as a one time but as a multiple time, and not as small decision but as a large decision you bring it into context that is more extensive and you’re less likely to basically give yourself a discount and say – “We’re just doing it once”.
You can listen to the entire podcast here:
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