Category: Notes

A fascinating history of Finance and Banking the US from the earliest days (1776) through the financial collapse of the Great Recession (2008).

An industry that makes so much money has to be good at managing themselves

• Bias (variance from the target) and noise (variance from others) appear is most organizations
• System noise compounds rather than balance (cancel) out
• Most people are content with maintaining a single world view
• Focusing on common language allows us to avoid developing common standards
  • Conflict avoidance helps support this
• (Feedback is really important to making consistent decisions)
• Verifiability does not affect our estimates
  • (Just because something can be verified does not mean we are better at estimating it)
• Decisions require predictive and evaluative judgements
• Bias and noise are independent errors
• Avoid mixing your values and facts
• Waiting a few weeks to make a second guess helps improve personal guess
• To get most accurate average estimates
  • Get input from other people
  • Ask yourself a second time, weeks later
  • Ask yourself to guess again, assuming your first guess is wrong
• Summing up votes can have a huge boost in accuracy
• Crowds are only wise if people register views independently from each other
• Discussing ideas with others often intensifies original beliefs
• “We do not need more accurate weights than our measures.”
• “Frugal rules” (algorithms with few inputs) are often better than complex algorithms but not as good as ML
• People are often willing to trust an algorithm until it makes a bad decision
• Most things happen in “the Valley of the Norm” where it is easy to explain after the fact
• Using comparisons instead of labels for more accurate judgements at scale
  • 7 is the magical number of categories
• We like casual stories of explanation, even if they are not rational
• Intelligence has a strong correlation with financial success
• Open minded is better than strong confidence
• Documenting each step helps to reduce bias due to information exposure

• Blame bad design, not human behavior
• Visibility is a good reminder of what can be done
• 1:1 button-to-function ratio is the simplest design
• There are “additives” and “substitutive” dimensions
• Feedback is important to determine relationship
• At the store, users care about prestige; at home, they care more about useability
• Arbitrary design happens when the design is broken
• Design so errors have a low cost
• We blame the environment when we fail and praise ourselves when we succeed; we blame others when they fail and praise their environment when they succeed
• We typically only store partial descriptions in memory (this saves time and space) enough to discriminate from similar items
• Rote memory is difficult to maintain
• Interpreting the arbitrary is not the same as understanding it
• Reminders have signals and actions
• If a design relays on labels, the design is faulty
• Usability should be considered in the purchase
• Seven steps of execution
  • Plan
  • Specify
  • Perform
  • Perceive
  • Interpret
  • Compare
• Mistakes are made in the reflective stages (plan and compare)
• Slips are made in the other stages
• Focusing on aesthetics can be detrimental to functionality
• Use groupings and shapes to make switches intuitive
• Slips are doing something when intending to do another
  • Capture errors (starting a task with a common start but switching to another)
  • Description error (correct action on the wrong object)
  • Data driven errors (dialing the number you are staring at instead of from memory)
  • Association errors
  • Mode errors
• We classify the rare as either unique or common and both are wrong
• Warning signals are rarely the solution
• Iterative processes allowed to naturally improve the product over time
• If you cannot constrain, standardize

• Choice architects know how to promote the good even if not perfect
• “Liberal paternalism” is the goal
  • Liberty to choose
  • Make it difficult to make ‘bad’ decisions
• The default option is the path of least resistance that people tend to most frequently go with
• Well-chosen defaults are a great way of subtly nudging
• People do well choosing in context where they have experience and feedback as rapid
• Nudging is better governance in general
• Reactance is when people do the opposite of the default out of protest
• We have two thinking systems one fast and automatic, the other slow and reflective
• People are dynamically inconsistent; wanting to go for a run later in the day but later skipping the run because they are lazing
• Temptation is when we consume more in a hot state than we planned to in a cold state
• People conform more readily when stating things publicly
• Groups tend towards Collective Conservatism (groups working to preserve the status quo)
• Businesses find ways to support what people want, whether it is good for them or not
• Providential norms trump demographic norms
• Implementation plans help improve follow through
• Feedback timing is crucial to improvement
• Less understanding should translate to fewer options or better nudges
• “No one makes money convincing people to not buy snake oil.”
• Incentive choices
  • Who chooses
  • Who uses
  • Who pays
  • Who profits
• Salience is understanding the incentives before you
• Dairy Farmer and the Pasture problem
  • Conditional cooperatives
• Liberty to choose
• Make it difficult to make ‘bad’ decisions