Decoding Human Psychology

It's a Superpower !!!

"Remember, with great power comes great responsibility." - Uncle Ben, 'Spider-Man', 2002.

I just watched Spiderman yesterday and it was a fantastic movie. No one does a better job than Disney + Marvel of showcasing the multitude of possibilities in the metaverse, and this one was just outstanding. It was a perfect package of a Superhero movie and I can’t wait for the next chapter of Dr. Strange in ‘The Multiverse of Madness’ that releases in 2022.

But that’s a world of superheroes, a realm of fantasy that you and I like to visit from time to time. Every hero in there has its own superpowers, Hulk being my favorite, especially when Edward Norton enacted the role.

While I was immersed in this world of extraordinary capabilities, I started wondering about the superpowers that we possess, as humans. Is it success? Is it a life of virtues Is it a growth mindset? Is it lots of money? Is it our systems thinking?

If these were indeed superpowers, then you wouldn’t have the following stories to ponder upon #

Wealth - 

Vanderbilts were once the richest family on earth but over generations, their wealth has been squandered away. Raymond Group's ex-Chairman Mr. Vijaypat Singhania recently released his only Autobiography wherein he admits his mistake was to give everything his son wished for, eventually to be ousted from the board by his own son.

Virtues -

Mahatma Gandhi spent 40+ years fighting for India’s freedom and eventually was gunned down after less than 1 year of gaining Independence.

Mindset -

Elon Musk recently was TIME Magazine Person of the Year and he is a genius par excellence. But you still have haters who troll him nonstop or analysts that take a dig at TESLA valuations or judge him on his actions regarding his companies, SEC, DogeCoin, and others.

Fame -

Jackie Chan shares in his autobiography about his best friend who swindled him off millions of dollars and it upset him because all his friend had to do was ask him for it. Britney Spears’s estate has been under conservatorship since 2008 i.e. not being in charge of her own decisions around money and estate. She finally got a reprieve from her father as the conservator of her estate.

System -

Facebook as a business is a Cash generating monster machine. In the last 5 years alone, it has generated more than USD 175 billion in Cash Flows. As a business, it has empowered a lot of Small Businesses and Content Creators worldwide. My own sister runs a successful Creative Arts Studio in Mumbai, and Instagram is her No. 1 medium to engage with her audiences, launch new products and packages and also share her progress with the world.

But no system is perfect, not even Facebook. Hence we recently saw one of the ex-Product Managers, Ms. Frances Haugen, sharing internal documents with SEC. These are known as ‘Facebook Papers’ and they highlight the inability of FB (now listed as META) to effectively moderate content, which has magnified societal and political dangers, both in the U.S. and abroad.

The reason I say that none of these are superpowers since they cannot protect you from the adversities that life will throw at you. They could give you a better arsenal of tools and resources to deal with unfortunate events, but they cannot fully secure you from it.

As for the unfortunate events referred to above, none of them are due to natural causes i.e. earthquakes, cyclones, tsunamis, etc. All are related to dealing with others and being stranded at the receiving end. Sometimes the damage caused is irreparable, as in the case of Vijaypat Singhania and sometimes it’s a minor nuisance to learn from and move on e.g. Jackie Chan. And at times, the damage will be caused from absolute left field which had no precedent e.g. disruptions due to COVID 19. Though COVID 19 was a natural phenomenon, the decisions to lockdown were taken by governments i.e. people.

How do you deal with it? How do you hold onto a balanced state of mind in these adverse scenarios? How do you avoid being the scapegoat or a victim? How do you think rationally? How do you make wise decisions amidst a cacophony of noises and opinions? How do you watch out for traps and landmines?

And that’s where Human Psychology comes in. On the face of it, sounds like a concept to be taught to students pursuing Psychology Majors or maybe to salespeople in a Profit-driven organization. But at its core, it’s the study of how the mind works in response to external stimuli i.e. others and situations.

“If we have data, let’s look at data. If all we have are opinions, let’s go with mine.” – Jim Barksdale

Let’s look at a few examples to highlight how you (actually) make decisions compared to how you think you make decisions -

View from my current house

The building in the picture is Eden House and I was shown a 3 BHK in this apartment at a particular rent, let’s consider that 100. Post this visit, I was shown another apartment next to Zabeel Park, and that was priced at 80. Both were beautiful houses but my budget was 55. And then I was shown the 3 BHK in the current building (Blue Tower) and that was priced at 65, and I was given 3 days to decide.

Guess what did I do, I booked it in 2 days and rationalized that those good apartments, with beautiful views, were costing upwards of 80 and I got a deal at 65, so it’s a no-brainer. But what happened was that I completely threw away the budget I had i.e. 55. It had no role to play in my decision-making, though it felt that it will be critical to my decision. But it wasn’t because my anchoring bias had locked the rates in my mind i.e. 100 & 80. Anything below seemed a good price to get in, and I did.

What if I was shown houses starting at 40 or 50 first, and then shown this apartment priced at 65, do you think I would have taken it? I doubt it as I certainly would have struggled paying up. But paying down was a no brainer. I am happy with my decision to move in here, but I am also cognizant of the anchoring bias that played on me.

“Anchoring bias is a cognitive bias that causes us to rely too heavily on the first piece of information we are given about a topic. When we are setting plans or making estimates about something, we interpret newer information from the reference point of our anchor, instead of seeing it objectively.” - Decision Lab website

Just look at the 2 images above and you have to consider one of them for a job opportunity or a Fiverr freelance job. Which one would you go for?

Your rational mind may need a few more profile details to go through, but the irrational part of your mind, the instinctive part, or maybe the emotional part of your mind may have already tilted the decision in favor of the one dressed to kill. Just think about the first few seconds when you saw these images, what was your mind doing on auto mode? Wasn’t it already choosing, even before you were thinking of the job at hand?

Just in case you think that you are very rational, then let’s look at your last week itself. Which habit are you trying to get rid of but couldn’t? Which conversation you needed to have but you didn’t yet? Which payment or purchase was to be completed but is pending still? Which agenda on your to-do list has survived for more than 7 days on that list? Which impulse decision did you make this week in spite of having decided to be strong-willed next time?

If you were completely rational, you would be operating like a machine. But you ain’t Robocop and hence you will have to live with your human elements, and instinctive decision making is a big part of it. You also are constrained on time and hence can’t optimize every decision of yours. Hence sometimes you go with your gut, and the gut can be tricked, big time. Just as I did here.

The picture (on left) above includes Mr. Parag Agrawal, CEO of Twitter and the youngest ever CEO of S&P 500 companies. As for the gentleman on the right, he is Mr. Jan Marsalek, ex-COO of Wirecard, and now a fugitive wanted by the German police, listed on Europol’s list of Europe's most wanted fugitives, and Interpol has issued a Red Notice against him.

If you were honest about the choice you made in the first few seconds, then you succumbed to the ‘Liking / Disliking Bias’.

“Under the influence of liking or disliking bias, we tend to fill gaps in our knowledge by building our conclusions on assumptions, which are based on very little evidence.” - fs.blog

Cognitive bias – also known as psychological bias – is the tendency to make decisions or to take action in an unknowingly irrational way.

The picture above shows just a few of the cognitive (psychological) biases that we as humans are afflicted with. If you were to explore Wikipedia for this topic, you might be introduced to at least 180 biases that are impregnated in your human DNA. There ain’t any way to run away from them, just as Spiderman Movie is titled ‘No Way Home’. And hence the only way left to tackle this predicament is ‘Self Awareness’; not the individual identity, but the self i.e. the mind and its quirks.

The examples I shared above are either personal or related to current events. But organizations/cults /institutions/fraudsters/deceitful sorts are aware of the quirks of the mind and hence they are on a nonstop action mode to lay a honey trap for you. Few recent examples are provided herein -

• Online scammers targetting prominent Indian women journalists with jobs at Harvard - Hindustan Times

• Elizabeth Holmes, Founder of the now-defunct Theranos was able to raise USD 1.4 billion from marquee investors like Rupert Murdoch (FOX), Tim Draper, Larry Elison (Oracle), Walgreens, and many more. She faces a maximum of 20 years in prison on nine counts of fraud and two counts of conspiracy to commit fraud.

• Squid Games Crypto collapsed 99% and the developers have made off with an estimated $3.38m (£2.48m), according to the technology website Gizmodo.

• Politicians lie constantly because making a voter feel good is better than 100 rational arguments. Even when the voter knows it’s a lie.

At the heart of all these frauds/shenanigans is the knowledge of human fallibility and a method to exploit that weakness. You may not be surrounded by Elizabeth Holmes of Squid Games Crypto developers, but you are certainly surrounded by people with the same mental quirks. Few of them would be wise, rational, and virtuous. But that’s just a few. Most have an incentive bias to make you buy something, do something, or trade something.

What you got to understand is that everyone is driven by their own biases i.e. emotional and cognitive. And its these biases, that make them see the world in a certain manner. And unless you are not cognizant of that, you are on a sure-shot path to confusion, frustration, rage, or regret caused by others’ actions.

“Knowledge is Power. But the knowledge of psychology is the purest form of that power.” - Scot Adams

And if you are keen to get started on this path of decoding human psychology, then Charlie Munger’s Youtube video with 25+ Human Misjudgements is the first step into this maze of human biases. Just in case you prefer the transcript of this speech, then it can be found on fs.blog post on the same topic.

You may have been moving around too long with your head swelled up, trying to understand why people behave the way they do, and also why you behave the way you do sometimes. It can get pretty difficult to move around with these biases, without even knowing that you are carrying a truckload of these in your 3-pound brain.

I invite you to explore this rabbit hole of human psychology. You will only thank me for having introduced you to this metaverse (it’s the most trending word online today, so why not use it too 😃), where all the human thinking happens, before you see it play out via the words spoken or actions taken.

“Every psychological trap on this list can be used to manipulate you, if there’s something on the list that you are not familiar with, you’re vulnerable to deception. In some cases, you’re missing opportunities to make your product and yourself more attractive to others. Hence it’s a good idea to make psychological your lifelong study. Over time it starts to feel like a superpower that allows you to understand things that confuse and confound those around you.” - Scott Adams

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Recommendations for the week #

Ben Carlson wrote a brilliant piece on building your wealth one year at a time. It is a simple strategy but takes loads of mental resolve to stick to. And trust me when I say that it’s the only choice for most of us, unless anyone reading my posts is a prodigy child with the abilities to compound wealth at 100% p.a. - It’s Ok to build wealth slowly

Christine Benz follows up on Ben Carlson’s piece with timely advice on building portfolios that provide peace of mind, simplicity, and time to enjoy the many perks that life can provide us when we are not spending 24/7 chasing alpha or unsustainable market-beating returns - There’s more to investing than risk and return

Nothingness of Money by Lawrence Yeo is a MUST READ. This is one of the best write-ups I have read in 2021. Money as a concept is understood but how about understanding the futility of money. Just before you find my statement silly, I invite you to explore a few certainties heading your way. Read the post to understand what I am referring to exactly.

Next Big Thing by C Dixon is the depiction of how ideas look like when they begin taking shape and start gaining traction with a few die-hard fans. All of us have ideas and this post can help in turning that idea into a life-changing one for you and many that believe in you.

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Wishing you all Merry Xmas in advance and a jolly good time with friends and family. I’m heading to Mumbai too in a few days to meet my friend and celebrate Christmas with him. We haven’t met in 10 years and hence I am soo looking forward to the visit.

Will be writing from Mumbai next Saturday. If you are from Mumbai, I’ll be happy to meet up. Do dm me if you are up for a good cuppa organic coffee at my favorite joint in Bandra☕️

Cheers and Have Fun 🎉