Three Longs & Three Shorts

How People Think

Author: Morgan Housel
Source: Collaborative Fund (

At the beginning of this piece Morgan Housel says that “This article describes 17 of what I think are the most common and influential aspects of how people think.” Whilst this piece lacks the elegance that we usually associate with his writing, it is still a very interesting read. Here are the four most striking things we took away from this piece:
Firstly, each of us belongs to a certain tribe and our thinking is heavily shaped by that tribe. It follows therefore that if in our teams, we had a blend of people from different tribes, the team’s quality of thinking would benefit from that diversity: “Everyone loves their tribe because there’s comfort in knowing other people who understand your background and share your goals.
But tribes have their own rules, beliefs, and ideas. Some of them you might disagree with; some are even abjectly terrible. Yet they remain supported because no one wants to risk being shunned by a tribe that’s become part of their identity. So people either willingly nod along with bad ideas, or become blinded by tribal loyalty at how bad the ideas are to begin with.”
Secondly, many successful people have mindsets and behaviours which are different from those around them. Amongst these behaviours we see the ones that are positive and we end up idolising these people without realising that there might be a darker side to the mindset/behaviour of the person in question: “…your role models – people who have extreme, outlying success. You like them because they do things other people would never consider, or can’t even comprehend.
Some of those traits are awesome and you should look up to them. Others aren’t.
Kanye West once put it: If you want these crazy ideas and these crazy stages, this crazy music, and this crazy way of thinking, there’s a chance it might come from a crazy person.
Paul Graham put it this way: “Half the distinguishing qualities of the eminent are actually disadvantages.”
Andrew Wilkinson says: “Most successful people are just a walking anxiety disorder harnessed for productivity.”
I’ve always thought that people who are abnormally good at one thing tend to be abnormally bad at something else. Or maybe not bad, but something you wouldn’t necessarily want in your own life. They’re natural maniacs, extreme in every way, good and bad.
But it’s so easy to ignore that fact when you admire someone. It gets dangerous when you admire a person for their good traits but start emulating their bad traits because you mistakenly believe that’s what made them great…”
Thirdly, because most of us have a natural affinity for stories, we fall for good stories. As a result says Housel: “The best story wins. Not the best idea. Not the right answer. Just whoever tells a story that catches people’s attention and gets them to nod their heads.
Sherlock Holmes put it: “What you do in this world is a matter of no consequence. The question is what can you make people believe you have done.”
Wherever information is exchanged – wherever there are products, companies, careers, politics, knowledge, education, and culture – you will find that the best story wins. Great ideas explained poorly can go nowhere while old or wrong ideas told compellingly can ignite a revolution. Morgan Freeman can narrate a grocery list and bring people to tears, while an inarticulate scientist might cure disease and go unnoticed.”
And the fourth interesting point that Housel makes – and this alone makes reading the whole piece worthwhile – is how poorly we understand the probabilities behind rare events: “John Littlewood was a mathematician who sought to debunk the idea of miracles being anything more than simple statistics….
Littlewood’s law of miracles states that in the course of any normal person’s life, miracles happen at the rate of roughly one per month.
The proof of the law is simple. During the time that we are awake and actively engaged in living our lives, roughly for eight hours each day, we see and hear things happening at a rate of one per second. So the total number of events that happen to us is about 30,000 per day, or about a million per month.
With few exceptions, these events are not miracles because they are insignificant. The chance of a miracle is about one per million events. Therefore we should expect about one miracle to happen, on average, every month.
The idea that incredible things happen because of boring statistics is important, because it’s true for terrible things too.
Think about 100-year events. One-hundred-year floods, hurricanes, earthquakes, financial crises, frauds, pandemics, political meltdowns, economic recessions, and so on endlessly. Lots of terrible things can be called “100-year events”.
A 100-year event doesn’t mean it happens every 100 years. It means there’s about a 1% chance of it occurring in any given year. That seems low. But when there are hundreds of different independent 100-year events, what are the odds that any one of them will occur in a given year?
Pretty good, in fact.
If next year there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something bad will happen next year – or any year – are … uncomfortably high.
Littlewood’s Law tells us to expect a miracle every month. The flip side is to expect a disaster roughly as often.”