Fun arti­cle by Daniel Kah­ne­man based on his new book,Think­ing, Fast and Slow.

How cog­ni­tive illu­sions blind us to rea­son (The Guardian):

Why do Wall Street traders have such faith in their pow­ers of pre­dic­tion, when their suc­cess is largely down to chance? Daniel Kah­ne­man explains.

- “Look­ing back, the most strik­ing part of the story is that our knowl­edge of the gen­eral rule that we could not pre­dict had no effect on our con­fi­dence in indi­vid­ual cases. We were reluc­tant to infer the par­tic­u­lar from the gen­eral. Sub­jec­tive con­fi­dence in a judg­ment is not a rea­soned eval­u­a­tion of the prob­a­bil­ity that this judg­ment is cor­rect. Con­fi­dence is a feel­ing, which reflects the coher­ence of the infor­ma­tion and the cog­ni­tive ease of pro­cess­ing it. It is wise to take admis­sions of uncer­tainty seri­ously, but dec­la­ra­tions of high con­fi­dence mainly tell you that an indi­vid­ual has con­structed a coher­ent story in his mind, not nec­es­sar­ily that the story is true.” …

- “The sub­jec­tive expe­ri­ence of traders is that they are mak­ing sen­si­ble edu­cated guesses in a sit­u­a­tion of great uncer­tainty. In highly effi­cient mar­kets, how­ever, edu­cated guesses are no more accu­rate than blind guesses.”

Related arti­cles:

• Clas­sic inat­ten­tional blind­ness test
• Brain Teaser: Con­sider Linda
• Your Trad­ing Brain: Expert or Novice

(Editor’s note: one of the most com­mon ene­mies of get­ting qual­ity cog­ni­tive exer­cise is being on “men­tal autopi­lot”. I recently came across an excel­lent new book, titled The Daily Trad­ing Coach: 101 Lessons for Becom­ing Your Own Trad­ing Psy­chol­o­gist, by trad­ing per­for­mance expert Dr. Brett Steen­barger, which explic­itly calls for address­ing the “men­tal autopi­lot” prob­lem in his Les­son 4. Even for those of us who are not traders, Dr. Steen­barger advice pro­vides excel­lent guid­ance for peak cog­ni­tive per­for­mance. Dr. Steen­barger gra­ciously gave us per­mis­sion to share with you, below, Les­son 4: Change Your Envi­ron­ment, Change Your­self. Enjoy!).

Human beings adapt to their envi­ron­ments. We draw on a range of skills and per­son­al­ity traits to fit into var­i­ous set­tings. That is why we can behave one way in a social set­ting and then seem like a totally dif­fer­ent human being at work. One of the endur­ing attrac­tions of travel is that it takes us out of our native envi­ron­ments and forces us to adapt to new peo­ple, new cul­tures, and new ways. When we make those adap­ta­tions, we dis­cover new facets of our­selves. As we’ll see shortly, dis­crep­ancy is the mother of all change: when we are in the same envi­ron­ments, we tend to draw upon the same, rou­tine modes of thought and behavior.

A few months ago I had an attack of acute appen­dici­tis while stay­ing in a LaGuardia air­port hotel await­ing a return flight to Chicago. When I went to the near­est emer­gency room at Elmhurst Hos­pi­tal out­side Jack­son Heights, Queens, I found that I was seem­ingly the only native Eng­lish speaker in a sea of peo­ple await­ing med­ical care. After some dif­fi­culty attract­ing atten­tion, I was admit­ted to the hos­pi­tal and spent the next sev­eral days of recu­per­a­tion nav­i­gat­ing my way through patients and staff of every con­ceiv­able nation­al­ity. By the end of the expe­ri­ence, I felt at home there. I’ve since stayed at the same air­port hotel and rou­tinely make vis­its into the sur­round­ing neighborhoods—areas I would have never in my wildest dreams ven­tured into pre­vi­ously. In adapt­ing to that envi­ron­ment, I dis­cov­ered hid­den strengths. I also over­came more than a few hid­den prej­u­dices and fears.

The great­est enemy of change is rou­tine. When we lapse into rou­tine and oper­ate on autopi­lot, we are no longer fully and actively con­scious of what we’re doing and why. That is why some of the most fer­tile sit­u­a­tions for per­sonal growth—those that occur within new environments—are those that force us to exit our rou­tines and actively mas­ter unfa­mil­iar challenges.

In famil­iar envi­ron­ments and rou­tines, we oper­ate on autopi­lot. Noth­ing changes.

When you act as your own trad­ing coach, your chal­lenge is to stay fully con­scious, alert to risk and oppor­tu­nity. One of your great­est threats will be the autopi­lot mode in which you act with­out think­ing, with­out full aware­ness of your sit­u­a­tion. If you shift your trad­ing envi­ron­ment, you push your­self to adapt to new sit­u­a­tions: you break rou­tines. If your envi­ron­ment is always the same, you will find your­self grav­i­tat­ing to the same Read the rest of this entry »

We are work­ing on improv­ing sev­eral sec­tions of our web­site, espe­cially our Resources sec­tion. It will look much bet­ter in a few days. Our first step has been to re-organize our Neu­ro­science Inter­view Series, and below you have how it looks today.

Some very inter­est­ing brain fit­ness soft­ware mar­ket news:

1) Sci­en­tific Learn­ing To Buy Out Soliloquy

- “Sci­en­tific Learn­ing Corp. has announced that it will acquire Solil­o­quy Learn­ing from JTT Hold­ings. Both Sci­en­tific Learn­ing and Solil­o­quy pro­vide tech­nol­ogy solu­tions for edu­ca­tion. The acqui­si­tion will cost SLC about $11 mil­lion and is expected to be com­pleted this month.”

- “Sci­en­tific Learn­ing is the devel­oper of Fast For­Word, a fam­ily of read­ing inter­ven­tion tools tar­geted toward stu­dents who are char­ac­ter­ized as strug­gling learn­ers and designed to develop the required “neu­rocog­ni­tive skills” for read­ing and learn­ing in gen­eral. Solil­o­quy is also a read­ing inter­ven­tion developer.”

Com­ment: this acqui­si­tion con­sol­i­dates Sci­en­tific Learn­ing (NSDQ: SCIL) as the lead­ing com­pany in the edu­ca­tion seg­ment of the brain fit­ness mar­ket. It will be inter­est­ing to track what research gets done on the neural and cog­ni­tive effects of Solil­o­quy, since Sci­en­tific Learning’s Fast For­word is backed by exten­sive literature.

2) Tech­no­me­dia Part­ners With SBT to Accel­er­ate Its Inter­na­tional Expansion

- “Tech­no­me­dia, a Cana­dian provider of tal­ent man­age­ment and human cap­i­tal devel­op­ment solu­tions, announced its part­ner­ship with the SBT (Sci­en­tific Brain Train­ing) group, a Euro­pean provider of train­ing and eval­u­a­tion of cog­ni­tive func­tions.” Read the rest of this entry »