Summarize your learnings in the files attached.:-
FRAMING • Framing is a cognitive shortcut, such as framing money into one or two actual checking accounts or into one or two mental accounts we keep in our minds. Each shortcut involves considerations of utilitarian, expressive, and emotional benefits and costs. • We use framing shortcuts when we simplify complex problems and substitute solutions to the simplified problems for solutions to the complex problems. • We use framing shortcuts well when the solutions to the simplified problems are close to the solutions to the complex problems. • We commit cognitive errors when the solutions to the simplified problems are far from the solutions to the complex problems
CONFIRMATION • We use confirmation shortcuts when we examine evidence to confirm or disconfirm beliefs, claims, or hypotheses. • We use confirmation shortcuts well when we search for disconfirming evidence as vigorously as we search for confirming evidence and assign equal weight to disconfirming and confirming evidence. • We commit confirmation errors when we search for confirming evidence while neglecting disconfirming evidence and when we assign less weight to disconfirming evidence than to confirming evidence. COGNITIVE SHORT CUTS AND ERRORS 3. HINDSIGHT • Hindsight shortcuts are always precise when there are one-to-one associations between past events and future events, actions and outcomes, and causes and consequences. • Hindsight shortcuts can easily turn into hindsight errors where randomness and luck are prominent, loosening associations between past events and future events, actions and outcomes, and causes and consequences. • Hindsight errors might arise from unawareness of the influence of randomness and luck or from a desire to see the world as predictable, devoid of randomness or luck. COGNITIVE SHORT CUTS AND ERRORS 4. ANCHORING AND ADJUSTMENT • We use anchoring and adjustment shortcuts well when we begin with proper anchors and adjust from them properly. • We begin the process of estimating the appropriate price-to-earnings ratio (P/E) of a privately held company by identifying an anchor, such as the average P/E of public companies in the same industry. • We adjust our P/E estimate upward to reflect the private company’s better growth opportunities and downward to reflect the status of this company as a private, rather than public, company. • We commit anchoring and adjustment errors when we begin with faulty anchors and adjust from them improperly. The average P/E of public companies in the same industry might be a faulty anchor, for example, if P/Es in this industry are inflated in a bubble. COGNITIVE SHORT CUTS AND ERRORS 5. REPRESENTATIVENESS • We use representativeness shortcuts when we assess the likelihood of events by their similarity to or representativeness of other events. • We use representativeness shortcuts well when we consider both representativeness information and base-rate information. • We commit representativeness errors when we assign too much weight to representativeness information and too little to base-rate information. COGNITIVE SHORT CUTS AND ERRORS 6. AVAILABILITY • We use availability shortcuts when we assess the probability of events by information that is readily available in our minds. • We use availability shortcuts skillfully when all the information is available in our minds or when we are aware that not all the information is available in our minds. • We commit availability errors when not all the information is available in our minds but we are not aware of its absence