The Vision Of Genius: Nikola Tesla’s Guide To Coming Up With Truly Innovative Ideas

For many people, if you are told to think of a wacky scientist, the name of Nikola Tesla usually comes up at the top of the list.

Anyone remember his Tesla coil in “Command and Conquer: Red Alert”? I always loved that thing when playing the game on my computer. Unfortunately this was one of his ideas that did not see mass production.

He was a veritable genius who came up with very creative ideas, and his propensity for first principles thinking can serve as an inspiration for any budding inventor in training.

Tesla was a very original thinker and one technique that he used to come up with ideas is visualization. He would literally picture his inventions in his head.

This is something that he learned to do through experience and it can be learned by you as well.

As a boy, his head was full of things that annoyed him and so he started using the visualization technique to get rid of these thoughts:

By that faculty of visualizing, which I learned in my boyish efforts to rid myself of annoying images, I have evolved what is, I believe, a new method of materializing inventive ideas and conceptions. It is a method which may be of great usefulness to any imaginative man, whether he is an inventor, businessman or artist.

The first step of the visualization method is the incubation period. You gather building blocks of knowledge and let your mind ruminate on them in the background:

Here in brief, is my own method: after experiencing a desire to invent a particular thing, I may go on for months or years with the idea in the back of my head. Whenever I feel like it, I roam around in my imagination and think about the problem without any deliberate concentration. This is a period of incubation.

In the second step, there is a period of direct effort, or thinking of the specifics:

Then follows a period of direct effort. I choose carefully the possible solutions of the problem I am considering, and gradually center my mind on a narrowed field of investigation. Now, when I am deliberately thinking of the problem in its specific features, I may begin to feel that I am going to get the solution. And the wonderful thing is, that if I do feel this way, then I know I have really solved the problem and shall get what I am after.

The mind starts playing around with all the different building blocks and then connects them subconsciously.

The feeling is as convincing to me as though I already had solved it. I have come to the conclusion that at this stage the actual solution is in my mind subconsciously though it may be a long time before I am aware of it consciously.

The key is to think of everything in your mind first, to examine different features and make improvements to this mental model before you put anything on paper:

Before I put a sketch on paper, the whole idea is worked out mentally. In my mind I change the construction, make improvements, and even operate the device. Without ever having drawn a sketch I can give the measurements of all parts to workmen, and when completed all these parts will fit, just as certainly as though I had made the actual drawings. It is immaterial to me whether I run my machine in my mind or test it in my shop.

An important thing to remember is to always keep the big picture in mind and start with a holistic view before you start working on the details:

Some people, the moment they have a device to construct or any piece of work to perform, rush at it without adequate preparation, and immediately become engrossed in details, instead of the central idea. They may get results, but they sacrifice quality.

Tesla came up with many great inventions using this method:

The inventions I have conceived in this way have always worked. In thirty years there has not been a single exception. My first electric motor, the vacuum tube wireless light, my turbine engine and many other devices have all been developed in exactly this way.

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Doing Hard Things Is The Cure For What Ails You

I have recently started climbing mountains and through this came to a few life-changing realizations. My successful summit of Mt. Blanc gave me a new perspective on things, which really improved my mindset.

It was a long and dangerous climb, and the hardest thing I have ever done physically. However, after two days of pushing myself, for a brief moment I was the highest located man for thousands of kilometers around me.

I had accomplished something that I had thought was impossible and beyond my limits just a few years ago.

Doing something like this really gives you a great feeling and a boost to your self-confidence. A sense of accomplishment that results from this is priceless and can really help you in other areas of your life.

Cure for what ails you

Unfortunately, in our lives we are often confronted with stupid shit, which we have no control over. Stupid people, stupid rules, and other retarded stuff that just don’t make sense.

You can’t really control it, but it ends up bothering you. You stress over it and it makes you miserable. You need to realize that this stuff doesn’t matter. It is just stupid shit done by stupid people, people who have lost touch with reality.

If you really want to find meaning, happiness and balance in your life, you need to concentrate on doing things that you have control over.

You are the judge of the worth of all things. Only you can determine that you are the man.

And no, you won’t do it by standing in front of the mirror all day and chanting affirmations, but by going out, working hard and challenging yourself.

Mt. Blanc is the perfect test of that. And even if you fail to reach the top the first time, you will feel good about giving it your best. You will then know what to work on and come a second time better prepared.

When you do reach the top, you will have achieved something that the vast majority of people will never achieve in their life. Best of all, you will have done it through your own willpower and perseverance.

You will have tested yourself and you will have succeeded. This will be an enormous boost to your self-esteem.

You can take that back to your little office life and use it to get through all those confrontations that often happen in the modern workplace. When an overweight, sweaty slob starts shouting at you over some minor BS, you can just sit back and smile at him.

He will never accomplish what you have done. This is just his way of compensating for his own failures. Keep that in mind, and you will be able to rise above the BS. You don’t even know what an amazing feeling that is.
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Every Hero Overcomes Things That Seem Impossible – What Is Your Impossible Challenge?

Every Hero overcomes things that seem impossible – What is your impossible challenge?

Ever since the beginning of history, the story of the hero has played an important part in society. Back thousands of years ago, people would sit around a campfire and listen to the tales of ancient heroes, whether real or imagined, and how they overcame impossible challenges to do incredible things.

Hero stories have always served an important role in the development of young guys growing up. They would set the examples to be emulated. They were meant to inspire so that these youngsters could aspire to something greater.

Every hero has an origin story

Some of the most popular stories proved to be the stories we now call origin stories. Heroes were known to possess incredible powers, do impossible things and overcome powerful forces. To most listeners, they seemed out of this world.

Yet, all these heroes had to start somewhere. Most of them started off as ordinary men, living in an ordinary world, doing ordinary things. This is what made them relevant to all the people sitting around the campfire and gasping at every feat of strength, every logical problem solved with brain power and every enemy defeated. The heroes were all once like them.

Whatever your endeavor, it all starts with a first step

The origin story covers the first few steps in a hero’s journey, the parts where they go from the ordinary world and cross over the threshold into a world of adventures, and also the first few challenges that they need to overcome.

Successfully completing these first few steps sets them on a path dependency towards their superhero status.

The good news is that you can use the same type of framework to guide you on your path to greatness. You too can create your origin story. However, you need to take action. It all starts with a first step.

That first step and the successful completion of your first challenge is what defines your origin story and sets you on your hero’s journey. At this point you will know that things that seemed impossible just a short while before, are in fact quite possible and achievable.

You can create your origin story for any type of goal that you want, whether it is an adventure you want to undertake, a mental challenge that you want to tackle or a physical challenge that you want to overcome.

Create your own adventure
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Find Out How To Combine Building Blocks Of Knowledge And Come Up With Great Ideas

A great idea or invention is usually a combination of other different ideas or inventions. Things don’t happen in a vacuum and as the old saying goes, you stand upon the shoulders of giants.

One of the greatest skills that you can have is to be able to combine ideas from different sources. And this is something that expert-generalists, or Renaissance Men, excel at. Their greatest assets are their combinatorial and associative skills.

However, how do you develop and cultivate these types of skills?

Step 1: Collect pieces of information

The first thing you need to do is to know the information and have it available. So the first step is the collection phase.

This has been described in different ways, as collecting pieces of a puzzle or different building blocks. If you want to glue together a picture out of a puzzle or build a house, you need to have the pieces ready in order to do that.

Each piece of knowledge is a like a building block, you can use it in different ways and combine it with other building blocks. The combinations are endless and every resulting structure can look different, even if you use the same building blocks (or it can look the same, up to you really).

How do you go about collecting these building blocks? One thing is by reading a lot. That’s why I wrote a short article on the reading habits of guys like Warren Buffett or Charlie Munger. It is kind of obvious, but a lot of people don’t do it.

Another way is to collect different experiences, like Steve Jobs says. Go to different places, expose yourself to different ideas, try different things. All of this will enrich you, and give you some building blocks which you can use later.

Once you have a good selection of building blocks (information) ready, you can go on to creating a few useful mental models to guide you. These are basically representations of real, or imaginary situations or things that you create in your head.

Scottish psychologist Kenneth Craik proposed the idea (although similar ideas were proposed earlier by others as well) that the mind works by constructing small-scale models of reality in order to reason and to offer explanations for events. Modern research so far seems to prove this assertion.

You can actively use these workings of your brain by building a latticework of mental models, something that comes from Charlie Munger, one of the greatest financial investors of all time.

From all the studying he does, Munger selects a handful of big ideas and stores them for later. These can come from things like physics, chemistry, economics, humanities, or any other type of discipline. As long as you think it will be useful later.

To quote Charlie Munger:

You have to learn all the big ideas in the key disciplines in a way that they’re in a mental latticework in your head and you automatically use them for the rest of your life. If you do that, I solemnly promise you that one day you’ll be walking down the street and you’ll look to your right and left and you’ll think “my heavenly days, I’m now one of the few competent people in my whole age cohort.” If you don’t do it, many of the brightest of you will live in the middle ranks or in the shallows.

The sources of mental models can come from anywhere. When you are reading books or collecting experiences, try to summarize some of the big lessons that you get out of them. These can then serve as your own personal mental models.

Step 2: Things start clicking automatically

You might not believe me, but collecting the information is the most important step. By collecting more and more information, things will start clicking automatically. Trust me! 🙂

You might have had the experience of you not understanding a problem, trying to go at it through different ways and failing. Then you forgot about the problem, but were walking one day and suddenly things clicked.

This is often called the “Eureka” moment, just like Archimedes had his “Eureka” moment when he was entering the bathtub.

Maria Popova, in an article for “Smithsonian Magazine” writes:

There is a curious cultural disconnect between our mythology of spontaneous ideation – the Eureka! moment, the stroke of genius, the proverbial light bulb – and how “new” ideas actually take shape, amalgamated into existence by the combinatorial nature of creativity. To create is to combine existing bits of insight, knowledge, ideas, and memories into new material and new interpretations of the world, to connect the seemingly dissociated, to see patterns where others see chaos.

These sudden flashes of the lightbulb are quite common. This doesn’t mean that something appears out of nothing. The building blocks of your idea are already there in the brain. It is that your brain is just playing around with them subconsciously.
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Combinatorial Knowledge Is The Key To Many Innovations – Find Out How To Apply It

In 2007, Steve Jobs got on stage to reveal a device which would go on to revolutionize the way we work in the world today. The device in question is the iPhone and it ushered in the era of the smartphone.

Ever the showman, Jobs gave a riveting speech. There is one part that really stands out and describes the essence of what the iPhone is.

An iPod, a phone, an internet mobile communicator. An iPod, a phone, an internet mobile communicator. An iPod, a phone, an internet mobile communicator. Do you get it? These are not three separated devices. This is one device, and we are calling it iPhone.

He mentioned three things: an iPod, a phone, and an internet mobile communicator. All of these things existed on the market when the iPhone came out. However each one was its own device.

What did Jobs and Apple do? They combined them and put them on one device!

This is what combinatorial knowledge is all about. You take different already existing pieces and combine them together to make something new. This something new can be another piece of knowledge, or a new device or anything else.

It is very, very hard to be truly original and come up with something totally new, something that has never existed before and which truly changes our understanding of the world. For the most part, to do that, you truly need to dedicate a lot of time to your field. This is what Albert Einstein did with his theory of relativity.

However, if you dig deeper, you will notice that even Einstein used some previously discovered knowledge, which served as inputs. He then combined it with his own things. James Hutton, when coming up with his theories on geology, also combined different strands of knowledge that were floating around in his time.

Combinations of knowledge from different sources is the key to new knowledge. It is also the key to new revolutionary devices like the iPhone.

An article in “Wired” magazine describes how Jobs came up with the idea:

In 2002, shortly after the first iPod was released, Jobs started thinking about developing a phone. He saw millions of Americans lugging separate phones, BlackBerrys, and — now — MP3 players; naturally, consumers would prefer just one device. He also saw a future in which cell phones and mobile email devices would amass ever more features, eventually challenging the iPod’s dominance as a music player. To protect his new product line, Jobs knew he would eventually need to venture into the wireless world.

The article goes on to list some of the challenges that such a product would have to overcome:

If the idea was obvious, so were the obstacles. Data networks were sluggish and not ready for a full-blown handheld Internet device. An iPhone would require Apple to create a completely new operating system; the iPod’s OS wasn’t sophisticated enough to manage complicated networking or graphics, and even a scaled-down version of OS X would be too much for a cell phone chip to handle. Apple would be facing strong competition, too: In 2003, consumers had flocked to the Palm Treo 600, which merged a phone, PDA, and BlackBerry into one slick package. That proved there was demand for a so-called convergence device, but it also raised the bar for Apple’s engineers.

These challenges lay in vastly different fields, not only with the technology, but also the way the wireless industry was structured and the business models. In order to make the iPhone a success, all these things would have to be pulled together.

Compare this description of what Steve Jobs (and his Apple team) did, and what Johannes Guttenberg did when coming up with his printing press. A passage in Samuel Arbesman’s “The Half-life of Facts” describes the process:

It turns out that the printing press is far from simple. The technological innovations that Gutenberg developed were much more than the modification of a wine press and the addition of the idea of movable type. Gutenberg combined and extended a whole host of technologies and innovations from an astonishing number of areas, and that is what made his work so powerful.

He used metallurgical developments to create metal type that not only had a consistent look (Gutenberg insisted on this), but type that could be easily cast, allowing whole pages to be printed simply at once. He used chemical innovations to create a better ink than had ever been used before in printing.

Gutenberg even exploited the concept of the division of labor by employing a large team of workers, many of whom were illiterate, to churn out books at a rate never before seen in history. And he even employed elegant error-checking mechanisms to ensure that the type was always set properly: There was a straight line on one side of each piece of type so that the workers could see at a glance whether any letters had been set upside down.

Only by having the combined knowledge of all of these technologies does the printing press become possible and cost-effective.

Just like Steve Jobs had to combine different elements when coming up with the iPhone, Johannes Guttenberg had to do something similar when he came up with the printing press. If you look at other types of inventions that revolutionized our world, you will most likely see a similar process at play.
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What Is The Secret Behind Warren Buffet’s Success? It’s Quite Simple Actually!

Warren Buffett is one of the richest men on the planet and in the investment world he is seen as one of the best investors of all time. His decisions have made him billions many times over.

However what is his secret? What does he do that gives him that mental edge?

It’s actually quite simple. He reads a lot!

One time he was asked what the secret to success is. This is his reply:

Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.

That’s it. This is what gives him the combinatorial mental powers that he has. The more he reads, the more information he has, the more things he can combine.

It also makes him less impulsive and more rational. To quote him again:

I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.

His investment partner, Charlie Munger, also reads a lot. From all the information he reads, he creates a select amount of mental models, which he then uses to guide him when making investment decisions, as well as many other decisions in life.

For him, reading a lot (and a variety of books) is fundamental:

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.

If you look at many of the successful people of today, the expert-generalists that have created the iconic enterprises of the past decades, they share this exact same trait with Buffett and Munger. They read a lot.

When he was young and beginning his investing career, Buffett would read between 600 and 1000 pages a day! He still spends about 80% of his day reading.

I already mentioned that Elon Musk also reads like 2 books a day. Bill Gates reads 50 books a year. In the old days, guys like Thomas Jefferson or Benjamin Franklin would also spend their days reading a variety of books.

As Benjamin Franklin said:

An investment in knowledge always pays the best interest.

The elite thinkers spend much of their time sucking up as much knowledge as they can.

What does the average person do? This:

There is a book by Tom Corley called “Rich Habits: The Daily Success Habits of Rich Individuals”, where the author mentions some very interesting findings.

There was a study done that surveyed the reading habits of different people. The results were quite telling.

Rich people (those with an annual income of over 160 000 Dollars) read primarily for self-improvement. Poor people (annual income of 35 000 Dollars or less) read for entertainment.

To quote him:

The rich are voracious readers on how to improve themselves. They’re reading self-improvement books, biographies, books about successful people, things like that.

You see what I am getting at? If you want to be successful, you need to start reading a lot. You might not become a multi-billionaire like Warren Buffett, but you will definitely have a leg up on the average dude on the street.
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A Short Lesson On First Principles Thinking

A while back, Elon Musk revealed that his success is based on a special way of solving problems called first principles thinking.

In this type of problem-solving method, you don’t rely on old ways of doing things (analogies), but instead you rethink the problem from the ground up. You go back to the fundamental assumptions (first principles) that underpin the problem and try to see what other possible directions could be followed.

However first principles thinking is not natural to most people. That is because the human mind evolved in order to promote survival. This favored speed and efficiency in the thinking process and not a slow, thorough evaluation.

Barriers to first principles thinking:

In order to reach quick decisions in a world of uncertainty, the human mind uses heuristics, or shortcut methods to solving problems. In most cases, these result in good enough answers, but there are instances when heuristics fail. These failures are called cognitive biases.

If you want to know more about cognitive biases, check out my series on critical thinking and my cognitive biases framework:

How to be a critical thinker

My Cognitive Biases Framework

There are two main cognitive biases that make it harder for you to solve problems using the first principles method: the Einstellung effect and functional fixedness.

These two effects are not bad things in themselves. They do promote fast thinking and an efficient way of doing things. For the vast majority of tasks this is the best way to proceed. In most cases, you want to follow best practices and do things using the tried and tested method.

Daily practice of the same moves reinforces them in the brain. More and more synapses between specific neurons are built up, which helps information to be passed on quicker between them. This then enables you to execute the moves faster and better (and after a significant amount of practice often even without thinking about them, just by instinct).

This is what makes experts so good at what they do. Their heuristics become automatic and since they have been in these situations many times before, they can execute almost effortlessly.

However there is also a problem. Once these neural pathways connecting different neurons are built up, it is hard to pass around them and to do things differently. When one neuron lights up, the other ones connected to it light up too.

That’s why functional fixedness is so strong. If you have a hammer and the only thing you have ever done with it is to pound in nails, then you will only see one use for the hammer. You might become really good at pounding in nails with a hammer, but you will fail to see the other potential uses of the hammer.
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A Framework For Cognitive Biases: More Types Of Cognitive Biases

It’s another great day on the savannah. You wake up as the sun is beginning to rise up above the horizon. A cool breeze starts blowing in from the east.

You get all your tools ready as you start preparing for another day of tracking and hunting on the vast grasses of the East African plains.

This probably would have been a typical scene for you, had you been born about 200 thousand years ago.

You would have had to struggle every day in order to survive, by finding food, battling enemies, and generally staying out of harm’s way.

Life wasn’t easy in those days. You were not guaranteed to make it to the next day, so you had to hustle hard and always be on alert.

Luckily, you had inherited a set of internal tools embedded deep in your brain that are the result of millions of years of evolution.

Those are your best bet for surviving and prospering. They drive you to want to achieve more, to struggle on, but also to take in all the different information coming into your brain from your senses and then make a decision.

These decisions need to be made quick and in an efficient manner. They could mean life or death and plus you don’t have too much energy to spare.

The internal tools I am talking about are called heuristics, shortcut ways to coming up with a solution to a problem and then acting upon it.

Psychologists and researchers have started to study them more intensely in the past few decades and have drawn up quite a list.

I had already discussed how I sat down and decided to make sense for myself of all these long lists of heuristics and the cognitive biases coming out of them.

Yes, these heuristics come up with good solutions most of the time, but can fail spectacularly as well some of the time. These failures result in cognitive biases.

In Part 1 of the Cognitive Biases Framework, I discussed the first category of biases that I found, ones I grouped under the “The world is centered around me” problem.

I further divided up this category into two main sub-categories: “I have an ego” and “I am a social animal”.

Yes, you do believe that the world is centered around you, and you do have an ego. And yes, you are a social animal. 🙂

The cognitive biases in these categories are meant to manage your drive for survival and reproduction based on potential risks.

2) I need to make the correct decision based on the information available.

However in order to survive and reproduce, you need to be able to manage all kinds of different information, interpret it, and then make a decision on a future course of action based on this.

Let’s get back to a prehistoric nature scene.

What do you see? What should you be seeing? Where is the danger? Where is the potential food?

Information overload! Too much information!

Wait, do you hear that sound? What could it be? Should you be scared? Is it nothing? Too little information!

You try to search in your memory. Yeah, you heard that sound before. Probably nothing.

What happened? You were bombarded with inputs from your senses and subconsiously a decision needed to be made about which of these inputs are important and which should not be paid attention to.

You focused in on some sounds, but unfortunately you did not have any more information to make any reliable conclusion. So your brain raced to find analogies to that sound in its memory.

Then based on all these things, your brain came to a decision: No danger imminent, continue on.

What made this decision possible? Information!

While the category described in Part 1 was about your relationship with other people, the category described here is about your relationship with information.

The brain uses different types of inputs as information in order to create patterns, and then get meaning out of these patterns. These processes are the source of many cognitive biases.

Why do many of these patterns turn out to be wrong? The answer once again has to do with risk.

Going back to our ancient savannah, imagine walking around in the tall, yellowish-colored grass. You hear a sound, and see the grass in front of you ruffle a bit.

You are missing information. There are two possible courses of action.

Your brain does not form a pattern, does not associate the sound and ruffle with anything and you continue on walking straight. Or, the brain makes a pattern, surmises that it could be a dangerous animal, and you decide to take out your spear and backtrack slowly and carefully.

Choose your own adventure!

What if it turns out that you did not form a link between the ruffle of the grass and anything and continued on walking, but walk straight into the mouth of a hungry lion! Big mistake!

On the other hand, if you formed a pattern and backtracked out of potential danger, you walked out of harm’s way. Even if there was no lion in the grass and the pattern you created was false, you are still alive and this mistake didn’t cost you much.

The risk of not making a pattern and turning into lunch meat is much bigger than making a pattern that turns out to be false.

This is why cognitive biases have a tendency to happen.

There are some basic principles about how you and your brain works in the context of information. These principles have a big effect on how these cognitive biases take place.

Principles:

Your brain tries to find meaning.

Your brain works by forming associations.

You brain works by drawing analogies.

What you see is all there is.

The emotions you feel at the moment have a huge impact on how you perceive a situation.

The way your brain stores memories is not perfect.

It has been said that humans are storytelling animals. Telling stories is one of the most ancient and most popular ways of conveying information. We are all suckers for a good story.

The reason why stories are so powerful is because they connect the dots smoothly. Things happen in sequence and there is always a cause and an effect.

This type of structure conveys meaning very well, and that’s the most important thing humans are looking for: meaning.

What all the different cognitive biases dealing with information have as a common denominator is that they are giving you some sort of an explanation (a meaning) for all the different things that are happening.

This is the basic principle from which all the other principles derive. Your brain tries to determine this meaning by forming associations between different elements.

These associations can then be stored in your memory, so that it can be used at a later date as well. The way your brain is set up is that synapses form between neurons, which then links them together. When they wire together, they fire together too!

Another principle behind how the brain works is that it likes to form analogies. For example if it has a hard question to answer, it might substitute that by forming an easier question which is similar and answering that.

To put all this in context, you need to understand that the brain usually works only in a limited context and largely devotes itself to the present moment (the now).

For the brain, what you see is all there is, which Daniel Kahneman calls the WYSIATI principle.

The future is unpredictable, and in order to get there you still need to deal with everything that is happening now! 🙂

The WYSIATI principle states that the brain deals with its immediate surroundings and what it can get out of them, with things it knows. It doesn’t concern itself with things it doesn’t know.

If it doesn’t know something, it just makes it up. Basically, your brain fills in the blanks with its best guesses.

To make decisions quickly, your brain relies on emotions. So the emotions you are perceiving at the moment have a huge impact on how you react to the situation.

Of course, another important element for any type of decision is the ability to store memories and then recall them as needed. The way this happens in the brain can be quite messy and is another source of cognitive biases.
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A Framework For Cognitive Biases: What Types Of Cognitive Biases Are Out There?

The internet has changed our lives in many ways, sometimes for the better, and sometimes for the worse. What the events of last year, such as Brexit and the US Presidential campaign, have exposed is the way that the structural flaws of the human brain can be taken advantage of using the internet.

What is encouraging is that these problems have gotten wider play and people are starting to take measures to combat them. Luckily, we can already build upon a wide range of research and solutions in this area, many of them developed because of similar large-scale failures of human rationality.

One of the most basic principles of traditional economics is the assumption that humans are rational actors always striving to maximize their own benefits.

I remember sitting in Econ 101 class and sort of scratching my head at this. In my experience, most humans were very far from rational actors. Actually, I have seen people literally shoot themselves in the foot more times than I can count.

Then the economic crisis of 2008 arrived and all these theories came crashing down. Most economists realized that humans are not so rational after all, and behavioral economics suddenly exploded onto the scene.

However, behavioral economics is nothing new and had been around for a while, but it was not really the prominent paradigm for most economists.

Already in the 1950s, Herbert A. Simon, an economist and psychologist (a polymath really), proposed the idea of “bounded rationality”. In this model, humans are only partially rational, and this rationality is limited by difficulties in formulating complex problems and in processing different types of information.

Many of the basic concepts in behavioral economics are based on the work of two Israeli psychologists, Amos Tversky and Daniel Kahneman. They noticed that there are specific patterns inherent in human decision-making.

The two big terms that they came up with are “heuristics” and “cognitive biases“. Heuristics are mental shortcuts that humans take in order to solve problems and then take action based on these solutions.

Most of the time, these mental shortcuts come up with a good solution. They are fast, efficient and effective. This then allows you to go about your daily life and navigate the world.

However, things are not perfect and sometimes these mental shortcuts come up with the wrong solution. This is called a cognitive bias. The process was fast and efficient, but obviously not effective.

Why do you behave in this way? All of this can be explained using evolutionary psychology.

Humans, just like any organism, are the product of millions of years of evolution. Their bodies and minds adapted due to pressures coming from their environment.

Not in a direct way, but indirectly. Due to random mutations, certain ways of behavior would arise. If these behaviors allowed the organism in question to survive long enough to reproduce, then they would propagate to their descendants.

This is the basis of evolutionary theory. An individual doesn’t have to be perfect. It just needs to be good enough to survive.

There are two main goals hardwired deep down into your brain: survival and reproduction. These two things are what drives your existence.

Imagine the everyday environment of your ancient ancestors, living somewhere on the vast savannas.

There are many dangers present. At any time of the day or night, a saber-toothed tiger could jump out of the bush and want to eat you, or a little snake could bite you and poison you.

In order to survive in such an environment, you need to be able to take in vast amounts of information through your senses, determine what is significant and what isn’t, and then make quick decisions based on this.

Is that noise you are hearing just wind beating against the sand or something more sinister? Is that shadow just a figment of your imagination or a lion heading your way?

These were the main things that your brain developed to analyze. However there are some constraints to this entire process.

The two basic principles behind the way your brain works are speed and efficiency:

1) You need to make quick decisions based on outside stimuli. So speed is important.

2) You should not expend too many resources, and so you need to do things in the most efficient manner possible. You never know when and from where your next dinner will come from, so saving energy is a priority.

In order to make decisions quickly and efficiently, your brain developed mental shortcuts. That’s where heuristics come from.

However, if your brain developed to make decisions to ensure your survival, why does it fall for cognitive biases? The answer here is costs.

By saying costs, I mean the potential pay-out of making the right and wrong decision.

Let’s go back to the prehistoric savanna in order to illustrate. You are walking on your way home from a successful hunt, your kill strapped to your back. You are walking alone, since you got held up and your companions went on ahead of you.

Then suddenly you hear a noise coming from behind a rock nearby. Quickly, your brain goes into overdrive. What could it be?

If it judges it to be nothing of concern and you pay no attention to the noise, but suddenly a lion jumps on you, you are dead meat. You have become a source of protein and essential fats (and maybe some carbohydrates too) for an entire lion family.

Hopefully, you die quick and don’t get to experience the joys of getting dismembered by a pride of lions, the alpha male and his harem of females, together with their baby cubs.

However, if you judge it to be danger and take out your spear while running away from the place, but then realize that it was nothing, there is no mortal cost to you. Sure, you got a bit sweaty, but you are still alive to hunt another day.

You see what I am getting at? It is much more costly if you judge something to be of no importance, when it is in fact significant, than it is if you judge something significant and there is nothing there.

In the first instance, you die, while in the second one, you continue on living and potentially pass on your genes. Your brain is wired to err on the side of caution.

This is where cognitive biases come from. Your brain evaluates thousands of stimuli from the outside every second, and sometimes it makes mistakes.

However that mistake doesn’t matter if it doesn’t kill you. What matters is that that specific way of solving problems and making decisions keeps you alive the rest of the time.

The brain looks at these different pieces of information and tries to make patterns out of them. If a wrong pattern emerges, it is called a cognitive bias.

One thing that I have noticed is that since now the study of cognitive biases is very popular, psychologists keep on coming out with newer and newer types of these almost every day. Sometimes many of these are very similar.

It’s hard to keep track of all of them. So I decided to sit my ass down and simplify things for myself. At the end, I came out with a small framework to help me make sense of cognitive biases.

I have based this framework on some of the things discussed above. Survival and reproduction are the two main goals that drive human existence.

Heuristics or mental shortcuts developed in order to help humans survive long enough to reproduce. These mental shortcuts need to be fast and efficient.

The inputs they work with are different types of information. This information comes from outside stimuli gathered by your senses or from storage (memories) in your brain.

The problem is that you need to construct all this information into some sort of meaningful patterns. Only once you have this meaning, can you make decisions.

I have broken down all these different cognitive biases into two basic categories arising from two fundamental ideas:

1) The world is centered around me.

2) I need to make the correct decision based on the information available.

The first fundamental idea is that you think that the world is centered around you. No matter how altruistic you are, there is still at least a bit of solipsism inside of you.

This idea shapes your inner thought patterns and your relationships with the people around you.

The second fundamental idea comes from the fact that you need information as inputs in order to make a decision.

Sometimes there is a lot of information around you and you need to determine which of it is significant. Sometimes, there is not enough of it and you need to determine what to do in the face of uncertainty.

Oftentimes, the relevant information may not be present at that moment in your environment, and you might need to pull it out of your memory.

Almost all of the main cognitive biases work within these two categories.

However, you also need to keep in mind that you cannot put all the biases into neat little boxes (otherwise you would be committing a cognitive bias ☺ ). Some biases belong in several categories and combine elements of each.

Here is the framework broken down and explained:
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