How simple rules, just-in-time learning and checking your understanding can help you make better financial decisions.
In this episode you’ll learn:
- How we rely on the environment and other people to think.
- Why we aren’t overwhelmed by complexity.
- What are the downsides of drawing on a community of knowledge and to mitigate them.
- The importance of simple rules and just-in-time learning.
We Know Less Than We Think
In 1986, Christopher Knight drove his car deep into the woods of his native Maine. He said, “I drove until I was nearly out of gas. I took a small road. Then a small road off that small road. Then a trail off that.”
He parked his car, left the keys on the center console, and walked into the forest. He didn’t walk out of the woods for 27 years, living in complete isolation the entire time.
“I can’t explain my actions,” he said. “I had no plans when I left, I wasn’t thinking of anything. I just did it.”
The Hungry Hermit
Author Michael Finkel relates Knight’s story in his book “The Stranger In The Woods.”
Knight carried little with him into the wilderness; some basic camping supplies and a few pieces of clothing. He had a little food, but no gun or fishing gear in order to secure something to eat.
“I had what I had,” he said, “and nothing more.”
“I kept largely to the ridges and sometimes crossed swamps going from one ridge to another. Soon I lost track of where I was. I didn’t care. I kept going. I was content in the choice I had made.”
“Content except for one thing, explains Finkel. “Food. Knight was hungry, and he really didn’t know how he would feed himself. His departure from the outside world was a confounding mix of incredible commitment and complete lack of forethought – not all that strange for a 20-year-old. It was as if he went camping for the weekend and then didn’t come home for a quarter of a century. He was an able hunter and angler, but he took neither a gun nor a rod with him.”
Knight decided to forage, but there are no fruit trees in the Maine woods and the berry season is short.
The Knowledge Illusion
Knight came face to face with the reality of being human. We like to think we are completely independent thinkers, but the reality is we are highly dependent on the environment and others to help us think and solve problems.
Steven Sloman and Philp Fernbach write in “The Knowledge Illusion: Why We Never Think Alone” that “The mind processes information so that individuals can act, so that they can transform the environment to their liking…The world serves as a memory and is part of the thought process. But a single thinker can do only so much. In nature we often see complex behavior arise through the coordination of multiple individuals. When multiple cognitive systems work together, group intelligence can emerge that goes beyond what each individual is capable of.”
“The division of cognitive labor makes the difference between the comfort and safety of living in society and of being alone in the wild.”
Christopher Knight survived 27 years in the woods by tapping into a community of knowledge that developed the modern food distribution system. In other words, he survived by breaking into cabins and stealing groceries, breaking locks with screwdrivers and other tools he also stole from cabins.
Sloman and Fernbach write, “We think the knowledge we have about how things work sits inside our skulls when in fact we’re drawing a lot of it from the environment and from other people.”
For example, psychologist Rebecca Lawson from the University of Liverpool showed a group of psychology undergraduates a drawing of a bicycle that was missing the chain, pedals and several parts of the frame. She asked the students to fill in the missing parts.
About half the students were unable to correctly complete the drawings of this seemingly straightforward contraption.
Why? Because we don’t need to know those details in order to ride a bike. All we need to know is that if we turn the pedals the bike will move forward.
The Purpose of Thought
Sloman and Fernbach write, “Thought is for action. Thinking evolved as an extension of the ability to act effectively; Thought allows us to select from among a set of possible actions by predicting the effects of each action and by imagining how the world would be if we had taken different actions in the past.”
“Thought is masterful at extracting only what it needs and filtering out everything else. When you hear a sentence uttered, your speech recognition system goes to work extracting the gist, the underlying meaning of the utterance, and forgetting the specific words.”
If we we need to know the specifics of how a bicycle works, we can look it up on YouTube. We do the same for most other topics.
We might have an area or two where we are truly experts, but in most other areas what we actually know from memory is sparse.
Much of our knowledge is really pointers and placeholders: knowing where we can find the missing information at the time that we need it and how that information fits relative to other placeholders in our mind.
Studies show that couples that have been together a long time distribute demand on memories by specializing in different areas.
For example, psychologist Adrian Ward of the University of Texas asked people in a relationship how long they and their partner had been together, and how much of the financial decision making they were responsible for. He discovered “people responsible for financial matters got more financially literate as the length of the relationship increased.”
We think we know so much more than we do. Sloman and Fernbach write, “The nature of thought is to seamlessly draw on knowledge wherever it can be found, inside and outside our own heads. We live under a knowledge illusion because we fail to draw an accurate line between what is inside our head and outside our head. And we fail because there is no sharp line. So we frequently don’t know what we don’t know.
Christopher Knight was captured in 2013 while stealing food from a summer camp. He was sentenced to seven months in prison and paid $1,500 in restitution for committing over 1,000 burglaries.
Finkel asked Knight what he learned over all those years of isolation.
Knight said, “It’s complicated. Solitude bestows an increase in something valuable. I can’t dismiss that idea. Solitude increased my perception. But here’s the tricky thing: when I applied my increased perception to myself, I lost my identity. There was no audience, no one to perform for. There was no need to define myself. I became irrelevant.”
“My desires dropped away. I didn’t long for anything. I didn’t even have a name. To put it romantically, I was completely free.”
When asked if there was some grand insight revealed to him in the wilderness?
“Get enough sleep,” Knight said.