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Cognitive Bias and Climategate

Credit Cards and Cognitive Bias

Tonight PBS's Frontline will air a fascinating article on how credit card companies manipulate consumers into bad deals.  Some of the stuff is illegal, although some perfectly legal tactics rely on cognitive biases like optimism bias:

"I used to use the word 'penalty pricing' or 'stealth pricing,'" [a credit card exec.] tells FRONTLINE. "When people make the buying decision, they don't look at the penalty fees because they never believe they'll be late. They never believe they'll be over limit, right? ... Our business took off. ... We were making a billion dollars a year."

More details on the special is here.  

There's a lesson for criminal defense lawyers in there, too.  How many conditions of probation should be inserted into a plea agreement?  Oh, of course every client will follow every term and condition of probation.  Next thing you know, you're saying, "How could you have been so stupid as to not do your community service?"  Well, how could you have been so optimistic that he would?

Optimism bias means - in law and in life - one should be bound to as few terms as possible - since it's not likely that one is really going to do everything he says he will.  Always ask: "What's the worst that can happen?" rather than, "How many things can I take on?"  It's a simple framing maneuver.  

Optimism bias will usually prevent a person from allowing negativity to prevent him from assuming any obligations.  One just needs to even the scales.

Reframing the issue away from optimism bias is also a procrastination killer.  "I'll get to it tomorrow" presupposes that you will be able to.  Maybe you'll get sick; get into a car wreck; need to attend to a family emergency.  If you truly can't get to it until tomorrow, fine.  

Don't put it off, though, just because you assume that you'll be around tomorrow.  I just had some sort of super flu.  Missed zero deadlines and asked for zero extensions because I don't procrastinate - even though I am naturally a procrastinator.  If I have time to do something, I do it immediately because there's no guarantee I'll be around to do it tomorrow.  

Probably there's a life lesson in there, too.  Do you assume your friends, family, and pets will be here tomorrow?  Why?  People die unexpectedly so often that it's to be expected.  

Recognizing that the sun might not come out tomorrow is often the way to ensure sunny days today.