Action Bias

Humans tend to favour action over inaction. Taking action often has benefits, but we tend to default to action even when it is against our best interests.

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Book Notes

Definition: "Look active, even if it achieves nothing"
Example: Doctors are prone to take action, even if the situation is not clear or waiting for further results would be best.
Insight: Action bias is greater when we are new to something, or there is uncertainty.
Insight: For hunter-gathers action was better than analysis, fast reactions were essential to survival.
Insight: Inaction is still not within our culture, even if it is more sensible.
Reference: Study by Michael Bareli on penalty shoot-outs and goalkeepers, who are more likely to dive left or right.

Example: Goalkeepers and penalties.
Insight: The action for bias can lead to poor, hasty decision making.
Insight: Pilots are specifically trained not to act instantly, but to calmly take a moment to assess the situation before acting.
Principle: Have patience, information, and alternatives.

Insight: For startups action can be better than over-planning in the very early stages.
Insight: After the initial results, it is often better to pause, assess, and decide what should be done next.
Principle: In business - get started quickly and take action.
Principle: Get the first sale as soon as you can.
Principle: Market before manufacturing: gather information through surveying before large scale manufacturing.

Insight: Female hedge fund managers consistently outperform male colleagues because they demonstrate more patience.
Reference: "Never underestimate the power of doing nothing." - Winne the Pooh
Principle: The best way is often to do less than you think you should.

Insight: We tend to make better financial decisions when we're calm and take a long term approach, rather than lots of activity.
Insight: Investors that have an action bias tend to perform worse over the long term.

Key Insights & Principles

Decision Making

We are prone to take action, especially when we are new to something, and this can lead to poor decisions.
Inaction is not within our culture, even when it is more sensible.
Have patience, gather information, prepare alternatives.

Personal Finance

Those that demonstrate patience in finance often outperform those that want to be active.
Better financial decisions are made with a calm longer term approach.
Do less than you think you should.

Business

For startups, action may be best.
After initial results, it is better to pause, and decide what to do next.
Get started quickly and take action.
Get the first sale as soon as possible.
Before scaling, pause, gather information and lessons learned before proceeding with action.