3BI: Declining Intelligence, March Madness, Decision Schools
Welcome to my 3BI newsletter, where I share three insights from the world of behavioral science on psychology, decision-making, and behavioral change.
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Hello and happy March Madness to those who celebrate. I’m back in Colorado this weekend to get some last ski runs in for the year, so get to mix my favorite sporting event with my favorite hobby. Here are some insights before the games begin, including some advice for last minute bracket updates.
Intelligence May Have Peaked
Has human intelligence peaked? According to analysis by the Financial Times, intelligence, as measured by reasoning and problem-solving test scores, reached its highest point in the 2010’s and has been steadily declining since.
Like any social science phenomena, there’s unlikely to be one clear explanation for this, as multiple factors are almost certainly contributing to the decline. That said, it’s hard to ignore the fact that this neatly coincides with the rise of smartphones and social media. Correlation doesn’t equal causation, but it’s fair to wonder if the mass adoption of technology that constantly distracts us and, perhaps more importantly, alters the way we receive and process information has hurt our cognitive abilities. From the article’s author, John Burn-Murdoch:
Most discussion about the societal impacts of digital media focuses on the rise of smartphones and social media, but I think that’s simultaneously an incomplete explanation, and one that lumps together benign/positive use of digital technologies with the more problematic.
I would point to something more fundamental: a change in the relationship between our brains and information.
The way we used smartphones and social media in the early 2010s was different to today. Usage was largely active, self-directed. You were still engaging your brain.
But since then we’ve had:
The transition from the social graph (seeing a selection of content from people you know and actively engage with) to algorithms (an infinite torrent of the most engaging content in the world, with much less active participation)
The shift from articles (longer material that requires the reader to synthesise, make inferences and reflect) to short self-contained posts (everything is pre-packaged in a few sentences, no critical thought required)
An explosion in the volume and frequency of notifications, each one at risk of pulling you away from what you were previously doing (or taking up some headspace even if you ignore it)
Research finds that active, intentional use of digital technologies is often benign or even beneficial. But passive use and interruptions have been linked to negative impacts on everything from our ability to process verbal information, to working memory and self-regulation.
This would line up with the fact that we see not only declining literacy, but deteriorations across a range of different knowledge domains, as well as that increase challenges with broader cognitive functioning.
I wrote a few weeks ago about my theory that we’re entering an era of declining cognitive fitness, in that the modern world increasingly requires less mental activity to get by just as the last century made us more physically sedentary. It seems increasingly likely that we’ve already entered that era, though.
Read more at the Financial Times. Futurism has a non-paywalled summary, as well.
Don’t Follow the Crowd for March Madness
Trusting the wisdom of the crowd is one of our deepest heuristics. In many (maybe most?) cases, what other people are doing is a pretty reliable indicator. If you’re walking around a new city looking for dinner, a packed restaurant is probably a better bet than an empty one across the street. We tend to trust supply and demand.
This is not a great strategy for investing or winning your office bracket pool, though. Value investing, popularized by Benjamin Graham and Warren Buffett, is a strategy where investors seek to buy stocks that are undervalued relative to their intrinsic worth. Value investors study the wisdom of the crowd, determine what they’ve gotten wrong, and buy cheaper assets to hold until the market to eventually recognize their worth.
If you’re filling out a bracket for March Madness this week, it may be smart to take a similar approach. From the WSJ:
In most pools, the later rounds of the NCAA tournament are worth a lot more than the first round, so you’re a lot more likely to win by accurately predicting the national champion than every upset on Thursday and Friday—unless you pick the same national champion as everyone else. In that case, you would have to get all the other games right, too.
That’s why it pays to be a contrarian and bet on the best, least popular team—and against the most popular team.
This year, that means betting against heavy favorite Duke, who have been picked by 28.2% of entries in Yahoo’s bracket, but only have a 22.9% probability to win it all.
I’ll always support rooting against Duke, but unfortunately, my Spartans are also low on value this year, too.
Instead of going with popular favorites, take the arbitrage opportunity and pick undervalued teams like Houston, who have a 12.2% chance of winning it all but have only been taken by 8.5% of people in Yahoo’s bracket contest.
Read more at the WSJ
The Schools of Decision-Making Theory
Most of what I do in this newsletter is share interesting findings from people much smarter than myself who are in the weeds studying our minds to understand how they work. In the world of decision science, those smart people are generally grouped into four major schools of thought with varied histories, research approaches, theories, and frameworks.
My friend Jared Peterson wrote a great summary of those different schools and their models, frameworks, and methods. Check out an overview below and read the whole thing at his newsletter.
Other stuff
A debate rages over March Madness bracketology metrics. Just ask the brains behind them - Examining the efficacy of the seven metrics (NET, KenPom, Torvik, BPI, Strength of Record, KPI and WAB) used by the NCAA Tournament selection committee this year.