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Douglas Adams brilliant novel The Restaurant at the End of the Universe describes Milliways, the fine dining establishment built in a time bubble and projected forward to the precise moment of the End of the Universe. Meals at such a singular restaurant are ridiculously expensivebut diners can easily pay for them. All you have to do is deposit one penny in a savings account in your own era, and when you arrive at the End of Time, the operation of compound interest means that the fabulous cost of your meal has been paid for, Adams wrote. When I read this novel as an impressionable 12-year-old, the Milliways-approved investing process appealed to me. With a little bit of money and a whole lot of time, compound interest could do the work for me while I sat back and looked forward to a truly world-shattering meal. I was reminded of this recently when my spouse asked if the investment decisions we had set-and-forget several years before were maximizing our returns. Instead of jumping at the chance to ensure our finances were living up to their potential, I was annoyed at the prospect of having to make changes to a system Id already set up. Until that moment, I thought I had a handle on my financial psychology. But apparently, I have some quirks of investment psychology that I wasnt even aware of. As do you. Heres how your investment psychology may be misdirecting your investing decisionsand what you can do to get back on track. What is investment psychology? Although we think of finance and investing as a rational activity, we are likely to react emotionally to money. This is partially because of mental shortcuts known as cognitive biases. These are systematic patterns in thinking that can lead us to irrational decisions or behavior that runs counter to our goals. For example, my preference to set-and-forget my investments is partially due to a cognitive bias known as the status quo bias. This cognitive bias describes a preference for the current state of affairs to remain the same. I dont like to think of myself as a stick in the mud, and I could have given my spouse a rational-sounding reason why I dont double check that our investments are maximized. But I can see that my lack of interest in revisiting old decisions reflects something about my investing psychology: I prefer to make a decision once and stick to it. Thats the specific aspect of the status quo that I dont want to change. This preference for once-and-done decision making isnt necessarily a bad thing, but it can cost me. If my spouse hadnt asked about our returns, I never would have thought to check and we could have lost years worth of potential returns. After this experience, my spouse and I have realized that he needs to occasionally nudge me to check back on old investing decisions. That will help me avoid the complacency of my status quo bias. Common investment psychology biases There are a number of cognitive biases that may be keeping your investments from growing. Which of these biases sound like you? Action bias The action bias could be seen as the opposite of the status quo bias. If you have this cognitive quirk, you will feel the need to do somethinganything!rather than nothing. If your portfolio drops in value, your action bias might lead you to sell in order to avoid a larger loss. Unfortunately, taking action at that time is often the worst option, since most losses are temporary, and selling makes the loss permanent. To avoid the action bias, commit to waiting 24 to 48 hours before taking any action with your portfolio. This will give the market some time to recover from momentary dips, and will not make a significant difference if action is called for. Additionally, find a trusted adviser or friend who can help you determine when action or inaction is appropriate. This can help keep you from developing an itchy trading finger. Disposition effect This cognitive bias describes the phenomenon where investors tend to sell a winning investment too soon while holding onto a tanking investment for too long. When you are experiencing the disposition effect, which combines a fear of losing out (in case the tanking investment suddenly goes gangbusters) plus a fear of regret (in case the winning investment takes a dive), you are trying to hedge your losses in both directions. But evidence has shown that selling the losing investment and holding onto the winning investment is the smarter strategy. The disposition effect is making an emotional decision to hedge loss, rather than a rational choice to try to maximize your returns. Researchers have found the best way to avoid the disposition effect is to implement long-term investment goals. Investors with a clear financial target not only successfully avoid the disposition effect, but they exhibit a reversal of the effect, selling the losing investments and keeping the winners. Familiarity bias Also known as the mere exposure effect, this cognitive bias leads investors to overinvest in assets they are familiar with. Specifically, American investors are more likely to put their money in domestic stocks, bonds, and funds, rather than getting international exposure in their portfolio. The familiarity bias can go even further, with investors buying shares of companies they recognize, or even the company that employs them. (You might remember that Lehman Brothers employees owned 30% of the companys shares at the time of the banks collapse.) But just because an investor is familiar with an asset doesnt make it the right investment for their portfolio. Diversification is typically the best way of combatting the familiarity bias. This may require the help of a financial adviser if you dont feel comfortable picking diverse international investments or other assets outside of your sphere of exposure. Dont panic: a rational guide to investing Humans arent great at making rational investment decisions, but were very good at lying to ourselves about that fact. To improve your investment choicesnot to mention your returnsstart by recognizing the ways in which your investing psychology may be leading you astray. Perhaps, like me, you suffer from the status quo bias, and prefer to avoid revisiting any decisions youve already made. Or you might experience the opposite quirk, the action bias, which tells you to do something! anytime there is the slightest movement in your portfolio. You may fall victim to the disposition effect, where you hold onto a stinkr and sell a winner, despite it being a losing strategy. Or you might just stick with the familiar companies, asset classes, and investments you know, rather than diversifying your portfolio. Heres the good news: once you know your brain is taking these shortcuts, youre better prepared to avoid them. As for me, Im still keeping my Milliways savings account open. Ive got the time.
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This article is republished with permission from Wonder Tools, a newsletter that helps you discover the most useful sites and apps. Subscribe here. The most powerful AI tools don’t just save time; they expand our consideration of what’s possible. These assistants help us consider 5 or 10 times the number of creative options wed otherwise think about. AI tools I consistently rely on Research and analysis Perplexity: Unlike Google’s long list of links, Perplexity delivers concise, citation-backed summaries that work like a presidential brief. This is perfect when you need to quickly understand consumer patterns, industry trends, or a complex topic. NotebookLM (and Claude Projects): Upload your own documents, examples, and data to get personalized AI assistance. That ensures the replies to your prompts are anchored in your own materials and context. Now you can work with huge collections of information more efficiently and creatively. Communication efficiency Letterly and other voice-to-text AI tools like AudioPen and Oasis have transformed how I capture ideas. I call this “bionic dictation” because these tools don’t just transcribe your voice but transform it into organized text. This is particularly powerful for peoplelike mewho think out loud. As you think aloud, your AI assistant acts as an idea mirror, reflecting back to you a coherent summary of your own key points Shortwave: This email tool uses AI to help you find messages using natural language rather than exact keywords. Many of us waste huge amounts of time hunting for messages. Shortwave helps. Multimedia creation Gamma (and Beautiful.ai) Create pro quality presentations without design skills. Spin up slide drafts quickly from a link, a doc, a detailed prompt, or an outline. Experiment with multiple styles quickly & easily. Spend time thinking and strategizing, not fussing with menus. Hypernatural For quick video creation, paste in text, a link to a newsletter or blog post, or give it some text, audio, or video. From virtually any raw material you provide it will create an original video you can revise. Eddie Edit video with simple text prompts. I recently trimmed an hour long workshop to an eight-minute highlight video just by instructing Eddie into what sections were most important using natural language. Descript Edit audio and video without any technical expertise. The AI removes background noise, sound gaps and filler words. And you can customize your project by trimming the transcript just as youd edit any text document. AI tactics that work surprisingly well Reverse interviews Instead of just querying AI, have it interview you. Get the AI to interview you, rather than interviewing it. Give it a little context and what you’re focusing on and what you’re interested in, and then you ask it to interview you to elicit your own insights. This approach helps extract knowledge from yourself, not just from the AI. Sometimes we need that guide to pull ideas out of ourselves. AI-assisted planning AI is particularly helpful for strategic planning. Try this: create a Claude Projector a ChatGPT Projectand detail for your AI assistant your objectives and operating context. Have it help you think through a plan for the next month based on your goals. The benefit is comprehensive thinking. Our planning falls short when we’ve left something out. We’ve forgotten to consider various factors or haven’t fully analyzed how things could go wrong. Identify writing weaknesses Give an AI assistant like Gemini, Copilot, Claude, or ChatGPT text you’ve written, with a prompt asking for specific feedback. For example: Ask for questions your writing should answer but doesnt yet. Prompt for a blind spot or a key point a critic might say youve missed. Tell your AI aid to point out a section of your text thats boring or bland. This approach elevates your work. In this paradigm, your assistant isnt writing for you. It’s giving you objective feedback on your work and helping you strengthen your own eye for edits. Its pushing you to reach a higher standard. This article is republished with permission from Wonder Tools, a newsletter that helps you discover the most useful sites and apps. Subscribe here.
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Every technological revolution brings with it management change. The rise of automation in the 1980s, for example, led to process reengineering (stripping out unnecessary steps to shorten timelines). Now with the dawn of AI, the next wave of organizational and leadership change is upon us. Ron Carucci, a consultant and researcher on leadership and organizations, and Kathleen Hogan, Microsofts former chief people officer and its newly appointed EVP of the Office of Strategy and Transformation, have identified what they believe are four of the most fundamental shifts that leaders and organizations must consider to be future-ready. Paid subscribers will learn: How to redefine career progression by impact, not rank The most important trait that talent teams need to look for when hiring Why AI will render the org chart a thing of the past The three things Microsoft is looking for from every manager to train future leaders 1. From change management to change readiness Less than a decade ago, best practices in change management involved carefully structured communication and stakeholder plans, phased rollouts with meticulous timelines, and well-resourced implementation strategies. This approach was built on the assumption that leaders knew in advance both the changes they needed to make and the precise destination they wanted to reach. But today, change arrives so quickly that there is often no time to define a fixed endpointlet alone build a road map to get there. The new reality requires a shift from managing change as a project to developing a culture where change-readiness is an everyday capability. To create this shift, leaders must first embrace a change-ready mindsetone that sees change as a continuous state rather than a series of isolated events. This means hiring and developing employees based on their ability to learn and adapt, not just their current expertise. At Microsoft, being a positive pivoter means embracing change as the new norm instead of seeing it as a hardship. This means rewarding adaptability and resilience, shifting away from valuing stabilitykeeping things under controlas the ultimate leadership virtue. Beyond mindset, leaders must also empower employees to actively drive change rather than passively waiting for direction. Rather than managing change top-down, leaders should coach employees to anticipate and shape it. This requires breaking down rigid structures and creating cross-functional teams that identify disruptions early and respond with agility. Finally, organizations must embed change as an everyday practice rather than a temporary initiative. Leaders should normalize experimentation and foster learning from failure. At Microsoft, leaders have been prepared for this under Satya Nadella, where challenging ones fixed mindset is a daily habit. For example, as Microsoft wrestled with how to win in AI, we had to challenge the fixed mindset that we had all the answers. When we shifted to a growth mindset we embraced the opportunity to bring in outside perspectives and ideas. In the last year weve added three new externally hired executives to Satyas leadership team to enable the push into AI. 2. From hierarchical leadership to agile networks In the past, organizations relied on well-defined hierarchies where leadership influence was dictated by reporting lines, and decision-making authority was concentrated at the top. This model created stability, but at the cost of agility, as decisions had to travel up and down a chain of command before action could be taken. In todays fast-moving environment this rigid structure has become a liability. The future demands a shift toward agile, networked leadership, where decision-making is based on expertise, not hierarchy, and teams dynamically form and reform to tackle challenges as they arise. To build this new model of leadership, organizations must move beyond traditional org charts to foster fluid, networked governance structures. One organization Ron consulted with, developed innovation hubs focused on specific product and customer segments. Each cross-functional group was assigned a specific innovation focus, given resources, and empowered to make go-no go decisions on their projects right up until prelaunch. This dramatically reduced the time it took to complete projects because it eliminated relying on hierarchical decision-making for approvals. In one year, they increased their successful product launches by 46%. 3. From leadership as control to leadership as coaching For decades, leadership was synonymous with creating order from chaos. The assumption was that strong leadership meant exerting control over ambiguity. However, today, uncertainty is no longer an occasional disruption, but a constant state. Future-ready leaders must embrace uncertainty and develop coaching mindsets to help employees navigate complexity with confidence. This shift begins with redefining leadership as coaching rather than controlling. Replace rigid performance reviews with real-time feedback that drives continuous improvement. Balance accountability with empathy, ensuring that expectations remain high (with clear measurable goals) while employees feel psychologically safe to take risks, experiment, and grow. Microsoft has declared this year of intensified uncertainty and transformation as the year of the coach. Microsoft has identified three competenciesmodel, coach, careas foundational to managers at all levels. Weve learned candid coaching is care. Role modeling what it means to give thoughtful, clear feedback as well as acknowledging personal shortfalls earns the permission to candidly coach. All people managers will have access to communities with tools and training to improve their coaching skills. They will also be able to exchange feedback. This will be particularly critical as AI agents become a regular part of managerial life. Managers will need to understand how to coach people to harness irreplaceable human assets like relationship building, empathy, and creativity. Equipping leaders with strong coaching skills is essential in this new paradigm. This means training managers to ask the right questions rather than simply providing answers. It also requires setting and exceeding the bar for meeting customers evolving needs. 4. From status as power currency to contribution as impact currency In many organizations, career progression has long been tied to status, measured by titles, reporting structures, team size, and invitations to high-level meetings. Employees have traditionally viewed promotions as the primary means of increasing their impact. But in an era where speed, collaboration, and expertise matter over rank, the future of leadership must be based on influence and contribution, rather than job titles. To create this shift, companies must redefine career growth and progression by rewarding employees for impact rather than hierarchy. Instead of promotions being the primary way to acknowledge high performers, companies should design pathways where employees can expand their influence by leading initiatives, shaping critical decisions, and contributing to strategic problem-solving, regardless of their title. Leaders should invite those with relevant expertise into key discussions, regardless of rank. This also requires rewarding horizontal collaboration, where employees who bridge silos and drive cross-functional innovation are recognized and valued. In one organization transformation, Ron helped a global financial services company redesign how key leadership meetings were handled. Originally, the company invited attendees to the meeting based on their rank. In the new approach, each attendee was assigned a role with clear expectations. Afterwards, everyone in the room was expected to cascade key messages and decisions. This eliminated the entitlement that senior leaders often display when its their turn to join the important meetings. Instead of, I deserve to be here because Im a senior vice president, leaders showed up with a broader understanding of how they could create success together. By centering contribution over hierarchy, organizations will create a culture where the most capable and impactful employees thrive, decision-making is faster, and leadership pipelines are built on merit rather than tenure. As the world of work continues to shift, leaders will do well to guide their organizations toward more adaptive structures that allow leadership to happen at all levels, and enable faster and more creative responses to market opportunities. Its time to leave behind outmoded approaches to leading and organizing human endeavors.
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