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John Spacey, August 11, 2016 updated on January 15, 2023
Productive assumptions are assumptions that are designed to motive behavior or direct strategy. These aren't necessarily designed to be true or even realistic, as they are purely intended to impact outcomes in a positive way. The following are examples.
Smart MarketsIt may be dangerous for an investor to believe she is the smartest participant in a stock market. As such, assuming that markets are incredibly intelligent is a safer assumption. This also reflects reality as market prices that look irrational are often influenced by hidden risks.Competitive WorldAssuming that situations such as sports will be highly competitive even when you're facing a weaker opponent.
Smart CoworkersAssuming that your coworkers are intelligent will lead you to treat them with respect that may be reciprocated. It can also make you more competitive as you assume that performance expectations are high. Such an assumption may work to your advantage even if it is far from true.Risk TakingOverconfidence is a poor strategy in an environment such as the stock market where optimistic risk taking is likely to be punished. However, many life situations have a tendency to reward risk taking meaning that overconfident assumptions may improve your long term results. For example, taking on job responsibilities beyond your experience often pushes a career forward.
Human Kindness A belief in human kindness tends to make people happier. For example, genuinely liking people tends to make them like you. This can become a self-fulfilling situation whereby because you assume people are kind, they are kind.Locus of ControlGenerally speaking, people who have a strong sense of control over their destiny may outperform in a wide variety of situations. This has limits, believing that you can control things that are out of your control such as the lottery isn't likely to be productive.
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