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Understand the difference between seeing and observing. Be focused and fully engaged. Be selective. Be objective. Make inclusive observations. Meditate. Challenge yourself. Take notes.
Watson saw, but Holmes observed. By default, you probably have a habit of seeing your surroundings without processing the basic information. Observing the full details of a circumstance is the first step you need to take if you want to think like Sherlock Holmes. You need to know your limits. The human brain is not structured for heavily complex multitasking. If you really want to make meaningful observations, you cannot be involved in too many activities all at once as it distracts your mind from thinking.  Being engaged in observation allows the mind to persist longer and trains it to solve problems more effectively and efficiently. Staying engaged is actually one of the simpler aspects of observation. All you really need to do is focus only on the matter at hand. When you are making observations, only pay attention to that which you are observing. Leave your phone on silent and don't let your mind stray to that email you need to write later on or the Facebook comment you read an hour ago. If you tried to observe everything you saw in full detail, you would make yourself exhausted and overwhelmed in no time. You need to learn to observe your surroundings, but you also need to be selective about the things you focus your attention on.  Better quality is prized over better quantity. You need to learn how to observe things more thoroughly, not simply how to observe more things. The first thing to do in a situation is to size up what areas are vital and which are of no consequence. This takes practice, and there is not much else you can do to hone your ability to distinguish one from the other. Once you determine which aspects are essential, you need to observe them down to the smallest details. If the areas you observe do not provide you with the sort of detail you need, you may need to slowly expand your field of observation to other aspects of the situation you previously ruled out as being inconsequential. By nature, humans tend to have biases and preconceptions that influence they way they perceive things. If you really want to make meaningful observations, though, you need to dismiss these biases and be objective as you take a look around.  The brain often takes what it wants to see and interprets it as fact, when in actuality, it is only perception. Once your brain records something a fact, though, it can be difficult to realize otherwise. You need to focus on being objective as you observe so that you do not taint your well of information. Keep in mind that observation and deduction are two different parts of the process. When you observe, you are doing nothing more than observing. Only during the deductive stage can you make judgments on the information you gather. Do not merely pay attention to what you see. Your observations should include mental notes on other senses, as well, including hearing, smell, taste, and touch. Focus on fine-tuning your senses of sight, sound, and smell. These three senses are the ones you rely on most, but they are also the ones you take for granted most. After you can use these senses objectively, move onto touch and taste. One practical way to exercise and develop your ability to observe is to meditate for fifteen minutes each day. Meditation can keep your mind keen and may help acquaint you with the concept of being fully focused on your surroundings. You do not need to go out of your way to meditate. All you really need to do is to spend a few minutes a day shutting out distractions and building your ability to focus. You can focus on a specific image in your mind, or you could focus on an external image during meditation. The main idea is simply to make sure that whatever you are meditating on has your full focus. A daily, weekly, or monthly puzzle can help you sharpen your powers of observation. Give yourself a mystery to solve, but make sure that the mystery will require the full use of your powers of observation.  One simple challenge you can give yourself is to observe something new every day. For instance, take one picture a day from a different perspective. Focus on taking pictures that demonstrate fresh perspectives on everyday locations. People watching is another powerful yet simple challenge you can give yourself. Start with simple details, like the clothes a person wears or the way that person walks. Eventually, your observations should include details about body language and signs of specific heightened emotions. Even though Sherlock Holmes does not need to carry around a notepad and pen, while you are working on developing your powers of observation, taking notes can be beneficial. Make sure that the notes you take are detailed enough for you to recall the various sights, sounds, and smells of a situation. The process of taking notes forces your mind to pay attention to situations in detail. Hopefully, you will reach a point at which such notes will no longer be essential. At the beginning, though, this activity may help gear your mind toward observing instead of just seeing