It’s no coincidence I really liked this book, because Kahneman admits at the beginning of his book that he was influenced by Nassim Thaleb, the author of The Black Swan. And the Black Swan is one of the best book I’ve ever read. Kahneman describes the same insight as Thaleb, namely that walking with the mild speed, just to drive your pulse up a bit, so that you sweat just a litle bit, will put us into the greater mental alertness. So, we should not run for our next train, because regarding to the ideomotor effect, if we are to “act calm and kind regardless of how you feel”, we’ll be rewarded by actually feeling calm and kind.
Sistem 1 and System 2 of the mind as they were originally proposed by the psychologists K. Stanovich and R. West, are the main topic of this book. It’s actually a psychodrama with those two characters, if I may use Kahneman’s own words. A bit of exaggerating, but WYSIATI (more about that below). Where System 1 operates automatically and quickly, System 2 demands effortful mental activities. The gorilla study illustrates two important facts about our minds: + we can be blind to the obvious, and + we are also blind to our blindness. We have “almost unlimited ability to ignore our ignorance.” This is mainly because we have a need for the positive or reasuring message that our actions will be rewarded. Success will follow our wisdom and courage. Sounds familiar? Yes, many self-help and business books are tailor made to satisfy this need of ours. Think, if you are reading this, you have definitely read some of those. I know, I have.
Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance. —Daniel Kahneman
The best available option we have, is to compromise. As for our-self’s we should learn on one side learn to recognise situations in which mistakes are more likely to happend. And on the other side we should try harder to avoid mistakes, when the stakes are high. This book shows us, that it’s easier to recognize other people’s mistake than our own. Which I’m certain you’ve noticed it already by yourself, because it’s always easier to be smart for somebody else, isn’t it?
The book will not make us neither happy neither optimistic about our future choices. We tend to take on risky projects because we are overly optimistic about the odds we face. Kahneman believes this could be explanation of “why people litigate, why they start wars, and open small businesses.” For risk takers in the economic domain, there is a special phrase introduced: “bold forecast and timid decisions”. We should be aware also of the sunk-cost fallacy, that is supposed to keep us for too long in poor jobs, unhappy marriages, and unpromising research projects. Sounds familiar? Fail fast, fail cheap, if you ask me.
This doesn’t mean, we shouldn’t be optimistic, mildly biased or at least “”accentuate the positive”, without losing track of reality.” Further, a general “law of least effort” is described which claims that laziness is built deep in our nature. If we have several ways available to achieve the same goal, we’ll eventually gravitate to the least demanding course of action. Logically, isn’t it? My conclusion is that also one of this law far reaching consequences is the rate of organ donation. In Austria close to 100% because they have an opt-out form, where people who don’t wish to donate – must check a box. And ‘only’ 12% of people in Germany donate, because they have to opt-in. That’s all. Really interesting. In Slovenia, according to media reports only 1% of individuals donate their organs. We are all are only Humans. And not Econs. But this is not to say that decision makers should not accept better decisions. Again, some countries lead the way. As for example Britain’s government by establishing the Behavioural Insights Team. Keep in mind though that this book was not written primarily for the decision makers.
Book is full od practical advices that we can use immediately. From the + use of fonts to + the conduct of meetings to + the prediction of marital stability. The formula for marital stability is supposed to be: frequency of lovemaking minus frequency of quarrels. If we divorce anyway and remarry after, this is than classical triumph of hope over experience. If we are to lead a meeting where there’s an issue to be discussed, good option would be that every participant writes a brief summary of hers or his position. This should make good value of the diversity of knowledge and opinions in the group. Namely, also my experience, an “open discussion gives too much weight to the opinions of those who speak early and assertively, causing others to line up behind them.” Kahneman remark comes from noticing “the remarkable absence of systematic training for the essential skill of conducting efficient meetings.” On use of fonts – we’ll this part of the book this not impress me, because any professional designer knows better.
Very good example of jumping to conclusions is one that very often happens in all sorts of organizations. Judging your new colleague at work: “She knows nothing about this person’s management skills. All she is going by, is the halo effect from a good presentation.” We better all invest in our presentation skills. Being managers or not. We’ll never have the second option to make the first impression. The same effect is also if you write down that something, some food for example, is “90% fat-free” – it’s a much more attractive as if the same food is labelled as “10% fat.” Kahneman describes it as WYSIATI—what you see is all there is.
Another example is the so called law of the small numbers because many facts of the world are due to chance. Therefore causal explanations of chance events are inevitably wrong. Among others Kahneman admits or better to say finds the support for the uncomfortable conclusion that teaching psychology is mostly a waste of time. Quite a statement from a psychologist. But he presents findings that “surprising individual cases have a powerful impact and are a more effective tool for teaching psychology because of the incongruity must be resolved and embedded in a causal story.”
In making decisions we should be familiar with the very difficult concept of regression. Even when you’ll be thinking rationally (Sistem 2, don’t make a mistake, Sistem 2 is “not a paragon of rationality.”) about your intuitive choices (Sistem 1) you should have in mind, if you are really making a decision based on the same parameters. Experience usually doesn’t help, we should have the law of small numbers in mind. Kahneman advice, a lesson that he learned is to not simply trust our “intuitive judgment—our own or that of others—but do not dismiss it either.” But what is actually a definition of the intuition? Kahneman writes at least twice in the book the definition of the intuition from a Nobel Prize laureate, Herbert Simon. Simon is the scholar recognized by all the competing clans and tribes of the decision making. Take notes, a note to myself.
Simon’s definition reduces the apparent magic of intuition to the everyday experience of memory:
The situation has provided a cue; this cue has given the expert access to information stored in memory, and the information provides the answer. The intuition is nothing more and nothing less than recognition. —Herbert Simon
Loss aversion is another important concept explained in this book. It’s supposed to be “the most significant contribution of psychology to behavioural economics.” If we go back to marriage stability. If we in our relationships avoid the negative emotions / parents / feedback / impressions / stereotypes in our interactions by at least 5 to 1 we have a chance of a stable relationship. Huh, quite demanding, isn’t it? Asymmetry between losses and gains is supposed to be guilty of that claim. Not only in markets, if I may add. Our brains are simply “not designed to reward generosity as reliably as they punish meanness.” Another concept is the denominator effect. We perceive statement that a disease “kills 1,286 people out of every 10,000” more dangerous that a statement with biggest ratio that a disease “kills 24.4 out of 100.” Strange, but obviously true.
Every chapter of the book ends with several examples which is a nice way to summarize the chapter. More than recommend this book.