Daniel Kahneman | The Knowledge Project #68

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The Knowledge Project

Daniel Kahneman spent a lifetime studying how we make decisions. In his book Thinking Fast and Slow, he explained why we make poor decisions. In this in-depth interview, he goes even deeper, uncovering what we can do to make better decisions. Check out https://fs.blog/daniel-kahneman/ for show notes, transcripts, and more. ✩THREE THINGS✩ 1. Follow us on Instagram HERE: https://www.instagram.com/farnamstreet/ 2. Subscribe to The Knowledge Project Podcast (Apple Podcasts: https://apple.co/3fz6u4X | Spotify: https://spoti.fi/2SSgCvT | Google Podcasts: https://bit.ly/2Wjw7iy) 3. Check out the full show notes including how to get a complete transcript: https://fs.blog/knowledge-project/daniel-kahneman/ AND ONE MORE THING ... 4. Over 300k people read my weekly newsletter. Sign up now https://bit.ly/2xP7tNt If you enjoyed this video, subscribe to our channel! -------- #TheKnowledgeProject #ShaneParrish #DanielKahneman

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They lay your intuition don't try to form an intuition quickly which we normally do focus on the separate points and then when you have the whole profile then you can have an intuition and it's going to be better hello and welcome I'm Shane parish and this is the knowledge project podcast exploring the ideas methods and mental models that help you master the best of what other people have already figured out to learn more In step to date on new episodes go to FS blog slash podcast I also put together a weekly newsletter that I think you'll love it's called brain food and it comes out every Sunday much like this podcast it's high signal low noise it's timeless and mind-expanding read what you're missing @ FS stop blog slash newsletter today I'm speaking with Daniel Kahneman emeritus professor of psychology at Princeton who received the Nobel Prize in Economics in 2002 for the Work he did on decision making with Amos Tversky Danny is the most influential living psychologist a true legend in his field and this conversation was a great honor publicly he's probably best known for his book Thinking Fast and Slow and his work on drawing attention to our cognitive biases our conversation revolves around how to make better decisions our intuitions what if anything we can do to reduce our cognitive biases and how rules make Great defaults it's time to listen and learn [Music] the knowledge project is sponsored by meta lab for a decade meta lab has helped some of the world's top companies and entrepreneurs build products that millions of people use every day you probably didn't realize that at the time but odds are you've used an app that they've helped design or build perhaps like slack coinbase facebook Messenger Oculus Lonely Planet and many more meta lab wants to bring their unique design philosophy be your project let them take your brainstorm and turn it into the next billion-dollar app from idea sketched on the back of a napkin to a final ship product check them out at meta lab co that's metal ab co and when you get in touch tell them Shane sent you yeah I was so happy to get a chance to talk to you well I'm happy to have you Here what was your childhood like what were you like as a child oh my god that was a long time ago I was I was an only child as you might expect I suppose I was I thought that'd be a professor when I was like three or four years old because people told me it would be because I promptly spoke with long words and stuff like that so and then the rest of my childhood of me I was five when world war ii began so when i was a jew in france had a difficult Childhood but from that point on but but i was like yeah i wasn't i was a nerdy child I was quite inept physically very fortunately for me when I'd finally moved to Israel at age 12 they held me up a grade and then and then it was alright but that's that's what I was like there any particular lessons or memories that stand out for you there are two of them that I speak about so one is that I was I was a psychologist very early on it was was Very clear I I wrote an essay before I was 11 I remember where because it was it was a German counter-attack it was during that period we're in Paris and I wrote an essay about faith and religion and it was a very pompous assay I have a little book that was that was titled what they what they write about what I think something pompous like that but the essay started with another pompous thing that I supported Pascal my my sister had passed her exams and I had Read not she studied some Pascal and I had read it and a skull had said that a faith is God made sensible to the heart you know little me I said how true that's that my they say and then but then I said but faith is really hard to get you don't sense God all the time so that's what religious pump is for cathedrals organ music they give you and I call that booze odds face sort of a substitute faith because it's a it's a Similar feeling it's got to do with God and that's what you must do it that's that's a psychologist so it's clear that you know that was my calling then so that's one significant memory of my childhood you warned yes I think so I think so I mean I you know it's always had that point of view that were later as a teenager it was you know interested in all the philosophical issues like you know this God exists and which good and bad and stuff like that and why Shouldn't we must obey you know serious questions but but I discovered that actually I was less interested in the question of whether or not God exists then in why do people believe that he exists that I thought was interesting and I wasn't particularly interested in the question of it's good or bad but I was really interested in what makes people angry and indignant so I've had a psychological point of view since terms up since my childhood is there anybody That sort of influenced you to go on to study this I mean it's one thing to have these dreams as like a 12 13 14 year old boy it's another to turn this into you know probably the most eminent career that's ever happened for a psychologist no not the most Lillith career you know and I wasn't sure actually that I would do psychology and I when I took a vocational exam to tell me what I was good at and psychology and economics stood out but you know that was Unexpected it was and then I took psychology undergraduate and mathematics at which I was not particularly good so and no it's not that I knew at the time that you know I had that calling to be a psychologist didn't occur to me I thought you know I thought I'd be a professor with one thing or another I mean that's thought I'd be an academic but not psychology specifically she worked for a with Amos Tversky for a Long time are there any particular stories that you remember about working with him that bring a smile to your face almost everything about working with him brings a smile to my face you know he was a very unusual person most people who knew them thought that he was the smartest person that ever met and in fact famous psychologist Nick Nisbet said that it's sort of an intelligence test he says that when you are with Amos how long does it take you to figure out That he's smarter than you are and the faster you figure that out the smarter you are so you know he was he was super bright and very very funny he joked a lot he laughed a lot at his own jokes and that was infectious when I went with him I was very funny too more than half of my the laughs of my love with my lifetime of out during the ten years I worked with him you have an interesting distinction between happiness and Satisfaction can you walk us through that yeah sure I mean the word happiness is so ambiguous and it means so many things to many people but one sensible interpretation of it is that it's got to do with your emotions with how you feel with the emotional tone of your life whether it's a happy life that you know its pleasant to be you lots of this faction is a completely different thing I mean life satisfaction it is how do you feel about your life when you think About your life and most of the time you don't think about your life you just live but you know sometimes look I mean that that's when you determine how satisfied you are that's life satisfaction it's not satisfaction in which slices should we balance the two or how would you think about them should we be more happy when were younger more satisfied when we're older that thought that never occurred to me when I began to work on Those so I started out thinking that happiness in that sense how you feel when you live that that was reality and that life satisfaction was just stories that people tell themselves and the important thing was to be happy in real time but later when we did more research it turned out that the circumstances that make people happy and the circumstances that make them satisfied with their life are not the same so happiness is mostly social that's you Know it's being with people you love and we love you back that's that's the loss of what happiness is life satisfaction is much more conventional it's to be successful and you know so it's money education prestige that sort of thing is what life satisfaction is about so those are two very different things I thought that life satisfaction is irrelevant you know that's how I began and we we have a research program where We were we were trying to you know to show that this is the case but then after a few years I realized that what people really want in their life is they don't seem to care about how happy they'll be the thing to want to be satisfied with their life they seem to want to have a good story about their life and then I was in the position of saying that to define well-being in a way that people didn't seem to care particularly about so that was not a Tenable position so I I dropped back into saying that I had no idea how to deal with it it was this a result of the research you did some research that was I think it said above 70,000 you don't become happier but you become more satisfied no the research I did with Angus Deaton and Prince the famous economist we showed that in terms of happiness in terms of emotional tone positive and negative I think a lot of money doesn't make you happier but being Poor makes you miserable so that's above a threshold that was like seventy thousand dollars approximately in the u.s. then extra money didn't make you emotionally happier but with life satisfaction was a different story he's less satisfaction that doesn't satiate so it's always good to have more and because basically I think money is a proxy for success and the proxy for subjective success in many cases so it's Not necessarily about spending it or doing something with no stone either just giving it something you know we look at all those people those billionaires working their heads off and they clearly are not doing this because they need more money they're trying to get more money and they're trying to get more money because that would be an indication that they're good at what they do I think most leads of proxy neither of those variables correlate to Longer living happiness or service both apparently but unites it's not to separate and I haven't been followed you know shortly after this deciding that I didn't know what well-being was I sort of stopped doing research on this or have you been following but I think there's clear evidence that being effectively happy you know is really good for you and you do live longer better and so and life satisfaction works in the same direction whether it's Separable which of them you know is more important that I don't switch gears a little bit and talk about behavior and I'd love your insider expansion upon the idea we can change behavior and how do we go about changing our behavior well you know I'm not sure I buy the premise the changing behavior extremely difficult there are few tips you know a few guidelines about how to do that but anybody was very optimistic about Changing behavior is just you it's it's not to change other people's behavior is very hard to change your own not simple this is what marriage is all about right longer the things you know people when when you know married people tried to change each other's behavior the lot of not satisfied yeah not on their way to a good marriage I think we'd all be happier with lower expectations yes I mean and even if you have expectation don't try to change because you know It's very unlikely to work in a significant way I can think of the common ways that we would sort of go about behavior changing it would be you know making good behaviors more easy or negative behaviors harder I think that's the main the main insights you know when you want to influence somebody's behavior that's a very big insights I've always thought that this is the best psychological idea ever you know so far so good see But it's that when you want somebody to move from A to B in terms of their behavior you can think of it that there are two ways of doing it you can push them or you can ask the question why aren't they doing B already which is an unusual question but you know water so then when you ask why why not why aren't they doing be at they ought to as I think they ought to then you get a list of words go to Wayne that's psychologists my guru wonders hero and Many people's here he spoke of restraining forces I mean so there are reasons why they're not where you want them to be so he spoke of behavior as an equilibrium there are forces that are pushing you one way forces that are pushing you the other ways how loud you speak how fast you drive it's easy to think of it as as an equilibrium and what we tend to do when we want to move people from A to B is we push them we add to the driving forces and Kurt Lewin's insight was that this is not what you should be you should actually work on the restraining forces and try to make them weaker and that's a beautiful point and he showed he had that image does you know I've had since I was an undergraduate and I'm not sure truly whether it was his image or something that I drew from reading him but it's like you have a plank and it's being held by two sets of Springs you know you wanted to move one direction And so you could add another spring that would push it that way or could remove one of the springs that are holding it back and the interesting thing and that's a striking outcome yes when he moves if it moves because of the driving force you have added to the driving force then at equilibrium it will be in a higher state of tension than it was originally that is because of compressed web spring and such pushing back harder but if you remove a restraining force I think Bolivian they'll be less tension on the system must have been twenty years old I thought that's just so beautiful what do you wish that everybody knew about psychology that you don't think that they do if that was class one what's classed here you know plus two which is the development from class one you know it's it's the same idea extended class two is that behaviors don't necessarily reflect the personality but behaviors have a lot to Do with the situation and so if people behave in strange ways look at the situation they're in and what are the pressures in the situation that make them this way so there is a bias that the social psychologist well-known social psychologist or the fundamental attribution error and that means that when you see people acting in some way you think that it's because of their personality that they do it may not be the case it's quite likely that the Situation is making I'd like people to know that motivation is complex and that people do good things for a mixture of good and bad reasons and they do bad things for a mixture of good and bad reasons and I think that if the reasons of point to educating people in psychology is to make them less judgmental just as more empathy and more patience and being judgmental doesn't get you anywhere when you talk about situation on one of the Things that comes to mind is it's so easy for us to give our friends advice but if we were in that situation where you might not necessarily see it what why is that the case why is it so much easier to give other people advice I mean feelings get in the way of key of thinking there is a phenomenon that we call the endowment effect which is that when I ask for more money to sell you my sandwich that I pay to get it I mean that's essentially the endowment effect And our explanation of it there are many explanations but a story I like to tell about it is that it's more painful to give something up than to get something but there is an interesting result that if you have an agent making decisions and somebody is behalf that agent doesn't have loss of us so that agent sells and buys are the same price which is the economically rational thing to do where this goes into policy and governments and really important things That governments are like agents or people who who think about the good of society and agents they take the economic view they take the view of what things will be like in the end they don't figure out that there are some people are going to be losing because of the reform that they make and it turns out that you can really expect losers potential losers to fight a lot harder than potential winners and that's the reason that reforms so frequently fare And that when they succeed they're almost always way more expensive than anticipated they're more expensive because you have to compensate the losers and and that frequently is not anticipated so that's an example of a story about that incorporates behavior change and and the difference between perspectives between being you know in the situation feeling the pain of giving up the sandwich and not feeling the pain if you Have this image that would have huge public policies sort of implications to write that we don't tend to think of it or discuss that's a really interesting angle there I'm gonna come back to sort of situational decision-making based on sort of like what we see is all there is and we have these feelings that we can't sort of disassociate with how does environment play a role like the physical environment in sort of what we decide or does it I mean you know there Are so sort of obvious thing that we know people are hot and bothered and distracted and and there is a lot of noise and so on then they'll think as well that we know that's but even there there are puzzles I mean many people think and work a lot better in cafes you know where there is actually ambient noise and activity around them and it helps them concentrate better so this is a very simple story the environment but certainly you can make the environment Tough enough so that people wouldn't be able to think properly that's that's feasible are the things that we could do - I guess push the environment to be more conducive to clearer thinking the physical environment in this case oh there all sorts of you know odd findings you know the color of the color of the room some colors are better than others and you would expect that some colors are more calming than others so you wouldn't want to be in a red room making Decisions making decisions but you know those are extremely minor effects I want to come to intuition and noise later is there anything else that stands out that gets in the way of clear thinking that we can sort of bring to the surface now well you know what what gets in the way of clear thinking that we have we have intuitive use of almost everything so as soon as you present a problem to me uh you know I some ready-made answer and but Gibson will have clear thinking Those ready-made answers and we can't help but help them so that's one thing that gets in the way emotions get in the way I would say that independent clear-thinking is the first approximation impossible I mean in the sense that you know we believe in things most of the time not because we have good reasons to believe them if you ask me for reasons I'll explain you I'll always find a reason but the reasons are not the causes of our beliefs we have Beliefs because mostly we believe in some people and we trust them and we adopt their beliefs so we don't reach our beliefs by clear thinking something you know unless you're scientists or doing something like that but even then it's probably a very narrow that's very narrow and there is a fair amount of emotion you're a scientist as well that gets in the way of keya thinking you know commitments to your previous views being insulted that Somebody thinks he's smarter than you I mean lots of things get in the way than when you're a scientist so upside there is less clear thinking some people like to think is there anything that we can do at the belief formation stage like it sounds almost as though and you say that we're reading a newspaper we read this op-ed and it's well-constructed and fits with it our view of the world therefore we adopt that opinion and we forget the context that we didn't learn it through Our own experience or reflection we learned it sort of from somebody else so we don't know when it's sort of likely to work or not work but we just proffer that as our opinion is there that's how I believe in climate change you know I believe in the people tell me there is climate change and the people don't believe in climate change they believe in other people so but similarly there's like fake news and all this other stuff we You would have a same reaction too you know but but I'm much more likely to believe fake news on my side then the fake news on on the other side I mean it's true that there is a huge degradation in public discourse in and the recent 10-15 years of the United States I mean there used to be an idea that facts not - what would be your hypothesis as to why that that is playing it where they're getting into politics cuz I don't want to talk Politics but like why is that well I mean it's not just it's not to answer that question without without politics because it's a general political polarization has had a very big effect and the fact that people can choose the sources of information let's switch gears a little bit and talk about intuition I think one of the the things that strikes me the most about some of the work that you've done is the cases where we're likely to trust our Intuition and when we're not and so if I'm correct me if I'm getting this wrong so it's sort of like a stable environment repeated attempts and rapid feedback it strikes me that most decisions made in organizations do not fit that environment and yet we're making a lot of these decisions on judgment or experience what are the ways that we can sort of make better decisions with that in the context well in the first place I think you know you You shouldn't expect too much impact to lower expectations inkyung should have low expectations about improving decisions I mean there is you know one basic rule is slow down especially if you if you have the immediate conviction slow down there are procedures you know there are ways of reaching better better decisions but reaching better judgments and they can talk about them I would love to hear if you really want to improve the core Decision-making use algorithms I mean whenever wherever you care if you can replace judgments by my rules and algorithms they'll do better now there's big social costs to trusting allowing algorithm to make decisions but but the decisions were likely to be better so that's one thing if you can't use algorithms then you slow yourself down and then there are things that you can do for certain types of problems and there are different types of problems so One class of problems like forecasting problems a friend Phil tetlock in the house that Bokan super forecasters where he identifies what people who were good at forecasting the future what they do that makes them good and I tries to train people and we can improve B so that's one class of problem I'm interested specifically in another kind of problem judgment problems where basically you're considering options or you're evaluating a situation and you're Trying to give it a score there there there is advice I think on how to do it for me it goes back to something I did and the Israeli army when I was like 22 years old so that's a long time ago like sixty-three years ago I was a psychologist in the Israeli on and I was sign the job of setting up an interviewing system for for the army that ridiculous look you know this was the beginning of the State of Israel so people were improvising low the place I had a BA and I was I think I were the best trained psychologist in the on my my boss was a chemist brilliant but anyway and the existing system was one where people would interview and try to form an intuitive global image how else that recruit would do as a combat soldier twist the objective of the object of the interview and because I have read a book at Paul mail at different talk and the different that was identified six traits that I sort of Made up and I cut them ask questions and evaluate each of these traits independently and score it and write down the score then go onto the next string and they had to do it for all six traits and that was that's all I asked them to do and the interviewers who were about when here younger than I or recruits but very very smart selected for being good at it they were furious with me and there were furious with me because they wanted to Exercise their intuition and I should remember that one of them said you're turning us into robots so I compromised with them and I said okay you you do it my way and I told them you try to be reliable not valid you know I'm in charge of validity you be reliable which was pretty arrogant but that's that's how I presented it but then when you're done close your eyes and just put down a number of how good a soldier is that guy going to be and when We validated the results of the interview it was a big improvement what had gone on before but the other surprise was that the final intuitive judgments others it was good it was as good as the average of the six straight and not the same it added information so actually we ended up with a spore that was half was determined by the specific ratings and the intuition that half the way and and that by the way stated their Israeli army for well over fifty years I Don't know whether it's I think it probably some version of it was still been forced but around fifteen years ago I visited my own base and and the commanding officer of the research unit was telling me how they run the interview and and then she said and then we tell them close your eyes so that that had stayed for fifty years now the close your eyes and that whole idea is not the basis of the book that I'm writing so up truly I haven't same idea Really that when you are making decisions you should think of options as if there were candidates solution break break it up in two dimensions evaluate each dimension separately then look at the profile and and the key is delay your intuition don't try to form an intuition quickly which is what we normally do focus on the separate points and then when you have the whole profile then you can have an intuition and it's going to be better Because people make form intuitions too quickly and the rapid intuitions are not particularly good so if you delay intuition until you have more information it's going to be better I'm curious how we delay intuition you delay intuition by focusing on the separate problems so our advice is that if you have you know the Board of Directors making decisions button investment we told them you do it that way take the separate dimensions and really think About each dimension separately and independently and don't allow me and I feel the chair don't allow people to give their final judgement say we wait until we cover the whole thing I mean if you find a deal-breaker then you stop but if you haven't found a deal-breaker wait to the end and look at the profile and then your decision is almost certainly going to be better does that include waiting the different aspects of the problem differently or do You highlight that in advance or do you yeah I mean it it makes you see the trade-offs more clearly otherwise when we don't follow that discipline there is the way in which people form impressions very quickly to form an impression and then you spend most of your time confirming it instead of collecting evidence and so if accidentally your impression was in the wrong direction we are going to confirm it and you don't give yourself a chance to Correct it independence of the key because otherwise when you don't take those precautions it's like having a bunch of witnesses to some crimes and allowing those witnesses to talk to each other they're going to be less valuable if you're interested in the truth then keeping them rigidly separate and collecting what they have to say what have you seen work in a repeatable way it may be a particular organization or cross organizations to not only reliably Surface disconfirming evidence but then place a value on what is service instead of being dismissive is is there a framework for that is there well yeah the many you know them there are many procedures like Red Team Blue team devil's advocate in Boots I've been you know many attempts in in general you know if you are if you are the head of the group that makes the serums one of your missions would be to protect the dissenters because they are very Valuable and you should make it painless to dissent or as painless as possible because it's out to be sick it's painful and costly so protecting the center's is important I'm curious about the distinction between intuition and judgment you had mentioned intuition judgment intuitive judgments can you walk me through some of like how those differ it's a bit hard to separate in judgment does is what you do when you integrate a Lot of information informally into the score of some kind I we speak we being my co-authors and I in the book we're writing we speak of judgment as measurements but it's measurement with the measuring instrument is your mind but you do it informally and because you do it informally people are going necessarily going to agree so wherever we say it's a matter for judgment we're allowing for differences for variability now judgment can be more or less slow More or less systematic so at one end you have pure intuition where you allow the judgment to go very quickly and so on and at the other end you try to delay intuition but ultimately if you're making it by judgment you're good to have a judgment and it's going to be like an intuition and you're going to go with it so the more or less deliberate judgment intuition is always involved at one point or another you rather sort of like listening to it or fending it off Yeah and our recommendation is tend Adolphe are there ways to judge the quality of somebody's judgment yeah sure I mean some of them would be unique to the actual scenario but what are the sort of other ways that we could well I mean you you may require people to explain their judgments and evaluating the quality of the explanation is you know whether it's logical whether it uses the evidence whether it uses all the evidence whether it is strongly Influenced by wishes whether the conclusion was reached before the judgments supposedly is made you know there are lots of there are lots of ways for judgment to fail that can be recognized so it's all good to recognize very good judgment but it's still easy to see you know what goes wrong and there were quite a few ways for judgment to go wrong and I think some of those ways are at the cognitive biases like overconfidence and sort of using small Or extrapolating from small sample sizes and one of the interesting things that I heard you say in interviews before so correct me if I'm off here is that you've studied cognitive biases effectively your whole life and you're no better at avoiding them than anybody else yeah certainly not much better know what helped you the rest of us have not much I mean I never you know I I think you know the quality of people's judgment is affected by my Education but so in general no more educated people make better judgments I think on average but people decide I'm going to make better judgments I don't think that's very hopeful I'm much more hopeful about organizations because organizations think more slowly and they have procedures for thinking and so you can control the procedures individual judgement is really hard to fix not impossible one of the things that I see people do in response to cognitive Biases and trying to account for them is to sort of make a list of them almost like a checklist and then go through that checklist and explain or rationalize why those things don't apply in this situation it also strikes me that the more intelligent you are the more stories you'd be able to conjure up about why why you're avoiding this I really think that's not very hopeful because there's so many biases and the biases work in different directions Anyway so sometimes you can recognize a situation as one in which you know you're likely to be wrong in a particular way so that's like illusions if you if you recognize a particular pattern as something that gives rise to visual illusion then you don't trust your eyes you know you do something else and the same thing happens when you recognize this is a situation where unlikely to make an error so sometimes you can recognize the importance for Example of what we've called an anchor so you're going to negotiate the price with somebody they start very high and that has an effect so you know or you should know that the person who moves in a negotiation has an advantage because it the first number changes everybody's view of what is considered plausible so it moves things in that direction that's that's a phenomenon people can learn that and they can learn to resist it so when I was teaching Negotiations I would say somebody does that to you comes up with the number that's absurd I would say lose your temper make a scene say I will not start the conversation from that number it's an absurd number I don't want to that's he erased at them so that's something that they you know you can improve if you recognize it I think people are aware of the fact that you shouldn't make the decision about road safety within short Interval of the terrible accidents you know so you should allow things to settle down and cool down there is a more subtle error and harder harder to fix but that the best prediction the best guess is always less extreme than your impression intuitive prediction is as we say not progressive it doesn't recognize regression to the mean but statistics is statistics of in statistics things are less extreme should I give you my favorite example of The bias yeah I have been unable to think of a bit of one but the story is about Julius that's part of the story that's her name she is a graduating senior at University and I'll tell you one fact about her that she read fluently when she was four what's a GPA and and the interesting thing here is that everybody has a number as soon as I told you that a number came to me now we know where that number came from we really that's one of The few things that I'm reasonably sure I understand perfectly and this is that when you hear she read fluently at age four you get an impression of how smart Ria's of how precocious she wants the date for and you could put that in percentiles you know whether that put her on a percentile for sort of aptitude ability and it's high it's not you know she read fluently at age two and a half could be more extreme but each four is pretty High so say at the 90th percentile and and then the GPA that comes to your mind is around the 90th percentile in the distribution of GPA so you pick something your prediction is as Extreme as your impression mm-hmm and it's idiotic statistically completely stupid because clearly the age at which try learn to read is not all that diagnostic with respect to GPA so it's better than nothing if you didn't know anything you would predict The mean GPA where they waited 3.1 3.2 now she's bright so probably a little higher but not 3.7 you don't want to so that's cool that's a bias that's non regressive prediction and that's very hard to resist sometimes I'm able to resist it but never when it's important you know what I'm really involved in something I don't think about it but sometimes it we recommend oh you know that's a situation I should moderate my prediction and if you're conscious of it That's an example of one you can sort of talk yourself yeah yeah you can talk yourself into although you know you you usually will find a way to cheat and end up with your intuition it's it's remarkable you know when you've been in academic life a long time so you've been at in many situations where people discuss the job candidate absurdities of that kind are very common so somebody a job candidate gives a talk and people evaluated And this is something happened you know a Berkeley when I was teaching there that somebody in the talk was a very good talk standard Abed now that person had teaching prizes and yet what was said about him in the discussion he can't teach you know we heard the talk so that's a mistake but the funny thing is you can point out to people that that's a mistake they still don't want to hire him Because he gave a lovely talk so it's hard to resist it's interesting one of the I think one of the ways I probably got my job is using psychology in the interview which is asking why I was there and then reinforcing those beliefs throughout the energy I want to come back just one second to the the immediacy of sort of having a stimulus and then making a decision so we use the example of roads and tragic accident happens and you're rethinking sort of Policy or laws or on the roads how much of that do you think is social pressure and I'm wondering if we could even extrapolate that a little more to we're taught to answer questions on a test right away right so we see this question then we answer it we're taught that we or maybe it's reinforced Todd is probably the wrong word that politicians need to have a response and immediate response to and even if they Know the best thing to do is like okay like let this settle take some time it's society writ large seems to demand it like the environment is not conducive I think it's pretty clear that people prefer leaders who are intuitive and were overconfidence leaders who deliberate too much of huge was suspicion you know so I think Obama was at a certain disadvantage relative to George Bush you know because you've seen is more deliberate yes I was all Deliberate and then when you're very deliberate you look as if you don't know what you're doing but when you act with confidence so people want leaders who are intuitively think boy and watch provided they've read it just working my way back through some of these rabbit holes that we've gone down you you taught negotiations I'm curious what would be in your your sort of syllabus for negotiations that everybody should learn About negotiations when it comes to you your work and psychology well you know the that goes back to a theme that we started with the essence of teaching negotiations if that negotiations is not about trying to convince the other guy it's about trying to understand them so again it's slowing yourself down it's not doing what comes naturally because trying to convince them is prime pressure arguments promises and threats are always of crime pressure and what You really want is understand you know what you can do to make it easy for them to move your way very non-intuitive that's a surprising thing when you teach negotiation it's not obvious you know we are we are taught to apply pressure in social arms that way you'd mentioned that there is procedures for thinking in organizations are there any that stand out in your mind that we could use to elevate thinking and if not elevate but give Feedback on the quality of thinking to improve it well I think one of the ideas that people like the most is an idea by Gary Klein and he calls the pre-mortem and that's a let's see Universal winner people really like that idea and this is that when you're about to make a decision a group not quite because if you've made it it's too late but you're approaching it and then you get people in a room can be the people who are making the decision and you said suppose It's two years from now and we made the decision that we're contemplating and it turned out to be disastrous now you have a pager in front of you write the history of that disaster envelopes that's the promoter and and it's beautiful as an ideal it's beautiful because when people are coming close to a decision it becomes difficult to raise doubts or to raise questions people who are flowing the group down when the group's is nearing a decision a Perceivers really you know person I mean you know this you want to get rid of them and the pre-mortem legitimizes that sort of descent and that sort of doubts not only legitimizes that too much rewards it and so that's a very good idea I don't you know I don't think that it's going to prevent people from making mistakes big mistakes but it could certainly it will alert people to possible loopholes to to things that they ought to do to make a safer this is So that's a that's a good procedure and there are many others what comes to money what comes to mind is is to make intelligence in the collection of information independent of the decision makers wishes and you really want to protect the independence of the people collecting the evidence and I would ask to you know procedures really people don't like but if it were possible to implement it I think would be good and that's that when you're going to be Discussing the topic and it's done in advance on people in sense of material to think about the topic that you may want them to write down their decision the decision they are in favor of before the discussions thoughts that has many advantages it's going to give you a broader diversity of points of view because people tend to converge very quickly in a in a group discussion and it forces people to be better prepared its accept people don't want this so I I Don't know with it impossible to implement but clearly if you could would be a good idea one of the reasons people don't want it too much work right forces you to do a lot of work rather than the signaling you can sort of get away with yeah and then you know there's somebody who is going to prepare the case so I glanced at the material and then you know so a lot of meetings are tremendous to sink for wasted time and improving the quality of Meetings would be big thing do you have any insights on how to do that keeping them short you know I'm not a professional but fixing meeting so I have I have a few ideas but not as an complete view the the question of structuring the meetings to be discussing topics one at a time that I think is is really useful I'll give you an example I mean it's something that I suggested when I was consulting but for some reason people didn't buy that Suggestion so you when an investment is being discussed say by an investment firm some staff people if it's a big investment staff people will prepare a briefing book the chapters now our recommendation would be that the staff should end each chapter with a score how does that trap to taken on its own independently of anything else affect the likely decision and then you could structure the meeting that discusses this in the meeting of the board to Discuss these scores one of the thought that has the effect that I was talking about earlier making the decision making the judgments about the dimensions we call them mediating assessments is a little draw into the mediating assertions come first and then you have the profile of them and then you make a global judgment and you can structure it so if the staff has presented a score and you discuss in the board do we accept their School you're forcing people to have a look at the evidence and think about why they were chased after rejects and then they they feel like they have to construct a new argument that might be less intuitive that's it so you know there are ways of doing this but if you're going to be too rigid about it it won't work either so I'm curious what other advice you gave as a consultant that nobody followed oh I mean no truly all the advice again people don't follow I mean you know I think that's that's not you shouldn't you know you're not going to be a consultant if you expect your advice to be taken you have to give the best advice you can well it would be other examples of something you think you be widely applicable that you would advise you would have advised people and these are sort of like southern drop the ball well I mean you know I would advise people make a lot of decisions to keep track their decisions and of how they Turned out so that later you can come and and evaluate your procedures and and see whether there is anything that is in common with those decision that turned out well and then not so well and so on people hate doing this well why do you think people hate doing it oh because because reach respectively they may look foolish some of them or all of them in particular the leader so they really don't like keeping track I mean there are exceptions Ray Dalio and his firm Where everything is exploited yeah yeah Bridgewater but in general in Mike's having consulted with Bridgewater they don't need me but but in general when I suggested that never went anywhere what are the variables that you would recommend people keep track of like what would your decision journal look like oh um you know my my decision journal would be a mess I don't not putting myself as an example but so obviously the outcome but you've got to do that Host laughter yeah but no no you would want to say what were the main arguments pro and con what were the alternative that were considered you know it doesn't have to be very detailed but it should be enough so that you can come later and debrief yourself should you have a calibration like what degree of confidence you are that would be good then you know it would depend on something that you could evaluate late It strikes me that decision journals and pre-mortem are a way to identify people that are sort of perhaps suppressed by their manager where you have somebody who's actually a better better at exercising judgment than the person that is you know that they're working for and this would be a pain-free sort of way to calibrate that score over time and identify the quality of judgment in a consistent way oh yeah I mean that strikes me as worth a lot of money to an Organization yeah but but also very costly and you you will see that certainly anything that threatens the leader is not going to be adopted and leaders may not want something that threatened their subordinates either people are really very worried about embarrassment you're writing a book now on noise yeah tell me about knows and decision-making can you explain the concept yeah I can't really explain it by saying what you know was the Beginning of it which was a consulting assignment to an insurance company where we had the idea of running a test to see whether people in a given row who was supposed to be interchangeable agreed with each other so you know when you come to insurance company in an underwriter gives you a premium the underwriter speaks for the company and sort of it's you expect that any underwriters that it doesn't matter which on the writer you get to for the Premiums and the company has that expected shouldn't make much difference so we tested that and they constructed some cases and then we have some like 50 underwriters assessor premium for the case with the same information mmm yeah with the really very realistic we didn't construct it they constructed the cases and they conducted the experiment but now the interesting question is how much variation do you expect there to be so We asked the executives the following question suppose you take two underwriters at random by what percentage they differ I mean you look at the difference between the premium divide that by the average premium what number do you and people expect 10% by the way it's not only the executives in that company for some reason people expect in person and it was roughly 50% 5-0 so that's you know that's what made me curious about most that and the fact That the company was completely unaware that it had the most took them completely by surprise so now we're writing a book because there's a lot of noise so wherever a rule is that wherever there is judgment there is noise and more of it than you think so that's the pattern are there procedures to reduce noise and conversely it is noisy it strikes me that the variation would be good but Maybe only in an evolutionary concept well we call that noises useless variability I mean variability can be very useful if you have a selection mechanism and some feedback so evolution is built up variability but of course it's useful but noise among underwriters is useless there's nothing nothing gets learned there's no feedback it's just noise and it's costly the first advice of course would be algorithms as I said earlier so Algorithm are better than people on judgments that's not intuitive but it's really it's really true and and after that then you know the procedure that I mentioned earlier for making decisions in an orderly way by breaking it up into assessments that's the best that we can do and and there is one very important aspect that I haven't mentioned but and this is training people in but the scale is so there is one piece of advice that you'd have for Underwriters that they should always compare the case to other cases and if possible if you can have them share the same frame of reference with other underwriters we're going to cut down on the noise that's controlling the scale and that exists in in human resources where performance evaluation which is one of the scandals of modern commerce how difficult it is but performance evaluation they have the thing that's called frame of reference training which Is teaching people you know how to use the scale there's a lot of variability in the scale and part of what the super forecasters do they make judgments in probability units and they teach them to use the probability scale so learning the scale is a very important aspect of reducing noise I know we're coming up to the end of our time here and what have you changed your mind on in the past ten years or long anything big yeah there's been a replication crisis in psychology And some of the stuff that I really believed in when I wrote Thinking Fast and Slow some of the dividends has been discredited so I've had to change my mind what are they what's the big some of the sexiest of priming and unconscious priming and so this hasn't held up in replication and I believed it and I wrote it as if it were true because you know the evidence suggested it and in fact I thought that you had to accept it Because that was published evidence and and I should have blamed myself for having been a big gullible that as I should have known that you can publish things even if they're not true but I just didn't think that's me so I changed my mind I'm not much more cautious about spectacular findings I mean very recently I've come I think I have a theory about why psychologists of parole or social scientists generally are prone To exaggerate them to be overconfident about their hypotheses so I've done quite a bit of learn words what's the theory on the theory one element of the theory is that all these hypotheses are true in what sense that you might fight and there's a famous study that you mentioned wrinkles to people and then you measure the speed at which they walk and they walk more slowly turns out that hasn't held up in replication which is very painful it's one of the favorite Studies but actually you know that if you mention wrinkle and it's been done any victims on the speed of walking it's not breaking to me it's not going to make people faster has any influence there to make them slower so directionally all these hypotheses are true but what there is is what people don't see is that then huge number of factors that determine the speed at which individuals walk and the differences in the speed of walking Between individuals and that's noise and people neglect noise and then there is something else which is touches on both philosophy and and psychology when you have intuitions about things so clear intuitions and they're strong intuitions another thing so clear intuition is if I offer you a trip to Rome a trip to Rome and an ice cream cone you know what you prefer it's easy but it's very weak of course I mean the amount of money you would pay to get the trip to Rome During an ice cream cone nothing but when you are philosopher and I should add one thing to see the clear intuitions you have to be in this kind of situation that psychologists call within subject that you have growths you have both yet with Wendy Astrid : without the ice cream cone so in a within subject situation that's an easy problem in a between subject situation it's an impossible problem but now if you're a philosopher you're always in a Within subject situation and but people live in a between subject situation they live you know in once condition and the same thing is true for psychologists so psychologists live in a when they cook up their hypotheses they're in them within subject situation but then they make guesses about what will happen between subject and they're completely lost between clear intuitions and strong intuition we have no way of calibrating ourselves so that makes us wildly Overconfident about what we know and reluctant to accept that we may be wrong as as a great place here and this conversation Danny thank you so on the knowledge project is produced in collaboration with Jason Oberholtzer and the team at charts and leisure you can find show notes on this episode as well as every other episode that FS blog a slash podcast if you find this episode valuable share it on social media and leave a review to support the podcast go To FS dot blog slash membership and join our learning community you'll get hand edited transcripts of all the podcasts and so much more thank you for listening

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