Making Sense — Daniel Kahneman

On: The Map of Misunderstanding

Episode: 150

Date: March 2019

Key Subjects:

  • Nobel Laureate, Professor of Psychology and Public Affairs, co-author of “Thinking Fast and Slow”.
  • On intuition:
    • Intuition really is recognition: of a pattern and the appropriate response to it.
    • Idea that comes to mind automatically with high confidence and you trust it.
    • Correlation between accuracy and confidence is not necessarily high.
    • Correcting for high confidence is difficult:
    • For intuition to work, three things are required:
      • Regular world (patterns).
      • Repeated exposure (ability to learn patterns).
      • Immediate and certain feedback (connection between outcomes and rewards).
    • Even when these conditions are not satisfied, people still form intuitions.
    • So, best you can do is try to recognize situations where your intuitions is unlikely to be correct – this is difficult and rare.
  • Framing:
    • Framing is putting a story around an experience.
    • As you form stories about your daily life and regular experiences, you develop intuitions.
    • When you strip away the stories, the framing, people are unable to form intuitions.
    • System 1 works on stories, not abstractions and numbers (system 2).
    • Choose the frame that leads to the better outcome: nudging, behavioral economics.
    • Akin to difference between emotional rationality (system 1) and cognitive rationality (system 2).
  • Regret:
    • Counter-factual:
      • You are not thinking about something that actually happened.
      • You think about something that could have happened but did not happen.
    • Anticipated regret (loss avoidance) plays an important role in decision making.
  • Fairness:
    • Evolutionary basis for assigning more weight to threat of loss than opportunity to gain:
      • Threats are usually more immediate and have to be dealt with in order to survive.
      • So, a potential loss is weighed more heavily than a potential gain.
    • This asymmetry affects how people look at fairness:
      • Fundamentally, people don’t want things taken away from them.
      • Fairness becomes: don’t inflict losses on me.
      • Fairness doesn’t mean: I will share my gains.
      • Applies to inequality debate:
        • You may have intuitions about end goals: you want people to be equal.
        • But given the state you are in now, that means a re-distribution of what you already have.
        • Something may have to be taken away from you: you don’t want that.
        • So you are less inclined to get to pursue a goal of everyone being equal.
  • Changing behavior – stories and removing obstacles.
    • Again, the importance of images, stories and framing.
    • If problems are remote, abstract and not immediate, difficult to solve.
    • Solution 1: central idea of behavioral economies: choose a better frame.
    • Solution 2: make it easy for people to make the right decision.
      • Apply pressure versus make it easier (preferred).
      • Pressure: threats, incentives, arguments, promises.
      • Making it easy: removing obstacles, reduce effort, conflict and stress.
  • Experience versus memory:
    • Experience (in the moment) versus how the experienced is memorized (retrospective).
    • Decision-making is based on memory and anticipated memories:
      • Anticipating which experience is likely to produce the best memory.
      • Future-directed: weighing anticipated regret versus anticipated satisfaction.
  • Well-being:
    • Generally, it may be the case that preventing misery is more important than pursuing well-being (given asymmetry of losses and gains).
    • Given the difference between experience and memory, what is more important for well-being – the experience in the moment or the story you tell yourself after?
      • In the moment happiness: largely about social connections, friends, love, et.
      • Retrospective satisfaction: about your “story” – success, rewards, achievement.
      • Very different conditions for happiness and satisfaction.
  • Common projects:
    • Conditions for collaboration: shared interests, common understanding of the world and of a desirable future.

Key Takeaways:

  • Changing behavior:
    • Choose the frame that leads to the better outcome: nudging, behavioral economics.
    • Make it easy for people to make the right decision (remove obstacles).
  • Recognize situations where your intuitions is unlikely to be correct.
    • Intuition (expertise) works in a regular world (patterns), where repetition (ability to learn patterns) provides immediate and certain feedback.
  • Decision-making is based on anticipated memories:
    • Which experience is likely to produce the best memory.
    • Weighing anticipated regret versus anticipated satisfaction.
  • People don’t want things taken away from them.
    • Fairness intuition is “don’t take away my stuff”; fairness intuition is not “I will share my stuff”).
  • Well-being:
    • In the moment happiness (social, love, etc.) versus retrospective satisfaction (achievements, rewards, success).

Worth Listening:


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