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Thinking Fast and Slow notes

Thinking Fast and SlowDaniel Kahneman

Notes compiled by Jane L. Sigford

Introduction: Although we believe we know how the mind works, the discussions of

the book talks about the biases of intuition. P. 3 The book discusses the current understanding of judgment and

decision-making. The way people think, the “availability heuristic helps explain why some issues are highly salient in the public’s mind while others are neglected p. 8[This is particularly important as we watch the interplay of politics and public policy surrounding education. HOW the message is given, WHAT the message is, the TIMING of the information all contribute to what message is perceived as true. How the message about public education is displayed is particularly important as a strategic device for us as public educators note mine.]

Part 1Two Systems

The Characters if the Story Psychologists have named two systems: System 1 and System 2.

o System1—operates automatically and quickly with little or no effort

o System 2—allocates attention to effortful mental activities including complex computations. Operations of System 2 often associated with subject experience of agency, choice and concentration.

When we think of ourselves, we identify with System 2—the conscious, reasoning self that has beliefs, makes choices, and decides what to think about and what to do. P.20

Actually System 1 is hero of book—the part the effortlessly originates impressions and emotions, display automatic complex patterns of ideas

o Detect that one object is more distant than anothero Orient to source of soundo Complete phrase “bread and ….” Are examples of system 1

thinkingS1 (=System 1 throughout the rest of these notes. S2 = System 2]S1—innate skills we share with other animals, help us perceive world

around us, recognize objects. S1—learned association such as reading and understanding nuances p.

21Some activities are voluntary but others are involuntary such as

understanding sentences in your native language. System2—slower, constructs thoughts in series of steps. S2—highly diverse BUT they require attention and are disrupted when

attention is drawn away.o Brace for starter gun in race

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o Focus attention on clowns in circuso Look for woman white hairo Search memory to identify a surprising soundo Maintain faster walking speed than is natural for you are

examples p.22 S2—can change how S1 works to some degree by programming

normally automatic functions of attention and memory—example you can deliberately set a faster walking pace

S2—is what you direct to “pay attention” However, intense focusing can make people effectively blind even to stimuli that normally attract attention e.g. distracting a driver p. 23

Example the “Invisible Gorilla” video where people are directed to watch how many times a basketball is passed among players. They miss completely the fact that a gorilla walked across the stage

Plot Synopsis S1 and S2 are both active when we are awake. S1 runs automatically, generates suggestions for S2, impressions and

intuitions turn into beliefs, and impulses turn into voluntary actions. If all goes smoothly, S2 adopts suggestions of S1 with little or no modifications. You generally believe your impressions and act on desires which is fine--usually

S2 normally a low-effort mode which only a fraction of capacity is engaged.

When S1 runs into difficulty, it calls on S2 to support more detail and specific processing to solve problem. S2 is mobilized when question arises for which S1 doesn’t have answer, such as 17 X 24.

S2—credited with continuous monitoring of your own behavior—control that keeps you polite when angry. Mobilized to increased effort when it detects an error about to be made

In summary, most of what you (your S2) think and do originates in your S1, bug S2 takes over when things get difficult, and it normally has the last word.

Division of labor between S1 and S2 is highly efficient. Minimizes effort and optimizes performance.

Arrangement works well most of time because S1 is generally very good at what it does; its models of familiar situations are accurate, its short-term predictions are usually accurate as well, and its initial reactions to challenges are swift and generally appropriate, p. 24

S1 has biases, systematic errors that it is prone to make in specified circumstances

It sometimes answers easier questions than the one it was asked It has little understanding of logic and statistics S1 cannot be turned off therefore causing conflict between an

automatic reaction and an intention to control p. 26 e.g. we have experience of trying not to stare at oddly dressed couple. We try to force attention to a book; we struggle to NOT tell someone to go to hell.

Illusions: The illusion we know of 2 lines, one with lines extending and one with

the lines coming in to form arrows. Our S1 says that the diagram that

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looks like an arrow is shorter when in actuality the lines are the same length. This is because S1 operates automatically and cannot be turned off at will.

Therefore we have errors of intuitive thought which are difficult to prevent.

Biases cannot always be avoided because S2 may have no clue to the error.{What are the ramifications of this when we as public educators have been dealing with the information, the bias, from things like A Nation at Risk for 40 years???] Note mine

The best we can do is a compromise to learn to recognize situations in which mistakes are likely and try harder to avoid significant mistakes when the stakes are high. P. 28

Caution: S1 and S2 are fictions—they are not systems in the standard sense of

entities with interacting aspects or parts. [Much like the old conversation of right brain and left brain thinking. Those are not distinct entities. They are interactive, complicated sophisticated definitions that try to help us understand how the brain. ] Note mine

The purpose is that thinking about thinking is useful because it helps us understand.

It’s easier to say S1 than “automatic system.” S2 is easier to say than “effortful system. “p. 29

Chapter 2: Attention and Effort Many people when engaged in mental sprint, may become effectively

blind as in the video The Invisible Gorilla mentioned above. The pupils of the eye are an indicator of the current rate at which

mental energy is used. Your use of attention has limited capacity but respond differently to

threatened overload. The “breaker” trips when demand is excessive. P. 34

Response to mental overload is selective and precise: S2 protects the most important activity, so it receives the attention it needs; “spare capacity” is allocated second by second to other tasks. P34

Allocation of attention has long evolutionary history. Orienting and responding quickly too gravest threats improved chances of survival.

As you become skilled in a task, its demand for energy diminishes. Studies of the brain have shown that the pattern of activity associated with an action changes as skill increases, with fewer brain regions involved.

Talent has similar effects. Highly intelligent individual need less effort to solve the same

problems as indicated by both pupil size and brain activity. General “law of least effort” applies to cognitive and physical exertion

—if there are several ways of achieving he same goal, people will eventually gravitate to least demanding course of action. In economy of action, effort is a cost and the acquisition of skill is driven by the balance of benefits and costs. Laziness is built deep into our nature. P. 35

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Effort is required to maintain simultaneously in memory several ideas that require separate action

S2 –only one who can follow rules, compare objects on several attributes, and make deliberate choices between topics.

The automatic S1 does not have these capabilities S1—detects simple relations—“They are all alike.” “The son is taller

than the father.” And excels at integrating information about one thing, but it does not deal with multiple distinct topics at once, nor is it adept at using purely statistical information

S2—can program memory to obey an instruction that overrides habitual responses. Such as counting all the fs on the page.

Ability to control attention is not simply a measure of intelligence (even though modern tests of working memory are included on tests of intelligence) p. 37

Time pressure is another driver of effort. Any task that requires you to keep several ideas in mind at same time has a hurried time pressure. You may be forced to work uncomfortably hard.

We normally avoid mental overload by dividing tasks into multiple easy steps, committing intermediate results to long-term memory or to paper rather than overworking memory. P. 37

Chapter3: The Lazy Controller S2—has natural speed—monitoring environment inside your head

demands little effort. But extremes cause pressure and change the experience. If forced to speed beyond natural rhythm, causes deliberate thought.

Frequent switching of tasks and speeded-up mental work are not intrinsically pleasurable, and that people avoid them when possible. This is how the law of least effort comes to be a law.

Busy and Depleted System 2 People who are cognitively busy are also more likely to make selfish

choices, use sexist language, and make superficial judgments in social situations.

Memorizing and repeating digits loosens the hold of S2 on behavior but of course cognitive load is not the only cause of weakened self-control. So does a few drinks or sleeplessness. The self-control of morning people is impaired at night; the reverse is true of night people

Self-control requires attention and effort—controlling thoughts and behaviors is one of the tasks S2 performs.

List of situations and tasks that are known to deplete self-control (list is long and varied. All involve conflict and the need to suppress a natural tendency, including:

o Avoiding the thought of white bearso Inhibiting the emotional response to a stirring filmo Making a series of choices that involve conflicto Trying to impress otherso Responding kindly to a partner’s bad behavioro Interacting with a person of a different race (for prejudiced

individuals p 42 List of indications of depletion is also highly diverse

o Deviating from one’s diet

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o Overspending on impulsive purchaseso Reacting aggressively to provocationo Persisting less time in a handgrip tasko Performing poorly in cognitive tasks and logical decision making

Activities that impose high demands on S2 require self-control, and that is depleting and unpleasant. P. 43

Ego depletion is at least in part a loss of motivation. After exerting elf-control in one task, you do not feel like making an effort in another, although you could if you had to.

Ego depletion is not same mental state as cognitive busyness. Mental energy is more than metaphor—nervous system consumes

more glucose than most other parts of body and effortful mental activity appears to be especially expensive in currency of glucose.

When you are engaged in such an activity, your blood glucose level drops which affects decision-making capabilities.

Lazy System 2 One of main functions of S2—monitor and control thoughts and actions

“suggested by S1, allowing some to expressed directly in behavior and suppressing or modifying others.

Recurrent theme of this book—many people are overconfident, prone to place too much faith in their intuitions, find cognitive effort at least mildly unpleasant and avoid it as much as possible. P. 45. [What does this say about how we make policy decisions about education and other important topics in the current political climate?] Note mine

When people believe a conclusion is true, they are also very likely to believe arguments that appear to support it, even when these arguments are unsound. If S1 is involved, the conclusion comes first and the arguments follow. P. 45 [A good discussion here would be the political discussion from Nation at Risk through NCLB. We know that NCLB is bad policy yet we continue to allow it to be the law of the land.] Note mine.

Intelligence is not only the ability to reason; it is also the ability to find relevant material in memory and to deploy attention when needed. Memory function is an attribute of S1. Everyone can slow down and check intuitive answers. But the extent of deliberate checking and search is a characteristic of S2, which varies among individuals. p. 46

Those who avoid the sin of intellectual sloth could be called “engaged.” They are more alert, more intellectually active, less willing to be satisfied with superficially attractive answers, more skeptical about their intuitions. P. 47

Intelligence, Control, Rationality What is relationship between self-control and intelligence? In famous

study by Walter Mischel who studied 4 year old children who had a choice between a small reward (one Oreo) at any time or a larger reward (two cookies) if they waited 15 minutes. Conclusion: children who had more self-control as 4 year olds had substantially higher scores on tests of intelligence.

Other research shows specific genes involved in control of attention, which is affected by parenting techniques. Demonstrates close connection between children’s ability to control their attention and

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their ability to control their emotions. [NB: this is an important fact for educators, but no surprise] note mine p. 46

S1-impulsive and intuitive; s2 capable of reasoning and it is cautious but in some people is lazy. Some people are more like S1; others more like S2. Some theorist, Keith Stanovich and Richard West call them Type 1 and Type 2 personalities.

Rationality should be distinguished from intelligence. Propose that lazy thinking a flaw of the reflective mind, a failure of

rationality and is a better indicator of susceptibility to cognitive errors than are conventional measures of intelligence. i.e. IQ tests. Time will tell whether the distinction between intelligence and rationality can lead to new discoveries. P.49

Chapter 4: The Associative Machine Bananas vomit. Your reaction to those two words is a product of your

experiences, your putting things in context and is an operation of S1. How you make meaning of those words is based on coherence—how things are connected and how ideas strengthen one another. P. 51 S1 made as much meaning as possible from those 2 words automatically and quickly.

Priming allows for one to focus possible association. For example, if you recently heard or saw the word SO_P as SOUP, rather than SOAP.

Priming effects—many forms. If EAT is on your mind, you will be quicker to recognize SOUP when spoken and are primed for multitude of other food-related ideas.

Primed ideas have some ability to prime other ideas, although more weakly.

Priming not restricted to concepts and words—emotions too can be primed. P. 53 For example, if you are primed to think of old age, you would tend to act old, and acting old would reinforce the thought of old age.

There are reciprocal links in priming. For example, being amused makes you smile and smiling tends to make you feel amused. If you hold a pencil between your teeth and force a smile, you are more likely to be amused at pictures, other emotions, etc.

People who nod up and down are more likely to rate an idea as positive, even though the gesture may be unrelated to the information.

Primes that Guide us We think of ourselves as thinkers. However, unconscious things prime

us more than we are aware. For example, voters are more likely to vote for a school referendum if the polling place is located inside a school.

If people are reminded of money, they are more likely to persevere on a problem before asking for help, they demonstrate more self-reliance, are more selfish, less willing to spend time helping another student who pretended to be confused about an experimental task.

General theme of these findings is that the idea of money primes individuals; a reluctance to be involved with others, to depend on others, or to accept demands from others. P. 55

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In dictatorial societies where pictures of the leaders are ubiquitous, people are primed to believe that they are constantly being watched and leads to a reduction in spontaneous thought.

Reminding people of their mortality increases appeal of authoritarian ideas which may become reassuring in context of terror of death.

Feeling that one’s soul is stained appears to trigger a desire to cleanse one’s body, an impulse that has been called “Lady Macbeth effect.”

Cleansing highly specific to body parts involved in a sin. Chapter 5—Cognitive Ease

Cognitive ease—when there are no threats, no need to redirect attention. Usually in a good mod, like what you see, believe what you hear, trust your intuitions, and feel situation is familiar.

Opposite is cognitive strain-affected by level of effort and presence of unmet demands. –likely to be vigilant suspicious, invest more effort in what you are doing, feel less comfortable, and make fewer errors but also less intuitive and less creative

Illusion—more than visual. Memory susceptible to illusion. E.G. if presented with list of names, and a few days later given a longer list, including those on the first list, one is likely to think those on the first list are well-known. You have a sense of familiarity which indicates a direct reflection of prior experience. This quality of pastness is an illusion.

Words you have seen before becomes easier to see again—you can identify them better than other words when they are shown very briefly and will read them quicker. P. 61

If something occurs during cognitive ease, it makes it easier for the associative machine to run smoothly and will also bias beliefs. A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth.

Authoritarian institutions and marketers have always known this fact. Familiarity of one phrase in a statement suffices to make the whole

statement feel familiar, and therefore true. [Swift Boat episode of the Kerry/Bush election] note mine

How to Write a Persuasive Message If message printed, use high quality paper, maximize contrast between

characters and their background, if in color use bright blue or red, not middling shades of green, yellow, or pale blue. Do not use complex language if simple language will do. Make message simple, memorable, put in verse if you can

If you cite a source, choose one with a name that is easy to pronounce. If a message is strongly linked by logic or association o other beliefs or

preferences you hold, or comes from a source you trust and like, you will feel a sense of cognitive ease and more likely to believe the message

Strain and Effort If under cognitive strain, S2 more likely to kick in which means

decisions are more likely to be made on intuition, not logic. If under cognitive ease, it is associated with good feelings. E.g. easily

pronounced words evoke a favorable attitude

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Companies with pronounceable names do better than others for the first week after the stock is issued, though the effect disappears over time.

Investors believe that stocks with fluent names like Emmi, Swissfirst, will earn higher returns than those with clunky labels like Geberit and Ypsomed

Petition induces cognitive ease and a comforting feeling of familiarity called the mere exposure effect.

Studies show that words presented more frequently were rated much more favorably than the words that had been shown only once or twice. Length of exposure not an issue. Can be so fast that reader is unconscious of being exposed. [ramifications for PR? Politics? ] Note mine

S1 can respond to impressions of events of which S2 is unaware. The mere exposure effect is actually stronger for stimuli that the individual never consciously sees.

Ease, Mood, and Intuition— If people are in a good mood, the “intuition index” is more accurate.

Unhappy subjects were completely incapable of performing intuitive tasks accurately

Good mood, intuition, creativity, gullibility, and increased reliance on S1 form a cluster.

As an opposite, sadness, vigilance, suspicion, an analytic approach, and increased effort also go together

Happy mood loosens the control of S2 over performance when in a good mood, people become more intuitive and more creative but also less vigilant and more prone to logical errors.

Chapter 6-Norms, surprise, and causes Capacity for surprise—essential aspect of our mental life and surprise

itself is most sensitive indication of how we understand our world and what we expect from it. P. 71 we are able to detect a surprise, or abnormality, very rapidly and subtlety.

Surprise comes when something violates what we expect as a norm. Like we share a norm of what a table is. S1 understand language and has access to norms of categories which specify the range of plausible values as well as the most typical cases

Chapter 7—Machine for Jumping to Conclusions Jumping to conclusions is efficient if conclusions are likely to be correct

and costs of an occasional mistake acceptable, and if jump saves much time and effort.

Jumping to conclusions is risky when situation is unfamiliar, stakes are high, and there is not time to collect more information. Then intuitive errors are probably which may be prevented by intervention of S2.

Conscious doubt is not repertoire of S1—it requires maintaining incompatible interpretations in mind at same time which demands mental effort.

Uncertainty and doubt are domain of S2.Bias to Believe and Confirm:

Daniel Gilbert proposes that understanding a statement must begin with an attempt to believe it; you must first know what idea would

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mean if it were true. Only then can you decide whether or not to unbelieve it. P. 80

If S2 is otherwise engaged, we will believe almost anything. S1 is gullible and biased to believe, S2 is in charge of doubting and unbelieving but S2 is sometimes busy, and often lazy

There is evidence that people are more likely to be influenced by empty persuasive messages such as commercials, when they are tired and depleted. P. 81.

Contrary to rules of philosophers of science, people quite often seek data that are likely to be compatible with beliefs they currently hold, not trying to refute hypotheses.

Exaggerated Emotional coherence (Halo Effect) If you like the president, you probably like his voice and appearance.

The tendency to like (or dislike) everything about a person—called halo effect.

Halo effect—one of ways representation of world that S1 generates is simpler and more coherent than the real thing.

Sequence in which we observe characteristics of a person often determined by chance but sequence matters—the halo effect increases the weight of first impressions, sometimes to the point that subsequent information is mostly wasted.

Halo effect—reduced if one uses multiple sources of evidence particularly if they are independent of one another and eliminate redundancy

Principle of independent judgments has immediate application for the conduct of meetings—all members of a meeting should be asked to write a summary of their position on an issue and then weigh each opinion, not just the first person to speak up which often biases the discussion.

What you see is all there is (Wysiati) S1—radically insensitive to both quality and quantity of information

that gives rise to impressions and intuitions. P.86 WYSIATI—explains why we think fast and are able to make sense of

partial information in complex world. Much of time the coherent story we put together is close enough to reality to support reasonable action.

Biases: Overconfidence—Neither the quality nor quantity account for the confidence in the story one can tell about what they see, even if they see little We often fail to allow for possibility that evidence that should be critical to our judgment is missing. Plus our associative system tends to settle on a coherent pattern of activation and suppresses doubt and ambiguity.

o Framing effects—different ways of presenting same information often evoke different emotions. E. G. saying something is 90% fat free rather than having 10% fat.

o Base-rate neglect—describing a meek person as a librarian, ignoring the fact that there are more male farmers than librarians did not occur.

Chapter 8: How Judgments Happen

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One makes basic assessments—S1 monitors what is going on in surrounding and inside mind and makes assessments. S2—receives and generates questions and directs attention

Basic assessments; S1—include computations of similarity and representativeness,

attributions of causality, and evaluations of the availability of associations and exemplars.

Intensity Matching S1—matches information across diverse dimensions. E.g. matches age

someone started reading with I.Q. as an adult. We have a tendency to make assumptions rightly or wrongly based on small items of information.

The Mental Shotgun S1—always carrying out computations such as what you see, where it

is, size of objects etc. You can carry out more deliberately if you wish, like counting the c’s on this page. We compute much more than we want or need—calls this excess computation mental shotgun.

It is impossible to aim at a single point with a shotgun because of the scatter and it is equally difficult for S1 not to do more than S2 charges it to do. p. 96

Chapter 9: Answering an Easier Question

We are rarely stumped—Have intuitive ideas and feelings about almost everything.

Sometimes we have a target question that is the assessment you intend to produce. The heuristic question is the simpler question that you answer instead. We often find adequate though often imperfect answers to difficult questions—called substitution.

Example: Target Question—Ho happy are you with you life these days?

o Heuristic Question—What is my mood right now? Mental shotgun makes it easy to generate quick answers to difficult

questions without imposing much hard work on your lazy S2. Sometimes we even find more than one possible simpler answer to the

target question.Mood Heuristic for Happiness

How happy are you these das?o How many dates did you have last month?

If you reverse the order of the questions, because of association respondents like # of dates with happiness and the answers are different than if the order is like the first pair.

Affect Heuristic Psychologist Paul Slovic—affect heuristic where people let their likes

and dislikes determine their beliefs about the world. Your political preference determines the arguments that you find compelling.

Entire list of characteristics of S1 on pp. 104-5Part2 Heuristics and Biases

Chapter 10 The Law of Small Numbers S1—tries to take statistics and make causalities of them.

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A random event y definition does not lend itself to explanation, but collections of random events do behave in a highly regular fashion. E

Extreme results happen more often in small samples but one cannot interpret the results as causal [We do too often with data about student performance.] note mine

Even sophisticated researchers have poor intuitions and a wobbly understanding of sampling effects. P. 111

Law of Small Numbers For a research psychologist sampling variation is not a curiosity; it is a

nuisance and a costly obstacle, which turns the undertaking of every research project into a gamble. P. 112

Researchers who pick too small a sample leave themselves at the mercy of sampling luck. Risk of error can be estimated using a sample procedure but psychologists do not use calculations to decide on sample size. They use their judgment, which is commonly flawed.

One researcher pointed out that psychologists commonly chose samples so small that they exposed themselves to a 50% risk of failing to confirm their true hypotheses! P. 112.

Kahneman had experienced choosing sample so small that results often made no sense. Why? The odd results were actually artifacts of my research method.!!! He had trusted tradition and intuition in selection of size.

Kahneman actually developed questionnaire that described realistic research situations and asked famous researchers to talk about how they chose sample size. Discovered that a large majority of respondents had paid insufficient attention to sample size. [implication for us in using research??]

Bias of Confidence over doubt When confronted with messages such as “In a telephone poll of 300

seniors, 60% support the president” S1 not prone to doubt—suppresses ambiguity and spontaneously constructs stories that are as coherent as possible.

Unless message is immediately negated, the associations that it evokes will spread as if the message were true. We have tendency to believe rather than doubt, which is more work p. 114

We are also prone to exaggerate the consistency and coherence of what we see—contributes to halo effect. It will produce a representation of reality that makes too much sense.

Cause and Chance Associative machinery seeks causes Our predilection for causal thinking exposes us to serious mistakes in

evaluating the randomness of truly random events. P. 115 Random processes produce many sequences that convince people

that the process in not random after all. P. 115 The idea of a “hot hand” in basketball for example. There is no such

thing as a hot hand in professional basketball, either in shooting from the field or scoring from the foul line. Of course, some players are more accurate than others, but the sequence of successes and missed shots satisfies all tests of randomness. The hot hand is entirely in the eye of the beholders, who are consistently too quick to perceive order

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and causality in randomness. The hot hand is a massive and widespread cognitive illusion. P. 116.

If you follow your intuition, you will more often than not err by misclassifying a random event as systematic. We are far too willing to reject the belief that much of what we see in life is random. P. 117

The research and money into small schools by Gates Foundation is an example. We constructed causal story that small schools made a difference. However the causal analysis was wrong because the facts were wrong. If the statisticians who reported to the Gates Foundation had asked about the characteristics of the worse schools, they would have found that bad schools also tend to be smaller than average. The truth is that small schools are not better on average; they are simply more variable. If anything, say Wainer and Zerling, large schools tend to produce better results, especially in higher grades where a variety of curricular options is valuable. P. 118

We pay more attention to content of messages than to information about their reliability and as a result end up with view of the world that is simpler and more coherent than data justify.

Statistics produce many observations that appear to beg for causal explanations but do not lend themselves to such explanations. Many facts are due to chance including accidents of sample. Causal explanations of chance evens are inevitably wrong. P. 119.

Chapter 11:Anchors Anchoring effect= when people consider a particular value for an

unknown quantity before estimating that quantity. What happens is one of the most reliable and robust results of experimental psych: the estimates stay close to the number people considered—hence the image of an anchor.

2 types of anchoring: adjustment and priming Anchors are threatening in that you are always aware of the anchor

and even pay attention to it, but you do not know how it guides and constrains thinking. E.g in negotiations. An outrageous offer is the anchor around which people revolve unless someone understands the principle of anchoring and provides counter effects.

Chapter 12: Science of Availability Availability heuristic—when people are asked to retrieve instances

from memory and it is easy and fluent to do so, the category will be judged to be large. If you can retrieve information easily about how movie stars have been in trouble with the law, you will form a bias about the size of the group of movie stars who have been in trouble.

People who let themselves be guided by S1 are more strongly susceptible to availability bias than others who have S2 more engaged and are exhibiting a higher vigilance to facts. P. 135.

Chapter 13-Availability, Emotion, and Risk Availability effects help explain pattern of insurance purchase and

protective action after disasters. The dynamics of memory fade with time and insurance purchases decline.

Availability and Effect Estimate of cause of death are warped by media coverage. The

coverage is itself biased toward novelty and poignancy. Unusual

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events (such as botulism) attract disproportionate attention and are consequently perceived as less unusual than they really are.

Our expectations about the frequency of events are distorted by the prevalence and emotional intensity of the messages to which we are exposed.

The ease with which ideas of various risks come to mind and the emotional reactions to these risks are inextricably linked. Frightening thoughts and images occur to us with particular ease, and thoughts of danger that are fluent and vivid exacerbate fear. P. 138

People perceive good technologies as having high benefit and low risk. If however there are low risk and low benefit, people will rate technology higher because “emotional tail wags the rational dog.”

Paul Slovic—Mr. and Ms. Citizen says they are guided by emotions rather than by reason, easily swayed by trivial details, and inadequately sensitive to differences between low and negligibly low probabilities. P. 140

Experts show many of the same biases in attenuated form but often their judgments and preferences about risks diverge from those of other people.

Experts often measure risks by the number of life or (life years) lost while public draw finer distinctions, between “good deaths” and “bad deaths”. These distinctions often ignored in statistics that merely count cases. Slovic argues that public has richer conception of risks than do experts. Consequently he strongly resists the view that experts should rule and that their opinions should be accepted without question when they conflict with opinions and wishes of other citizens

However, Ass Sunstein disagrees with Slovic and says that experts act as bulwark against “populist excesses. P. 141.

We have basic limitation in the ability of our mind to deal with small risks: we either ignore them altogether or give them far too much weight—nothing in between. P. 143. Threat of terroristic attacks for example.

Chapter 14: Tom W’s Specialty When people asked to decide probability of an event, they are likely to

use shotgun approach, evoking answer to easier questions p.150 When people make predictions based on representativeness (if a factor

represents a group/pattern—similarity to stereotypes) exclusive reliance upon it is an error against statistical logic. Some people ignore base rates (basic information) because of the belief that the fact is irrelevant. And some discount the quality of the evidence. S1 automatically processes information as though it were true. If you have doubts about quality of evidence, let your judgments of probability stay close to the base rate. P. 153

Anchor your judgment of probability of an outcome on a plausible base rate

Question the diagnosticity of your evidence. Chapter 15—Linda Less is More

Another case study about Linda with discussion about conjunction fallacy—when people judge a conjunction of two events to be more probably than one of the events in a direct comparison.

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There was discussion about some theorists who dispute Kahneman’s discussion.

Chapter 16—Causes Trump Statistics

Contributions to stereotypes—2 types—statistical base rates which are facts about a population to which a case belongs, but they are not relevant to the individual case. Causal base rates—change the view of how individual case came to be.

Stereotypes—although a negative connotation—are how we think of categories. But neglecting valid stereotypes inevitably results in suboptimal judgments.

Nisbett and Borgida found that when they presented their [psychology] students with a surprising statistical fact, the students managed to learn nothing at all. But when the students were surprised by individual cases—two nice people who had not helped others—they immediately made the generalization and inferred that helping is more difficult than they had thought. There is a deep gap between our thinking about statistics and our thinking about individual cases.

Even compelling causal statistics will not change long-held beliefs or beliefs rooted in personal experience. [Hence the difficulty in getting rid of racism note mine]

However surprising individual cases have a powerful impact and are a more effective tool for teaching psychology because the incongruity must be resolved and embedded in a causal context.

You are more likely to learn something by finding surprises in your own behavior than by hearing surprising facts about people in general. P. 174

Chapter 17-Regression to the Mean Regression to the mean—discovered by Francis Galton in the 19th

century Regression effects found everywhere. If there is a great performance,

the next is likely to be nearer average; if a poor performance, the next is likely to be more average. This is called regression to the mean.

Regression effect is common source of trouble in research. Scientists often imply causality when it is correlational. P. 183

Chapter 18—taming Intuitive Predictions Intuitive predictions need to be corrected because they are not

regressive and therefore are biased. P. 190 Most predictions do not allow for regression to the mean. They are usually overly optimistic.

Correcting the prediction is a task for S2—to look at quality of baseline data, and evaluate quality of evidence. P. 192

If your predictions are unbiased, you will never have the satisfying experience of correctly calling an extreme case.

It is natural for S1 to generate overconfident judgments because it is determined by the coherence of the best story you can tell from the evidence at hand. P. 194

Regression even a problem for S2—the idea of regression is alien and difficult to communicate and comprehend. Matching predictions to evidence is not only something we do intuitively; it also seems a

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reasonable thing to do. We will not learn to understand regression from experience. P. 195

Part 3Overconfidence

Chapter 19—Illusion of Understanding Nassim Taleb introduced notion of narrative fallacy—stories that arise

from our continuous attempt to make sense of the world. The explanatory stories that people find compelling are simple; concrete rather than abstract, assign a larger role to talent, stupidity, and intentions than to luck and focus on a few striking events that happened rather than on countless events that failed to happen. P199 Humans constantly fool ourselves by constructing flimsy accounts of the past and believing they are true.

Good stories provide coherent and believable account of people’s actions and intentions. Foster an illusion of inevitability. Seek and obtain funding to start a company and make a series of decisions that work out well.

Paradoxically, it is easier to construct a coherent story when you know little; when there are fewer pieces to fit into a puzzle.

Core of the illusion is that we believe we understand the past, which implies that the future also should be knowable, but in fact we understand the past less than we believe we do. P. 201

Humans have imperfect ability to reconstruct past states of knowledge, or beliefs that have changed. Once you adopt a new view of the world (or of any part of it), you immediately lose much of your ability to recall what you used to believe before your mind changed. P. 202

Hindsight bias has pernicious effects on evaluations of decision makers. Leads observers to assess quality of a decision not by whether the process was sound but by whether its outcome was good or bad. P. 203

Hindsight particularly unkind to decision makers who act as agents for others—physicians, financial advisers, CEOS, etc. We are prone to blame decision makers—called outcome bias.

The worse the consequence, the greater the hindsight bias e.g. Sept 11.

Because decision makers who expect to have their decision scrutinized with hindsight are drive to bureaucratic solutions—and to an extreme reluctance to take risks.p. 204

This also brings undeserved reward to irresponsible risk seekers—those who take crazy gambles and win. These people are believed to have “flare.”

CEOS do influence performance, but the effects are much smaller than a reading of the business press suggests. [What does this say about the superintendency? Question mine]

Consumers have hunger for a clear message about the determinants of success and failure in business, and the need stories that offer a sense of understanding, however illusory. P206

In Halo Effect by Philip Rosenzweig, he concludes that stories of success and failure consistently exaggerate the impact of leadership

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style and management practices on firm outcomes, and thus their message is rarely useful. P. 206

Halo effect and outcome bias—explain extraordinary appeal of Jim Collins’ Good to Great and Jerry I Porras’s Built to last. Messages are the good managerial practices can be identified and that good practices will be rewarded by good results. Both messages are overstated. The comparison of firms that have been more or less successful is to a significant extent a comparison between firms that have been more or less lucky. Knowing the importance of luck, you should be particularly suspicious when highly consistent patterns emerge from the comparison of successful and less successful firms. In the presence of randomness, regular patterns can only be mirages. P. 207

On average gap in corporate profitability and stock returns between outstanding firms and the less successful studied in Built to Last shrank to almost nothing in the period following the study.

Stories of how businesses rise and fall strike chord with readers by offering a simple message of triumph and failure

Chapter 20—Illusion of Validity Illusion of Validity is a cognitive illusion—we use substitution

sometimes—we think that performance on a teamwork challenge e.g. is an example of how someone will perform as a leader in the military when there is no correlation.

Confidence in judgment is a feeling which reflects coherence of information and cognitive ease in process. It is wise to take admissions of uncertainty seriously but declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true. P.212

Illusion of Stock-Picking Skill Stock market industry appears to be built largely on illusion of skill Study showed that, on average, the most active traders had the

poorest results, while investors who traded the least earned the highest returns. Another paper showed that men acted on their useless ideas significantly more often than women, and that as a result women achieved better investment results than men.

The evidence from more than 50 years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than like playing poker. Typically at least two out of every 3 mutual funds underperform the overall market in any given year.

Year to year correlation between outcomes of mutual funds is very small, barely higher than zero. The successful funds in any given year are mostly lucky; they have a good roll of the dice. P. 215

The subjective experience of traders is that they are making sensible educated guesses in a situation of great uncertainty. In highly efficient markets, however, educated guesses are no more accurate than blind guesses. P. 216

The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry. Facts that challenge such basic assumptions—and thereby threaten people’s livelihood and self-esteem—are simply not absorbed.

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What Supports the Illusions of Skill and Validity Cognitive illusions can be more stubborn than visual illusions. The illusions of validity and skill are supported by a powerful

professional culture. It is not surprising that large numbers of individuals in that world believe themselves to be among the chosen few who can do what they believe others cannot. P. 217

Illusions of Paradox Idea that future is unpredictable is undermined every day by the ease

with which the past is explained The illusion that we understand the past fosters overconfidence in our

ability to predict the future. In predicting events in the future the experts performed worse than

they would have if they had simply assigned equal probabilities to each of the potential outcomes. Those who know more forecast very slightly better than those who know less. But those with the most knowledge are often less reliable. The reason is that the person who acquires more knowledge develops an enhanced illusion of her skill and becomes unrealistically overconfident. P. 219

It is not the Experts’ Fault—The World is Difficult The main point of this chapter is not that the people who attempt to

predict the future make many errors. The first lesson is that errors of prediction are inevitable because the world is unpredictable

The second is that high subjective confidence is not to be trusted as an indicator of accuracy (low confidence could be more informative)

Short-term trends can be forecast, and behavior and achievements can be predicted with fair accuracy from previous behaviors and achievements.

We should not expect performance in officer training and in combat to be predictable from behavior on an obstacle field.

You should expect little or nothing from Wall Street stock pickers who hope to be more accurate than the market in predicting the future of prices. P. 221

Chapter 21:Intuitions vs. Formulas Paul Meehl’s groundbreaking research showed that simple statistical

algorithms are better predictors than experts. Experts are inferior to algorithms because those experts try to be

clever, think outside the box and consider complex combinations of features in making predictions. Complexity may work in the odd case but more often than not, it reduces validity.

Simple combinations of features are better. Several studies have shown that human decision makers are inferior to

a prediction formula even when they are given the score suggested by the formula because they feel that they can overrule the formula because they have additional information but they are wrong more often than not.p. 224

Another reason is that human are incorrigibly inconsistent in making summary judgments of complex information. When asked to evaluate the same information twice, they frequently give different answers.

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Surprising conclusion: to maximize predictive accuracy, final decisions should be left to formulas, especially in low-validity environments such as admission to medical school

People often give too much weight to interviews. Multiple regressions—finds optimal formula for putting together

weighted combination of predictors. However, Dawes observed that the complex statistical algorithm adds little or no value. One can do just as well be selecting a set of scores that have some validity for predicting the outcome and adjusting the values to make them comparable.

Formulas that assign equal weights to all predictors are often superior, because they are not affected by accidents of sampling.

It is possible to develop useful algorithms without any prior statistical research. Simple equally weighted formulas based on existing statistics or on common sense are often very good predictors of significant outcomes.

Hostility to Algorithms Certain hostility to algorithms because humans don’t want to give up

their belief in expert judgments. Learning from Meehl

Intuition adds value but only after a disciplined collection of objective information and disciplined scoring of separate traits.

Chapter 22—Expert Intuition: When can we trust it The confidence that people have in their intuitions is not a reliable

guide to their validity. In other words, do not trust anyone—including yourself—to tell you how much you should trust their judgment

When to trust intuitions as expertise? When 1) an environment that is sufficiently regular to be predictable and 2) there is an opportunity to learn these regularities through prolonged practice.

When both these conditions are satisfied, intuitions are likely to be skilled. Chess for example.

It is wrong to blame anyone for failing to forecast accurately in an unpredictable world. However, it seems fair to blame professionals for believing they can succeed in an impossible task. Claims for correct intuitions in an unpredictable situation are self-delusional at best, sometimes worse. P. 24

Expertise is not a single skill but a collection and the same expert may be highly expert in some tasks while remaining a novice in others

Experts may not know the limits of their expertise. Short-term anticipation and long-term forecasting are different tasks.

When to trust expert? When the environment is sufficiently regular and if the judge has had a chance to learn its regularities, the associative machinery will recognize situations and generate quick and accurate predictions and decisions. You can trust someone’s intuitions if these conditions are met.

Associative memory also generates subjectively compelling intuitions that are false. In less regular environment S1 is often able to produce quick answers to difficult questions by substitution, creating coherence where there is none.

Chapter 23—The Outside View

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Planning Fallacy—overly optimistic forecasts of the outcome of projects are everywhere. People have a tendency to ignore data that does not coincide with their beliefs. The project initially has more energy and people often do the easiest part first and don’t take into consideration life’s interruptions that provide time delays.

Planners should make every effort to frame forecasting problem to facilitate utilizing all the distributional information of similar projects that is available.

Because of this unrealistic optimistic view that most people take, people pursue initiatives that are unlikely to come in on budget or on time or to deliver the expected returns—or even to be completed because they are overly optimistic about the odds they face. P. 252

Chapter 24—Engine of Capitalism Planning fallacy is only one of the manifestations of a pervasive

optimistic bias. Optimism is normal but some fortunate people are more optimistic than the rest of us. p. 255

Optimistic individuals play a disproportionate role in shaping our lives. They are inventors, entrepreneurs, etc. and risk takers

Optimistic people often spur organizations to take risks but they underestimate the odds they face, and do invest sufficient effort to find out what the odds are. They misread the risks

One of benefits of optimism is it encourages persistence in face of obstacles.

Organizations that take the word of overconfident experts can expect costly consequences. The study of CFOs showed that that those who were most confident and optimistic about the S & P index were also overconfident and optimistic about the prospects of their own firm and went on to take more risk than others. Other professionals must deal with the fact that an expert worthy of the name is expected to display high confidence. P. 262

Confidence is valued over uncertainty. Extreme uncertainty is paralyzing under dangerous circumstances, and the admission that one is merely guessing is especially unacceptable when the stakes are high.

The main benefit of optimism is resilience in the face of setbacks. As a team converges on a decision—and especially when the leader

tips her hand—public doubts about the wisdom of the planned move are gradually suppressed and eventually come to be treated as evidence of flawed loyalty to the team and its leaders.pl. 264

The suppression of doubt contributes to overconfidence in a group where only supporters of the decision have a voice.

Part 4-ChoicesChapter 25-Bernoulli’s Errors

Prior to Bernoulli, mathematicians had assumed that gambles are assessed by their expected value: a weighted average of the possible outcomes, where each outcome is weighted by its probability. Most people dislike risk and if they are offered a choice between a gamble and an amount equal to its expected value they will pick the sure thing. In fact a risk-averse decision maker will choose a sure thing that

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is less than expected value, in effect paying a premium to avoid the uncertainty. P. 273

However, his theory is seriously flawed. Bernoulli’s theory assumes that the utility of wealth is what makes people more or less happy. However, the happiness that one may experience is determined by the recent change in their wealth.

Why did the theory stay in place so long? Because people give the theory the benefit of the doubt, trusting the community of experts who have accepted it. Also disbelieving is hard work and S2 is easily tired. P 277

Chapter 26 Prospect Theory 3 factors in prospect theory: 1) evaluation is relative to a neutral

reference point (judged by deviation from this point), 2) principle of diminishing sensitivity applies to both sensory dimensions and the evaluation of changes of wealth. (Turning on a dim light in dark room more startling than turning on same light in brightly lit room), 3) loss aversion when directly compared or weighted against each other, losses loom larger than gains. P. 282

Chapter 27—Endowment Effect In the past there have been errors in thinking that your value for the

current state of affairs is that only the current state, not history, matters. However, people value money, time, etc based on their current access to money and time. Correcting the mistake of ignoring personal history has been one of the achievements of behavioral economics.

Endowment effect—the response to a loss is stronger than the response to a corresponding gain.

However, for the poor their choices are between losses. Money that is spent on one good is the loss of another good that could have been purchased instead. For the poor, costs are losses. P. 298

Chapter 28—Bad Events Concept of loss aversion is certainly most significant contribution of

psychology to behavioral economics. P. 300 Brain processes angry faces quicker than happy ones—brains of

human and other animals contain a mechanism that is designed to give priority to bad news. P. 301

Even emotionally charged words attract attention faster than do happy words

Bad impressions and bad stereotypes are quicker to form and more resistant to disconfirmation that good ones. P.302

Long-term success of a relationship depends far more on avoiding the negative than on seeking the positive. Gottman estimated that a stable relationship requires that good interactions outnumber bad interactions by at least 5 to 1. P. 302

The desire to avoid losses shows up in negotiations and renegotiations of contracts—the existing terms are reference points and a proposed change is inevitably viewed as a concession that one side makes to the other. Loss aversion creates an asymmetry that makes agreements difficult to reach.

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Negotiations over a shrinking pie are especially difficult, because they require an allocation of losses. People tend to be much more easygoing when they bargain over an expanding pie. P. 304

In reorganization and restructuring, for the affected parties, potential losers will be more active and determined than potential winners [school boundary changes e.g. note mine]

Chapter 29—Fourfold Pattern The decision weights that people assign to outcomes are not identical

to the probabilities of these outcomes, contrary to what can be expected. Improbably outcomes are overweighted—this is the possibility effect e.g. chances of winning the lottery p. 312

People attach values to gains and losses rather than to wealth and the decision weights that they assign to outcomes are different from probabilities. P. 316—called fourfold pattern

Many unfortunate human situations are were people face very bad option, take desperate gambles, accepting a high probability of making this worse in exchange for a small hope of avoiding a large loss. Risk taking of this kind often turns manageable failures into disasters. This is where businesses that are losing ground to a superior technology waste their remaining assets in futile attempts to catch up. P. 319

Consistent overweighting of improbably outcomes—a feature of intuitive decision making—eventually leads to inferior outcomes. P 321.

Chapter 30—Rare Events Psychology of terrorism similar to high-prize lotteries. Highly unlikely

events are either ignored or overweighted p. 323 because of focused attention, confirmation bias, and cognitive ease. Part of the cause of underweighting of rare events is because few people have actually experienced that event, e.g. Californians experiencing earthquakes. P. 331

Chapter 31—Risk Policies Risk policies are broad frames to issues. An organization that could

eliminate both excessive optimism and excessive loss aversion should do so but very difficult to do.

Chapter 32—Keeping Score Except for the very poor, for whom income coincides with survival, the

main motivators of money-seeking are not necessarily economic. We use mental accounts to keep score on money. We may put money

in several accounts and then keep tabs on it. We may put money in a savings account and keep a credit card balance which has a higher interest rate.

People avoid cancelling a floundering project even when one should because it leaves a permanent stain on the executive’s record and his personal interests are perhaps best served by gambling further in hope of recouping original investment or at least in an attempt to postpone the day of reckoning. [Failure to redo NCLB note mine]

This inability to “pull the plug’ keeps people for too long in poor jobs, unhappy marriages, and unpromising research projects. P. 346

Regret

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Fear of regret is a factor in many of the decisions that people make. P346 Regret is one of the counterfactual emotions that are triggered by the availability of alternatives to reality.

Regret and blame are both evoked by a comparison to a norm but the relevant norms are different.

Consumers who are reminded that they may feel regret as a result of their choices show an increased preference for conventional options, favoring brand names over generics. P. 348

Responsibility Losses are weighted about twice as much as gains in several contexts:

choice between gambles, the endowment effect, and reactions to price changes.

Dilemma between intensely loss-averse moral attitudes and efficient risk management does not have simple and compelling solution. P 351

You can take steps to inoculate yourself against regret—most useful is to be explicit about anticipation of regret. If you can remember when things go badly that you considered the possibility of regret carefully before deciding, you are likely to experience less of it. Regret and hindsight bias will come together so anything you can do to preclude hindsight is likely to be helpful. P, 351

Chapter 33—ReversalsUnjust Reversals

There is good reason to believe that the administration of justice is infected by predictable incoherence in several domains. Context can alter opinions drastically

Difficult to see unless results are compared across types of cases.Chapter 34—Frames and Reality

In 2006 World Cup Italy played France. Italy won. France lost. The meaning of those two sentences depends on your associative machinery and may mean different things.

Emotionally loaded words cause either approach (if positive) or avoidance (if framed as a loss

Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative. P 368

Good Frames Not all frames are equal—the frame of miles per gallon provides very

poor guidance to decisions of both individuals and policy makers. P. 371

Organ donation another example—Some countries have opt-out, not opt-in, policy like US. Austria is opt-out and has 100% donor rate. Denmark has opt-in and has 4% donor rate.

Part 5—Two SelvesChapter 35—Two Selves

Difference between the experience and the memory of the experience. Remembering pain is an example. The experiencing self does not have a voice. The remembering self is sometimes wrong, but it is the one that keeps score and governs what we learn from living, and it is the one that makes decisions. P. 381

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What we learn from the past is to maximize the qualities of our future memories, not necessarily of our future experience.

We have strong preferences about the duration of our experiences of pain and pleasure. We want pain to be brief and pleasure to last but our memory has evolved to represent the most intense moment of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end. P. 385

Chapter 36-Life as a Story How long a story lasts (duration neglect) normal and the ending often

defines its character. The same is true in the rules of narratives and in the memories of colonoscopies, vacations, and films. This is how the remembering self works: it composes stories and keeps them for future reference. P. 386

What matters is how the person feels at the end of the experienceChapter 37—Experienced Well-Being

The experience of a moment or an episode is not easily represented by a single happiness value p. 393

It appears that a small fraction of the population does most of the suffering.

An individual’s mood at any moment depends on her temperament and overall happiness, but emotional well-being also fluctuates considerably over the day and the week. The mood of the moment depends primarily on the current situation. At work what is important are situational factors such as opportunity to socialize, exposure to loud noise, time pressure. Attention is key. Our emotional state is largely determined by what we attend to, and we are normally focused on our current activity and immediate environment. P. 394

Pleasure is increased when people switch time from passive leisure, such as TV, to more active forms, such as socializing and exercise.

Some aspects of life have more effect on the evaluation of one’s life than on the experience of living. Educational attainment is an example—experience greater well-being.

The more educated tend to report higher stress. Ill health has much stronger adverse effect on experiences= well-being

than on life evaluation. Living with children –report stress and anger are common among

parents Religious participation has relatively greater favorable impact on both

positive affect and stress reduction than on life evaluation. However religion provides no reduction of feelings of depression or worry. p. 396

Severe poverty amplifies experience effects of other misfortunes. Illness worse for very poor.

Chapter 38—Thinking about life Experienced well-being on average unaffected by marriage, not

because marriage makes no difference to happiness but because it changes some aspects of life for the better and others for the worse.

The goals that people set for themselves are so important to what they do and how they feel about it that an exclusive focus on experienced well-being is not tenable.

Conclusions

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What is remembered and what actually happens is important when talking about people’s happiness. This must be considered when making policy decisions.

People are not entirely rational or irrational. The theory that rational people should be free to choose is part of the libertarian approach to public policy

Behavioral economists believe that freedom has a cost borne by individuals who make bad choices and by a society that feels obligated to help them. The economists of the Chicago school, however, believe that rational agents do not make mistakes. P. 412

There is further discussion of different economic theories and the effect on public policy.

There is also further summary of S1 and S2, particularly discussing judgment errors and how to avoid them.

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