Bits of Books - Books by Title
Thinking, Fast and Slow
Daniel Kahneman
Very good Vanity Fair review here
and London Times review here
More books on Mind
Found that he, and others, had identical silly idea about the future professions of several toddlers they knew. They cd see the argumentative 3 yo lawyer, the nerdy professor, the empathetic psychiatrist. Absurd but appealing. Intuitions governed by the resemblance of each child to the cultural stereotype of the profession.
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Try Q: "Steve is very shy and withdrawn. Always helpful but little interest in other people. Meek and tidy soul, he likes order and has a passion for detail. Is he more likely to be a farmer or a librarian?" Fits conventional idea of male librarian but statistically far more farmers than libs, so much more likely that he is a farmer.
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We mythologise expert's intuition - the firefighter who pulled his team out of the burning house just before the floor caved in; the chess grandmaster who can reconstruct games after a short glance. But we forget our own ability to detect anger in the first word of a telephone call, or recognize that we are the topic of conversation when we walk into room.
Therapy teacher's bit of wisdom: "You will from time to time meet a patient who shares a disturbing tale of multiple mistakes in his previous treatment. He has been seen by several clinicians, and all failed him. The patient can lucidly describe how his therapists misunderstood him, but he has quickly perceived that you are different. You share the same feeling, are convinced that you understand him, and will be able to help." At this point the teacher raised his voice and said, "Do not even think of taking this patient. Throw him out! He is almost certainly a psychopath and you will be unable to help him."
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Expt using pupil dilation to measure how much brain working while engaged in a task - the harder the task, the more dilate, until task accomplished or given up on. Add-1 where hold 4 digit number in memory then add 1 to each digit. Add-3 much harder.While people engaged in hard mental task, they become temporarily blind, as in Invisible Gorilla expt.
System 1 the automatic controller, System 2 the thinker. System 1 takes over in emergencies and assigns total priority to self-protective actions.
Both self-control and cognitive effort are forms of mental work. People who are simultaneously challenged by a demanding cognitive task and by a temptation are more likely to yield to the temptation. System 1 has more influence on behaviour when System 2 is busy (say remembering a 7 digit number), and System 1 has a sweet tooth. Self control of thoughts and behaviour is run by System 2. It requires attention and effort.
Ego depletion: self control is tiring. If you have to force yourself to do something, you are less willing or able to exert self-control when the next challenge comes along. A long and varied list of situations which deplete self-control: avoiding thought of a white bear, making a series of choices involving conflict, trying to impress others, responding kindly to a partner's bad behaviour, interacting with someone from a different culture or age group. After exerting self-control in one one task, you don't feel like doing it in another.
When people believe a conclusion is true, they are more likely to believe arguments that appear to support it, even though the arguments are unsound.
Priming: classic study John Bargh at NYU gave students sentences to unscramble. Half had words about old age. Those students walked down hallway slower than ones who'd had neutral sentences. Two stage - the words prime thoughts of old age, though that is never directly mentioned, and then the idea primes a behaviour, all happening without any conscious thought.
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And it works in reverse - students asked to walk around room at 30 paces per minute (about one-third their normal speed) were much quicker to recognize words related to old age.
Students told they were testing new audio headphones: one group had to move their heads up and down, the other from side to side, while they listened to a message. Those who'd nodded were far readier to accept truth of the message than those who'd shaken their heads.
Reminders of money have particularly strong effects. Money-primed people become more independent, they try longer to solve a difficult problem, they become more selfish and less willing to help another.
Force people to sin (tell a lie) produces 'Lady Macbeth Effect': want soap or disinfectant. People who'd lied on the phone preferred mouthwash, those who'd lied by email or fax preferred soap.
Author says "When I describe priming studies to audiences, the reaction is often disbelief .... System 2 believes it is in charge and it knows the reasons for its choices." But you don't have the option of disbelief - these studies are real and statistically valid. You have to accept that you would behave in the same way.
Truthiness: A reliable way to make people believe a lie is frequent repetition, because we have trouble distinguishing familiarity from truth. You don't even have to repeat the whole statement. Repeatedly showing "the body temperature of a chicken" made you more likely to accept the statement "the body temperature of a chicken is 44 degrees". The familiarity of one part of the phrase made the whole phrase seem familiar, and thus true.
Credibility: do anything you can to reduce cognitive load. So simple language, good quality paper, use dark blue or red for bits you really want believed. And to make it memorable, use short verse where possible. Woes unite foes. Little strokes tumble great oaks. And any quotes need to be from easily-pronounced sources. None of this will overcome obvious falsehoods, but as long as System 1 is running the show, judging by what feels right, then System 2 doesn't get activated, and rational evaluation is avoided.
System 1 excels at building a coherent story. The amount or quality of data on which the story is based is irrelevant. When info is scarce, as it usually is, System 1 is great at jumping to conclusions. If asked "Will X be a good leader. He is smart and strong ... " you quickly decide 'Yes', but what if the next two adjectives were "corrupt and cruel". Take note of what you did not do: You did not start by thinking "What sort of info do I need to form an opinion about someone's leadership qualities." System 1 got to work on its own and delivered a satisfying story from just the first two adjectives. WYSIATI: What You See Is All There Is.
System 1 doesn't entertain doubts. It suppresses ambiguity and values coherent stories. System 2 can maintain doubt, but takes more cognitive effort; it's easier to slide into certainty.
Judging Happiness: German study where asked students these 2 questions:
How happy are you?
How many dates did you have last month?
There was no correlation between the two - they didn't take 'dates' into account when thinking about happiness.
But when asked another group same questions, but reverse order:
How many dates did you have last month?
How happy are you?
The results were completely different. The students who'd had dates were reminded of something that made them happier; and vice versa. Figuring out "Am I happy?" requires quite a bit of mental work. It's (cognitively) a lot easier to substitute a related question for which they had a ready answer.
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If price is only thing to be settled between buyer and seller, there is a first-mover advantage ie the first price mentioned anchors rest of the debate. Author's advice - if other side has made an outrageous first offer, don't try and counter by making an outrageous offer in return, because that just sets up an unbridgeable gap. Instead, storm out or make a scene - somehow make it clear that you will not continue negotiating with that number on the table. Other suggestion was to activate System 2 by coming up arguments against the anchor.
More books on Business
Ask partners in a marriage, "in percentage terms, how much was your contribution to ... (cooking/cleaning/etc)". As expected, the percentages combined added up to more than a hundred. Because simple availability bias - each person remembers their contribution more clearly than the other's.
In his book The Black Swan Nassim Taleb introduced the idea of narrative fallacy to describe how flawed stories of the past shape our view of the world and our expectations of the future. The explanatory stories that people find compelling are simple, they are concrete rather than abstract, they assign a larger role than they should to talent and intent rather than luck, and they focus on a few striking events that did happen rather than the thousands of events which failed to happen.
Halo effect - if we see a sportsman as handsome and athletic, we are more likely to see him as a good player as well. And reverse applies - an ugly player is likely to be underrated.
More books on Sport
Luck not Skill #1: Books like Built to Last and earlier In Search of Excellence were studies of "successful" companies. Authors of each book (and many others like them) analysed companies and decided which qualities made them successful. Built to Last for example, looked at eighteen pairs of companies and decided that the reason one of each pair was better was due to great CEO's or great planning etc. But problem was that the difference between each pair shrank to almost nothing after the book published. Same thing happened to the companies lauded in In Search of Excellence. Fortune magazine went back after 20 years and found the 'best' companies dropped sharply almost straight after book came out, and the firms with the worst ratings went on to earn much higher stock returns than the most admired ones.
Luck not Skill #2: study by Terry Odean, a finance prof at Berkeley of 160,000 trades over 7 year period. Tracked the stocks they sold and ones they bought. The ones they sold did 3.2% better than ones they bought (and of course didn't incur transaction costs). On average, the most active traders did worse, the least active earned highest returns. Women acted on their useless ideas far less than men, so they did much better than men. Few beat the market year after year. But of course, when he delivered the lecture explaining all this, he was ignored. Wall Street has too much tied up in the mystique of 'expert traders' to give in to mere statistics.
More books on Money
Difficult to explain much about the 20th Century without mentioning Hitler, Stalin or Mao. Yet each of those men were the result of extreme chance in terms of parents meeting, conception, surviving childhood etc. In other words, someone in 1900 trying to predict the coming century would have no way to take those chance events into account. Yet we listen to forecasters all the time who try to do just that. Philip Tetlock asked Expert Political Judgement. How Good Is It? and found that the correct answer was "no good at all." He interviewed 284 people who made a living forecasting events and gathered more than 80,000 predictions about future political events. The results were devastating. Monkeys throwing darts would have done better. And even more of a problem, the experts were more certain of their (erroneous) judgements in areas where they were supposed to know most. Too many hedgehogs. Strongly resisted idea that they were wrong - excuses like "nearly right" "just had timing wrong" or "would have happened if ...".
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Statistics are better than intuition: Paul Meehl compared subjective diagnoses by clinicians in a wide range of fields - counselors predicting uni grades of freshmen, parole violations, pilot training and criminal recidivism. And in health, longevity of cancer patients, length of hospital stays, cardiac diagnosis and susceptibility to sudden infant death syndrome. In every one of the studies found that a few significant statistical algorithms did better than humans. And of course the equations are a lot cheaper to administer than human.
Clinicians strongly resist idea that numbers better than them. Believe that they have additional info about each patient which justifies them over-ruling, but in fact the added complexity doesn't improve the diagnosis.
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Making the formulae more complex doesn't improve. Marital stability is well predicted by the formula
frequency of sex minus frequency of quarrels
(You need to keep the number positive)
More books on Marriage
Excessive optimism: How do new restaurant owners rate prospects for success? They all take the 'inside view' ("I cannot fail" or "mine is different") rather than the 'outside view' (60% of new restaurants fail in first 3 years). A Canadian organization (the Inventor's Assistance Program) gives inventors an objective assessment of commercial prospects of their idea. Ratings on 37 criteria such as need for product, cost of production and estimated demand, then summarize with an A to E grade (D and E meaning 'probably will fail'). Turned out to be very accurate - only 5 of 411 products graded D or E made it to commercialization, and none were successful.
More books on Inventions
But even after discouraging news, nearly half the inventors continued development. Overall average, these persistent/obstinate individuals doubled their losses before giving up.
CEO's often take big risks - acquire another company in fond belief that they can manage it better than other guy can. Stock market generally downgrades value because know from experience that efforts to integrate fail far more often than they succeed. Similar effect when a CEO starts getting prestigious awards or makes it on cover of business magazines. CEO wants more pay, he takes more risks to make more headlines, and he takes time away from real business to speak at conferences or to join boards of other companies.
More books on Fame
Over-confidence rife in medicine. Postmortems showed clinicians who were 'completely confident' of their diagnoses were wrong 40% of time. But largely due to clients. They want answers, not waffle. To appear unsure makes sound weak and poorly informed. Experts who acknowledge extent of their ignorance can expect to be replaced by more confident competitors who are better able to gain the trust of their clients. These clinicians don't take higher risks in other circumstances, so it's not that they are more careless. They are simply less aware of the risks than more timid people are.
Premortem: one of few ways excessive optimism can be tamed. Just before an organization has committed to an important decision, all relevant 'experts' meet to address this: "Imagine that we are a year into the future. We have implemented the plan as it now exists. The outcome was a disaster. Please take 10 minutes to write up a brief history of that disaster." This lets doubts come to the surface, whereas usually groupthink takes over, and any negatives are suppressed.
Endowment effect: wine lover would buy wine at auction up to $35, but refused to sell wine from his collection, even for $100 (this was in 1975). What's happening is two different mental states. If he owns it, he considers the pain of giving up the wine. If he doesn't own it, he thinks of the pleasure of having it. Because of our aversion to loss, the pain of giving it up is greater than the pleasure of acquiring. Distinguish between goods you hold "for use" (like wine and concert tickets) which you are reluctant to sell, and goods "for exchange" (such as cash or shop stock) which you are temporarily holding to exchange for something else you value (a pair of shoes for the individual or money for the shopkeeper).
Bad is Stronger Than Good: The negative trumps the positive in many ways. A single cockroach destroys the appeal of a bowl of cherries, but a single cherry does nothing to a bowl of cockroaches.We are more motivated to avoid bad self-definitions than to pursue good ones. John Gottman's Love Lab expt where 1 criticism outweighed 10 compliments.
Golfers putt better (by 3.6%) when they are trying to save par than when trying for a birdie. Analysed over 2.5 million putts, including those of Tiger Woods. Showed that even for him, if he'd holed birdies at same rate he saved par, he'd have earned an extra million dollars that season.
Labor negotiations: a zero sum game - everything I concede to you is a loss to me, and I value losses more than you value gains. That of course encourages theatrical pretence to value something very highly even though you always plan to give it away as a bargaining chip, in exchange for some equally painful concession from the other side.
Attitude to Fairness: shop sells umbrellas for $12, but when raining increases price to $15. Rated as unfair as it is lifting prices because it can, rather than because it had to. Shop paying worker who has worked there 6 months $15 an hour. Then there's a recession, and other nearby shops can get good workers for $13 an hour. Can the shop owner reduce guy's wages to $13? 80% see that as unfair. But if guy leaves, and owner hires new guy for $13 an hour, 80% see that as ok. Later research has shown that 'fairness' has an economic value - employers who break 'rules' get punished with lower productivity, and 'unfair' pricing loses sales.
One less expected outcome occurred when shop lowered prices - those who'd bought at higher price perceived an (unfair) loss and reduced purchases from that shop.
Investors notorious for selling a profitable stock and hanging on to a losing one. But instinct can be tamed. Tell them to 'think like a trader'and accept losses as a cost of doing business, and your shares as part of a parcel. Also don't check your investments - typical short-term reaction to bad news is increased loss aversion.
Keeping score: except for people on breadline, money is about keeping score. It's a proxy for points on a scale of self-worth, all in our heads. So, we refuse to cut losses when doing so would admit failure, and we are biased against actions that could lead to regret.
Sunk Cost Fallacy: a company has already put $10 mill into a project. It is now behind schedule and projected returns are less favorable than when began. You need to stick in another $10m to get the project completed. But the company has the chance to invest that $10m in another project which seems to have better numbers. What does the company do? If company cancels original project the failure will be a permanent blot on the responsible exec's record. But if he tips in the other $10m, the project might succeed, and anyway, the day of reckoning will have been postponed. This is when the Board replaces the CEO - they know the next guy won't necessarily be any better, but he will be more dispassionate about pulling the plug.
Framing: 2 car owners trade in their cars for thriftier models. A goes from a 12mpg car to a 14mpg car. B goes from a 30mpg car to a 40mpg one. If they both drive a similar distance in a year, who will save more? Instinctively we choose B. But in fact if they both do 10,000 miles, A will go from 833 gallons to 714, saving 119 gallons, whereas B will go from 333 gallons to 250, saving only 83 gallons. So it's not miles-per-gallon that should be worrying about, but gallons-per-mile.
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London Times article on investment implications here
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