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If the brain were so simple we could understand it, we would be so simple we couldn't.
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Daniel Kahneman is a very well known researcher in the field of cognitive science. Together with his research collaborator, Amos Tversky, they were pioneers in the field. Their seminal research started in the 1970s. Kahneman ended up winning a Nobel Prize in Economy, even if he is a psychologist, because his research demonstrated that we do not really think like that creature of the economists' imagination, Homo economicus, is supposed to act.  The results of their research is known in professional circles as prospect theory. Prospect theory is based on the observation that human beings have perceptual weaknesses or biases built into our cognitive structure. According to Kahneman, decision making can be intuitive (system 1) or reasoned (system 2). The degree of interaction between the two can result in changes to the way we make judgements and decisions. Many of you know of Khaneman and Tversky's research through their experiments on risk or loss aversion, framing of questions, and how that influences our decisions (we fear loses more than we love gains). Kahneman has finally written a book (which I put on my reading list), "Thinking, fast and slow" which I'm sure will be fascinating. The Guardian published an excerpt from his book, and that little excerpt alone contains amazing information:

 

Daniel Kahneman: How cognitive illusions blind us to reason

Why do Wall Street traders have such faith in their powers of prediction, when their success is largely down to chance? Daniel Kahneman explains how cognitive illusions skew our thinking

  • The Observer, Saturday 29 October 2011

  • Otto Dettmer
    Illustration by Otto Dettmer. Photograph: Otto Dettmer for the Observer

    Many decades ago, I spent what seemed like a great deal of time under a scorching sun, watching groups of sweaty soldiers as they solved a problem. I was doing my national service in the Israeli army at the time. I had completed an undergraduate degree in psychology, and was assigned to the army's psychology branch, where one of my duties was to help evaluate candidates for officer training. We used methods that had been developed by the British army in the second world war.

    One test, called the "leaderless group challenge", was conducted on an obstacle field. Eight candidates, strangers to one another, were instructed to lift a long log from the ground and carry it to a wall about six feet high. The entire group had to get to the other side of the wall without the log touching either the ground or the wall, and without anyone touching the wall. If any of these things happened, they had to declare it and start again.

    There was more than one way to solve the problem. A common solution was for the team to send several men to the other side by crawling over the log as it was held at an angle, like a giant fishing rod, by other members of the group. Or else some soldiers would climb on to someone's shoulders and jump across. The last man would then have to jump up at the pole, held up at an angle by the rest of the group, shin his way along its length as the others kept him and the pole suspended in the air, and leap safely to the other side. Failure was common at this point, which required them to start all over again.

    As a colleague and I monitored the exercise, we made a note of who took charge, who tried to lead but was rebuffed, how cooperative each soldier was in contributing to the group effort. We saw who seemed to be stubborn, submissive, arrogant, patient, hot-tempered, persistent, or a quitter.

    We sometimes saw competitive spite when someone whose idea had been rejected by the group no longer worked very hard. And we saw reactions to crisis: who berated a comrade whose mistake had caused the whole group to fail, who stepped forward to lead when the exhausted team had to start over. Under the stress of the event, we felt, each man's true nature revealed itself.

    After watching the candidates make several attempts, we had to summarise our impressions of soldiers' leadership abilities and determine, with a score, who should be eligible for officer training. The task was not difficult, because we felt we had already seen each soldier's leadership skills.

    Some of the men had looked like strong leaders, others had seemed like wimps or arrogant fools, others mediocre but not hopeless. Quite a few looked so weak that we ruled them out as candidates for officer rank. When our multiple observations of each candidate converged on a coherent story, we were confident in our evaluations and felt that what we had seen pointed to the future. The soldier who took over when the group was in trouble and led the team over the wall was a leader at that moment. The obvious best guess about how he would do in training, or in combat, was that he would be as effective then as he had been at the wall. Any other prediction seemed inconsistent with the evidence before our eyes.

    Because our impressions of how well each soldier had performed were generally coherent and clear, our formal predictions were just as definite. We rarely experienced doubts or formed conflicting impressions. We were quite willing to declare: "This one will never make it," "That fellow is mediocre, but he should do OK," or "He will be a star." We felt no need to question our forecasts, moderate them, or equivocate. If challenged, however, we were prepared to admit: "But of course anything could happen."

    We were willing to make that admission because, despite our definite impressions about individual candidates, we knew with certainty that our forecasts were largely useless. The evidence was overwhelming. Every few months we had a feedback session in which we learned how the cadets were doing at the officer training school and could compare our assessments against the opinions of commanders who had been monitoring them for some time. The story was always the same: our ability to predict performance at the school was negligible. Our forecasts were not much better than blind guesses.

     

    Read the rest here.

Tags: bias, cognition, decision, psychology, reason, thought

Views: 220

Replies to This Discussion

Looking back, the most striking part of the story is that our knowledge of the general rule that we could not predict had no effect on our confidence in individual cases.

Lack of self-confidence is to be avoided at all costs it seems. It makes evolutionary sense (and that's what I felt I had to teach my kids). But as it's a feeling and not a judgement it is subject to its own bias.

 
Interesting that the stock market would be based on the ignorance of the correct price of a commodity. They either think it's too low and they want to buy or they think it's too high and they want to sell. And it turns out that most of them are wrong most of the time. And these guys are the ones with very high income, yet they are no better than dice throwers.

However, it is clear that for the large majority of individual investors, taking a shower and doing nothing would have been a better policy than implementing the ideas that came to their minds.

No wonder the system is so fucked-up.

I have come to a realization that putting money in the stock market is more or less like gambling.

 

Yes, we all have an aversion to lack of self-confidence. I also think that Kahneman and hos colleagues also could not face telling the army "we have no freaking clue what we are talking about".  Even in science, where we know that we don't know A LOT of stuff, when people are asked a question after a scientific talk, etc., for which the simplest answer is clearly "we don't have the faintest idea at the moment", most people tend to answer sideways, saying that yes, we don't know but we think that perhaps it could be blah, blah, blah.

 

A little personal story about self-confidence: when I was in college, I took a vertebrate zoology course, and as part of the final exam, we had to completely describe the systematic classification of a random vertebrate the professor picked out for us. I had studied a lot, I was (still am), the studious type. And the professor, a very wise, knowledgeable, calm man in his seventies, picks out this fish for me. Fish were my nemesis, because the classification is the hardest. I had no idea what that specific fish was, I only knew the Class and Subclass, not the Order, etc. So I looked at the professor, he appeared absent minded. So I decided to recite the perfect classification and description of a fish that wasn't the one in front of me, in case he wasn't paying too much attention. He let me go through with it, then when I was done, he dismissed. At the end of the day, after all the students had taken the oral test, he posted the grades. I had aced it! The professor was not paying attention, after all! But before we left, he called me aside in the corridor. In his usual calm manner, he told me: "Adriana, do not think I didn't noticed you were describing a different fish. But it was obvious you had studied very hard for this test, and I'm a believer that sometimes, such amazing self-confidence needs to be rewarded, so I gave you an A. Don't let me catch you doing that again, though."

Great teacher, great lesson!

Yes, he was an amazing teacher! I will never forget the lesson he taught me!

Ha! That's a great story.

That was great. I'll definitely pass that along.

 

Also, I want to take this opportunity to point to my book review: On Being Certain: Believing You Are Right Even When You're Not

"they appear ignorant of their ignorance"  well, it seems an ultimate form of arrogance to me...

Just ran across a radio interview with the author (haven't listened yet though):

 

Thinking, Fast and Slow

 

What is known about how the human mind really works? We’ll talk this hour with Daniel Kahneman, one of the only non-economists to win a Nobel Prize in Economics. Currently the Professor of Psychology and Public Affairs Emeritus at the Woodrow Wilson School and the Eugene Higgins Professor of Psychology Emeritus at Princeton University, Kahneman has distilled decades of observations and research into his new book “Thinking, Fast and Slow” (Farrar, Straus and Giroux, 2011).

Thanks! Will listen.

Sam Harris conducts a short interview with Daniel Kahneman.

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