Posted on : March 13, 2017
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Category : Career

According to Daniel Kahneman (Nobel Prize Recipient), frequently we make poor decisions without even realizing it.

  1. A key concept is the characterization of two methods of thinking. All people employ both methods, which Kahneman names ‘system 1′ and ‘system 2′. System 1 is automatic – it determines if someone is happy when you look at them, it judges distance, and it forms first-impressions. System 2 is slow and deliberate – it comes into play when someone asks you: ‘what is 17 x 58′. The key point of the opening section is to highlight that often we think we are using system 2, when in fact we are using system 1.
  2. People have a tendency to ‘substitute’ easier questions when asked difficult questions. This is an unconscious reversion to system 1, when the question really demands system 2′s detail. For example, when asked ‘are you happy?’ people will often answer the question ‘how did the past few days make you feel’ rather than the much more profound and difficult question. This is done automatically.
  3. Heuristics and Biases: We are natural pattern seekers.
  4. People have a huge tendency to make inferences from data that is too small. A sufficiently large sample size is critical.
  5. The availability of information (typically through the media), distorts the decisions people make.
  6. But even compelling causal statistics will not change long-held beliefs or beliefs rooted in personal experience. On the other hand, 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 story.
  7. Overconfidence: Outcome bias results in poor evaluations of judgments (stupid decision can still work out well due to factors beyond one’s control). The world is very uncertain. This is a massively under-appreciated fact. “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