Kahneman - Judgement, heuristics, biases and action
At a relaxed dinner few months back, with some of the smartest people I know, the conversation drifted from what makes good customer experience, a practical question, to a very theoretical topic of what we experience versus what we remember. I generally listen more with this group to pick up as many nuggets of wisdom as I can, but this conversation hit me like my favorite song just played and I had to jump on the dance floor. I started talking about one of my favorite authors Dr. Daniel Kahneman and his work. Gave examples from his work with patient experience when it comes to colonoscopies (yes, not a good topic to bring up during dinner but it made the point).
Dr. Kahneman, a psychologist, won a Nobel Prize in economics for Prospect Theory which he worked with Amos Tversky focusing on the basic principles of risk aversion. This spawned a whole new branch in economics combined with psychology called behavioral economics or behavioral finance
I recommend Kahneman’s book, Thinking Fast and Slow, to anyone who still reads long non-fiction books. The recommendation comes with a warning, that it is nearly 500 pages long with couple of interesting appendices, dryly as educational material and not entertainment. (That itself is a dichotomy since he knows about what we remember and what we don't, more than other authors.).
Later on, I was reflecting on why this book is one of my all time go-to books. That motivated me to start writing here after a long hiatus. It is not a summary of the book which you can easily find via a Google search, both on youtube and several other sites (this one on medium is really good and along with this article from Scientific American). It is about what this book made me reflect on, renew and review some of my own assumptions, biases and what dots it helped me connect. I will also link to interesting talks, podcasts, videos, articles, papers or quotes that helped me with understanding these concepts better and how they are applied in various scenarios.
I came across Tversky and Kahneman’s work first while reading Fooled by Randomness by Nassim Nicholas Taleb but not till I read Blink by Malcolm Gladwell that I got really interested in their work along with the work of Gary Klein. I believe, the popularity of Blink expedited Kahneman to publish his own, Thinking Fast and Slow.
Michael Lewis, (Author of Liar’s Poker , Moneyball and several great books, another one of my favorite authors) wrote a detailed book on the background of Tversky and Kahneman, their relationship and their work, called The Undoing Project.
Now you cannot pick any book on decision making that does not refer to that great collaboration. I have listed several of these books in later section.
Introduction
This book, as the title says, is about how we think - sometimes fast, instantaneous and reactive and sometimes slow, deliberate, and methodical. Which in turn is about how our mind works. How it helps us sometimes and distracts and plays games on us at other times.
It is about how we behave, make judgements and react to different situations. It is about how we experience things and how we remember them (where this conversation started). How we decide or choose one option over another. Whether we choose based on rational choices or rationalize each of our choices in support of the decision already made. The book is about how we rationalize past with stories. In part, this is about what makes us human.
Intelligence
I am not sure if this is one of the most popular quotes but it is the one that I highlighted, the first time I read this book and kept going back to it to make sense of this book throughout. I used that same pattern in writing this post.
“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…”
I have not come across a better definition of intelligence. It is not just reasoning or pure intellect but being about to recollect from memory (or from Google) and able to discern what is relevant or irrelevant, fact or fiction, and deploy attention or take appropriate action.
We learn so many things in school and on the job, how often do we apply it when needed at the right time and place? The knowledge and doing gap has been a subject of several management classes and books.
This definition also covers intelligence in every sphere, whether it is music, sports, academics, armed forces and regular everyday activities. The ability to use what you learned in the exact time and place that is needed. Sports, music and armed forces inculcate this intelligence via regular and repeated practice. More on this topic later in the blog.
Memory & Attention
Attention, the concious or unconcious way we notice something or somebody. It is what we are currently indulged in.
Kahneman distinguishes between what we experience, our attention, versus what we remember, our memory.
“Odd as it may seem, I am my remembering self, and the experiencing self”
This distinction is very important on several fronts. What we pay attention to and what we remember forms the basis of defining happiness for most people. In the current age of constant distraction, what we pay attention and what we remember can be controlled by us or others through several ways. When we deploy attention based on those memories, our intelligence is also effected, going back to our definition of intelligence.
Memory and how we deploy attention, these two form the basis of a number of heuristics and cognitives biases we will focus on next.
Stories and Narratives
We love stories. Stories make sense of our past and envision our future. But mostly in our every day lives, one of the easiest ways our memory is enhanced is through stories. What we and others remember are bits and pieces, which can be emphasized or de-emphasized via narratives by ourselves and others.
I became very aware of this listening to stories of same incidents from different family members growing up especially for events that I had a completely different memory. Increasingly over time, people converged on collective memories more than our own based on stories. Of course, this is memorialized for us by Kurosawa in his movie, Roshomon. The film shows the subjective, narrative and self-serving perspectives of various characters who present the same incident with different stories.
Religions through out the world have used the power of stories and narratives for ages. More on how this power is used or misused in current times later in the post.
Our 2 minds — System 1 & System 2
Now that we understand a few of the key features of our mind, intelligence, memory and attention, it is time to introduce the 2 main characters from the book, System 1 and System 2.
In Indo-persian literature especially in poetry, our behaviour is motivated in 2 ways — Dil (literal meaning heart) or Dimag (literal meaning Brain). Going with your heart is similar to going with your gut feeling — instinctive, fast, driven by emotions, controlled by your heart. Going with your brain means that you have given it some thought. The conflict between dil-aur-dimag/emotion versus thoughtful action) has been the fodder for many a stories in the world.
Daniel Kahneman uses the same model, with System 1 and System 2 as the labels. The functions match closely too. System 1 is the fast, subconcious, intuition based thinking which is very efficient when trained well. It operates automatically with little or no effort or no sense of voluntary control and generates impressions, feelings and inclinations.
System 2 corresponds to the logical thinking which requires brain cycles and can be explained to another person or documented as steps. It is the internal peer review module, the one that needs convincing via data or some rationalization which keeps System 1 in check. System 2 needs concentration and attention. Distractions, lack of sleep, not being comfortable, being hungry, lack of will power all negatively effect System 2. It is lazy and goes along with System 1 when any of these break the concentration it requires.
Kahneman explains the reasons for using System 1 and System 2 very well in this lecture and why it is so easy to grasp this concept via metaphors and agents.
Decision making — Perception, Intuition & Choice
Everyday each and everyone one of us is faced with many decisions to make. If we rationally evaluate every decision with all possible options and choose the best, we will be stuck in analysis paralysis forever.
In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients.
Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it — Herbert Simons
This is where System 1 comes to the rescue by building mental shortcuts that helps us solve problems and make quick and efficient judgement calls or decisions. These mental shortcuts are also called heuristics or mental models. Heuristics were popularised by Gerd Gigerenzer, about how these short cuts help us in our everyday lives.
Mental models have become a very popular topic among new authors who are in the process of documenting all mental model of super performers to learn from them. Shane Parrish of Farnam Street and other books are linked in the more reading section.
Biases
While the mental models and shortcuts are great, it can lead to stereotypes and prejudice. System 1 jumping to fast decisions leads to cognitive biases or programmed errors into our thinking. Most of us classify and categorize people based on many factors including what we see in the media. For example, some people may get uncomfortable when someone wearing a turban and having a beard boards a flight with them.
Tversky and Kahneman laid the foundation of their work in the paper “Judgement Under Uncertainity: Heuristics and Biases” in 1970s which goes into various heuristics and related biases, and how they help or mess up our decision making capability. The list below gives 20 most commons cognitive biases that can effect our decision making. I have this framed on my desk for a few years but as Kahneman says being aware of your biases does NOT mean you will always make good decisions but at least you will have a more rational post reasoning.
Practice makes perfect
System 1 can be programmed by regular deliberate practice. This is where real expertise comes from. The simple act of learning to drive with some apprehension to the level, where we can perform another simple task while driving shows this process.
When regularly endorsed by System 2, System 1 can be mobilized when certain patterns are detected. Blink and Outliers by Malcolm Gladwell is based on this. In Blink, Gladwell uses examples of expert firemen who are able to sense trouble before it hapens.
Good and immediate feedback, is the basis of 10,000 hours of practice. It has been named muscle memory in sports and music. The last couple of years, I have been working with AI startup that helps armed forces with individualized training and most of the training happens is based on this repeated practice till the response becomes instintive.
This quote by Bruce Lee says it all. Adequate training generates intuitions and skilled responses in appropriate situations, which again goes back to the definition of intelligence.
Positioning and Branding
Branding Guru, Al Ries, the author of one of the most cited marketing books, Positioning, knew how our minds work.
A successful branding program is based on the concept of singularity. It creates in the mind of a prospect the perception that no other product in the market quite like your product — Al Ries
He used simple narrative techniques to find permanent residence of an idea for a product or service in our over-crowded mind. Make the idea ubiquitous via every media (availabity heuristic), make it social (Bandwagon, groupthink) and let it spread (choice-supportive). Several successful companies such as Apple have used his techniques for telling great stories around their brand.
The highjacking of Democracy
Democracy is sacrosant to anyone growing in the west. Fortunately or unfortunately, I grew up in India, where long term politicians or their heirs, film stars (especially those who played Hindu Gods or mythical characters) and local criminals got the popular votes regularly. As a young student, I got sucked into leading some of the biggest protests in the mid 80s. I learned about the flaws in democracy and how it is manipulated.
Few years in Washington DC attending graduate school at GWU, on my regular walks by The White House, Capitol, Lincoln and Jefferson memorial, I started seeing the system here in US. I read about the founding fathers, formation of the constitution and the wisdom in the various branches. I became a believer. That was fairly short lived before I learned about posh offices of lobbyists on K street, all the marketing consultants and constant fundraising by politicians. I saw the hearings of Clarence Thomas and Anita Hill. Then came the Clinton/Gingrich era and how divided Americans were in either support or opposition. It reminded me that democracy may be as close to perfect, but it is hackable.
During the last 25 years I saw the polical polarization in America grow. The addition of internet with news sites, blogs, positioning of candidates based on instant polls, micro-targeting and social media broke traditional gate keepers of unbiased (if it ever was) media . From the book again:
“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.”
In 2016, a very smart partner at a California VC tried convincing me that Hillary was running abortion clinics and ran a child porn ring out of DC. He was so convinced that no amount of questioning or facts made any difference.
The rise of authoritarian leaders elected in some of the largest democracies such as India, Turkey, US, Brazil, and Philippines has proven that democracy is hacked. The confusion and disinformation that spread in Europe with Brexit and others has been debilitating to any progress there. The use of whatsApp and Facebook in organized oppression of minorities all just makes me nervous about how much of the power of persuasion and mind-hacking is used by the dark side.
The Blackbox of AI/ML — Biases and Explainability
I am involved with several startups that use Artificial Intelligence (AI) and Machine Learning (ML) as their underlying technology and main differentiator. There is a lot of hype along with experiments and pitfalls in AI/ML as in any emerging technology. There are a whole group of algorithms that spawned from the work on heuristics guru Gerd Gigerenzer, called Fast and Frugal Trees, but I want to focus on two key features that connect AI/ML to this blog, biases and explainability.
Many of us remember the Microsoft Chatbot that did not have a great ending. Basic lesson, if you train the AI with biased behavior, chances are you will propogate that behavior. This is same as kids learning bad behavior from parents and can be exponentially worse without the innate capability of distinguishing between good or bad and being extreme fast at the learning. Chatbots are easy to shut off
The issue of explainability is tougher. The great mathematician and a good friend of Capital Factory Dr. Stephen Wolfram explains explainability as being pretty hard. This generally stems from the fact that in a number of occasions, even human beings are unable to explain some of their actions and motivation. Causality can be “cause and effect” or just rationalization.
Lex Fridman (Celebrity AI researcher) recently interviewed Dr. Kahneman. Very interesting discussion including why “kind learning” environments such as chess are easier to train versus “wicked learning” environments such as healthcare are harded - covered first by David Epstein in his book — Range — Why Generalists Triump in a Specialised World.
Conclusion
Dr. Kahneman says that even though he wrote the book on this topic, he is no better at making decisions than others who do not have knowledge of these biases and heuristics. so what do we do?
Here are a few things that I learned to practice and pay attention to after this book:
- Accept that none of us, neither our family nor friends or co-workers, teachers, managers, or politicians always act rationally. Most of us are working with limited information along with our own biases or filters.
- Know thyself. Understand some of your own regular biases, what do you do habitually, what triggers what action from you. And help a loved one become aware of the same.
- Be aware and mindful that we are being programmed by ourselves or by others. Understand when someone or some organization maybe providing you selective information to sway your decision. Remember even some of the most successful people trusted Maddox to manage their money. Ask questions. Trust but verify.
- Time and attention are most scare commodities. Use them well. It is attention based economy and that is why you need to pay attention to attention.
- Use both System 1 and Sytem 2 for your big decisions. (The way indo-persian literature would put it, decide with dil and dimag.)
- Be responsible for your actions. Maintain a decision journal in at least one particular area of your life. This will help you own your story or you go end up in someone else’s narrative. (One of the boards I served on early was a publisher called Badgerdog, they had a cool sticker — “Author Your Life”)
- Regular repeated practice by doing something with good feedback loop helps in developing expertise everything from sports to our behavior. Repeated activity also develops habits, both good and bad.
- Whenever you use the word “always”, such as “you always do this…” stop yourself and think if it is supported by actual data or avoid it. What we remember may not always be what we experienced.
- If you are managing a event or an experience, make sure the start and end is great.
- In organizations, transparency, great communications and regular repeated reminders are necessary to keep everyone focused. This sometimes is referred to as company culture.
And yes, Dr. Kahneman is continuing his research work even today with the same gusto to learn more. Heard that he is working on a book on organizational noise versus signal. I know I will preorder it as soon as it is announced.
More reading
Some of the books which cover applied behavioral science, habits, judgement, decision making, mental models, (no affiliation) links:
(Nir Eyal recently wrote a new book, called Indistractble, to help his readers with how to control your attention and choose your life, to counter Hooked, which helped product managers build addictive engagement. Start a fire and then go sell extinguishers.)
(Sales people love this book — Influence:)
(I attended Dr. Bazerman’s course on decision making at HBS and found it extremely useful to discuss my understanding of Kahnemans work with him)
More media
Bounded Rationality
Kahneman explains the concept of bounded rationality first theorized by Herbert Simons and the art of satisfiers in decision making during his speech at Nobel Prize ceremony for Prospect Theory.
Nassim Taleb with Daniel Kahneman
Nassim Taleb can come across as an arrogant man by many in academia. This is one of his interviews with Dr. Kahneman and notice how respectful and nervous he is in the presence of Dr. Kahneman, the real deal. The deference to the rigor of Dr. Kahneman’s research work. Really good discussion before his Antifragility book.
Finally, I am really into podcasts, and this one by Farnam Street (Shane Parrish) is one of the best on mental models and how to best use them.
And you can imagine, this is the one I started with
There is lot more podcasts, videos and other media including TED and Authors@Google by Dr. Kahneman but I think you can take it from here.
