Daniel Kahneman on Cutting Through the Noise (Ep. 56— Live at Mason)

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Happiness feels good in the moment. What you’re left with are your memories. And that’s a very striking thing — that memories stay with you, and the reality of life is gone in an instant. So memory has a disproportionate weight because it’s with us. It’s the only thing we get to keep.

COWEN: If you think of your own life, have you maximized happiness or the overall sense of how your life has gone?

On bias

COWEN: If you miss a flight due to a traffic jam outside your control, would you rather be two hours late or just one minute late?

On noise

COWEN: Much of your last book is about bias, of course. And much of your next book will be about noise. If you think of actual mistakes in human decision-making, how do you now see the relative weight of bias versus noise?

Now, it’s hard to say what there is more of, noise or bias. But one thing is very certain — that bias has been overestimated at the expense of noise. Virtually all the literature and a lot of public conversation is about biases. But in fact, noise is, I think, extremely important, very prevalent.

COWEN: Do you think of low intelligence as yet a third independent source of error? Or is that somehow subsumed in bias and noise?

But to exaggerate the odds of success is a very useful thing for people. It will make them more appealing to others, they will get more resources, and they will take risks. It’s not necessarily good for them…But for society as a whole to have a lot of optimists taking risks — that’s what makes for economic progress, so I call that the engine of capitalism, really, that sort of optimism

COWEN: There’s a collaboration between a human being and a machine, and occasionally the human being overrides the machine. Do you feel the human beings in those situations are, on average, either too overconfident or too optimistic?

On psychologists

COWEN: Some questions about psychologists outside of what you’ve worked on, but maybe related — Freud. What do you think of Freud’s body of work? And has it influenced you at all?

I’m optimistic on virtually nothing.

KAHNEMAN: But that AI is developing faster than anybody could have anticipated — no question. And if it continues to develop at that rate, meaning a lot faster than we expect, then things are going to happen relatively quickly.


COWEN: There are mics on each side. I will call on you, and please, questions only. This is our chance to hear from Danny Kahneman. If you start making a long speech or statement, I will cut you off.

I grew up very early in the history of Israel, when the state was small and everyone could make a difference. And you really could make a difference. I was, as a lieutenant in the army, age 21 or 22 — I made a difference. I created an interviewing system for the whole army.

Those kinds of experiences — that you can do things that seemed impossible or unlikely — that is certainly very liberating and encouraging and induces creativity.

I think some of that is actually present now that the state is bigger and more established. I was telling you earlier how my grandson is in the Israeli army — the kinds of experiences that he has as a sergeant. He feels very free in an intelligence unit. He feels that he can use his mind and that he can speak his mind, and it’s going to be wonderful for his future.

Human nature hasn’t changed. In certain domains, it’s much easier to be rational when you can look things up, when you can search on the computer instead of going out and searching, as you had to when I was a young person. Then, of course, you can achieve more rational results than you could. But whether it has changed anything significant, I doubt it.

And what is very striking over the last few years is that it’s not only information that is readily available. Misinformation is also readily available. So the net effect . . . It used to be very clear that this is all to the good, but what we’re seeing in the last few years is that there is a very heavy cost to the availability and the ease of expression that transmits itself over the internet.



A podcast in which esteemed economist Tyler Cowen engages with today's most underrated thinkers in wide-ranging explorations of their work, the world, and everything in between. For new episodes, visit conversationswithtyler.com/episodes.

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The Mercatus Center at George Mason University is the world’s premier university source for market-oriented ideas.