We don't notice the problem because we have evolved to reconstruct reality (after it happens) to fit in with what our gut instinct has already decided.
Makes you think is there really very much free will at all?
The book also looks at how our brains are really poor at dealing with randomness - seeing patterns and assigning causes where there are none.
It contains ideas on how to improve the recruitment process and remove the biases that we all bring.
How planning and budgets are usually pretty pointless and how to avoid senior executives making risky bets that break the company without anyone realising what they are agreeing to (it need only take 30 minutes of effort)
And finally once again, the book covers the topic of how the presentation format of the statistics (rather than the facts themselves) can dramatically affect peoples' choices.
This is the essence of intuitive heuristics: when faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.Read more at location 269
The often-used phrase “pay attention” is apt: you dispose of a limited budget of attention that you can allocate to activities, and if you try to go beyond your budget, you will fail.Read more at location 395
The gorilla study illustrates two important facts about our minds: we can be blind to the obvious, and we are also blind to our blindness.Read more at location 413
One further limitation of System 1 is that it cannot be turned off. If you are shown a word on the screen in a language you know, you will read it—unless your attention is totally focused elsewhere.Read more at location 434
The best we can do is a compromise: learn to recognize situations in which mistakes are likely and try harder to avoid significant mistakes when the stakes are high. The premise of this book is that it is easier to recognize other people’s mistakes than our own.Read more at location 487
System 1 has more influence on behavior when System 2 is busy, and it has a sweet tooth.Read more at location 709
The notion that we have limited access to the workings of our minds is difficult to accept because, naturally, it is alien to our experience, but it is true: you know far less about yourself than you feel you do.Read more at location 925
College students were asked to rate the humor of cartoons from Gary Larson’s The Far Side while holding a pencil in their mouth. Those who were “smiling” (without any awareness of doing so) found the cartoons funnier than did those who were “frowning.”Read more at location 964
The general theme of these findings is that the idea of money primes individualism: a reluctance to be involved with others, to depend on others, or to accept demands from others. The psychologist who has done this remarkable research, Kathleen Vohs, has been laudably restrained in discussing the implications of her findings, leaving the task to her readers. Her experiments are profound—her findings suggest that living in a culture that surrounds us with reminders of money may shape our behavior and our attitudes in ways that we do not know about and of which we may not be proud.Read more at location 995
On average, the users of the kitchen contributed almost three times as much in “eye weeks” as they did in “flower weeks.” Evidently, a purely symbolic reminder of being watched prodded people into improved behavior.Read more at location 1032
Anything that makes it easier for the associative machine to run smoothly will also bias beliefs. 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.Read more at location 1109
“How many animals of each kind did Moses take into the ark?” The number of people who detect what is wrong with this question is so small that it has been dubbed the “Moses illusion.”Read more at location 1326
The moral is significant: when System 2 is otherwise engaged, we will believe almost anything. System 1 is gullible and biased to believe, System 2 is in charge of doubting and unbelieving, but System 2 is sometimes busy, and often lazy. Indeed, there is evidence that people are more likely to be influenced by empty persuasive messages, such as commercials, when they are tired and depleted.Read more at location 1460
The normal state of your mind is that you have intuitive feelings and opinions about almost everything that comes your way. You like or dislike people long before you know much about them; you trust or distrust strangers without knowing why; you feel that an enterprise is bound to succeed without analyzing it.Read more at location 1755
generates impressions, feelings, and inclinations; when endorsed by System 2 these become beliefs, attitudes, and intentions operates automatically and quickly, with little or no eff ort, and no sense of voluntary control can be programmed by System 2 to mobilize attention when a partic ular pattern is detected (search) executes skilled responses and generates skilled intuitions, aft er ade quate training creates a coherent pattern of activated ideas in associative memory links a sense of cognitive ease to illusions of truth, pleasant feelings, and reduced vigilance distinguishes the surprising from the normal infers and invents causes and intentions neglects ambiguity and suppresses doubt is biased to believe and confirm exaggerates emotional consistency (halo effect) focuses on existing evidence and ignores absent evidence (WYSIATI) generates a limited set of basic assessments represents sets by norms and prototypes, does not integrate matches intensities across scales (e.g., size to loudness) computes more than intended (mental shotgun) sometimes substitutes an easier question for a difficult one (heuristics) is more sensitive to changes than to states (prospect theory)* overweights low probabilities* shows diminishing sensitivity to quantity (psychophysics)* responds more strongly to losses than to gains (loss aversion)* frames decision problems narrowly, in isolation from one anotherRead more at location 1887
We started from a fact that calls for a cause: the incidence of kidney cancer varies widely across counties and the differences are systematic. The explanation I offered is statistical: extreme outcomes (both high and low) are more likely to be found in small than in large samples. This explanation is not causal. The small population of a county neither causes nor prevents cancer; it merely allows the incidence of cancer to be much higher (or much lower) than it is in the larger population. The deeper truth is that there is nothing to explain.Read more at location 1946
The risk of error can be estimated for any given sample size by a fairly simple procedure. Traditionally, however, psychologists do not use calculations to decide on a sample size. They use their judgment, which is commonly flawed.Read more at location 1979
System 1 understands sentences by trying to make them true, and the selective activation of compatible thoughts produces a family of systematic errors that make us gullible and prone to believe too strongly whatever we believe.Read more at location 2178
“Plans are best-case scenarios. Let’s avoid anchoring on plans when we forecast actual outcomes. Thinking about ways the plan could go wrongRead more at location 2294
You will occasionally do more than your share, but it is useful to know that you are likely to have that feeling even when each member of the team feels the same way.Read more at location 2352
The contest yielded a clear-cut winner: people who had just listed twelve instances rated themselves as less assertive than people who had listed only six. Furthermore, participants who had been asked to list twelve cases in which they had not behaved assertively ended up thinking of themselves as quite assertive! If you cannot easily come up with instances of meek behavior, you are likely to conclude that you are not meek at all. Self-ratings were dominated by the ease with which examples had come to mind. The experience of fluent retrieval of instances trumped the number retrieved.Read more at location 2368
Psychologists enjoy experiments that yield paradoxical results, and they have applied Schwarz’s discovery with gusto. For example, people: believe that they use their bicycles less often after recalling many rather than few instances are less confident in a choice when they are asked to produce more arguments to support it are less confident that an event was avoidable after listing more ways it could have been avoided are less impressed by a car after listing many of its advantagesRead more at location 2379
A professor at UCLA found an ingenious way to exploit the availability bias. He asked different groups of students to list ways to improve the course, and he varied the required number of improvements. As expected, the students who listed more ways to improve the class rated it higher!Read more at location 2385
Here’s a sample of their findings: Strokes cause almost twice as many deaths as all accidents combined, but 80% of respondents judged accidental death to be more likely. Tornadoes were seen as more frequent killers than asthma, although the latter cause 20 times more deaths. Death by lightning was judged less likely than death from botulism even though it is 52 times more frequent. Death by disease is 18 times as likely as accidental death, but the two were judged about equally likely. Death by accidents was judged to be more than 300 times more likely than death by diabetes, but the true ratio is 1:4. The lesson is clear: estimates of causes of death are warped by media coverage.Read more at location 2463
Statistical results with a causal interpretation have a stronger effect on our thinking than noncausal information. 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. That is why this book contains questions that are addressed personally to the reader. You are more likely to learn something by finding surprises in your own behavior than by hearing surprising facts about people in general.Read more at location 3165
Having read this chapter, you know that the obvious solution of adding 10% to the sales of each store is wrong. You want your forecasts to be regressive, which requires adding more than 10% to the low-performing branches and adding less (or even subtracting) to others. But if you ask other people, you are likely to encounter puzzlement: Why do you bother them with an obvious question? As Galton painfully discovered, the concept of regression is far from obvious.Read more at location 3359
Extreme predictions and a willingness to predict rare events from weak evidence are both manifestations of System 1. It is natural for the associative machinery to match the extremeness of predictions to the perceived extremeness of evidence on which it is based—this is how substitution works. And it is natural for System 1 to generate overconfident judgments, because confidence, as we have seen, is determined by the coherence of the best story you can tell from the evidence at hand. Be warned: your intuitions will deliver predictions that are too extreme and you will be inclined to put far too much faith in them.Read more at location 3555
Of course there was a great deal of skill in the Google story, but luck played a more important role in the actual event than it does in the telling of it. And the more luck was involved, the less there is to be learned.Read more at location 3614
You cannot help dealing with the limited information you have as if it were all there is to know. You build the best possible story from the information available to you, and if it is a good story, you believe it. Paradoxically, it is easier to construct a coherent story when you know little, when there are fewer pieces to fit into the puzzle. Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.Read more at location 3616
A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge, or beliefs that have changed. Once you adopt a new view of the world (or of any part of it), you immediately lose much of your ability to recall what you used to believe before your mind changed.Read more at location 3639
On average, the gap in corporate profitability and stock returns between the outstanding firms and the less successful firms studied in Built to Last shrank to almost nothing in the period following the study. The average profitability of the companies identified in the famous In Search of Excellence dropped sharply as well within a short time. A study of Fortune’s “Most Admired Companies” finds that over a twenty-year period, the firms with the worst ratings went on to earn much higher stock returns than the most admired firms.Read more at location 3740
It is wise to take admissions of uncertainty seriously, but 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.Read more at location 3824
In a paper titled “Trading Is Hazardous to Your Wealth,” they showed that, on average, the most active traders had the poorest results, while the investors who traded the least earned the highest returns. In another paper, titled “Boys Will Be Boys,” they showed that men acted on their useless ideas significantly more often than women, and that as a result women achieved better investment results than men.Read more at location 3855
Finally, the illusions of validity and skill are supported by a powerful professional culture. We know that people can maintain an unshakable faith in any proposition, however absurd, when they are sustained by a community of like-minded believers. Given the professional culture of the financial community, it is not surprising that large numbers of individuals in that world believe themselves to be among the chosen few who can do what they believe others cannot.Read more at location 3926
It is hard to think of the history of the twentieth century, including its large social movements, without bringing in the role of Hitler, Stalin, and Mao Zedong. But there was a moment in time, just before an egg was fertilized, when there was a fifty-fifty chance that the embryo that became Hitler could have been a female. Compounding the three events, there was a probability of one-eighth of a twentieth century without any of the three great villains and it is impossible to argue that history would have been roughly the same in their absence. The fertilization of these three eggs had momentous consequences, and it makes a joke of the idea that long-term developments are predictable.Read more at location 3938
because they are not affected by accidents of sampling. The surprising success of equal-weighting schemes has an important practical implication: it is possible to develop useful algorithms without any prior statistical research. Simple equally weighted formulas based on existing statistics or on common sense are often very good predictors of significant outcomes. In a memorable example, Dawes showed that marital stability is well predicted by a formula: frequency of lovemaking minus frequency of quarrels You don’t want your result to be a negative number.Read more at location 4083
room. Atul Gawande’s recent A Checklist Manifesto provides many other examples of the virtues of checklists and simple rules.Read more at location 4105
Suppose that you need to hire a sales representative for your firm. If you are serious about hiring the best possible person for the job, this is what youRead more at location 4205
should do. First, select a few traits that are prerequisites for success in this position (technical proficiency, engaging personality, reliability, and so on). Don’t overdo it—six dimensions is a good number. The traits you choose should be as independent as possible from each other, and you should feel that you can assess them reliably by asking a few factual questions. Next, make a list of those questions for each trait and think about how you will score it, say on a 1–5 scale. You should have an idea of what you will call “very weak” or “very strong.” These preparations should take you half an hour or so, a small investment that can make a significant difference in the quality of the people you hire. To avoid halo effects, you must collect the information on one trait at a time, scoring each before you move on to the next one. Do not skip around. To evaluate each candidate, add up the six scores. Because you are in charge of the final decision, you should not do a “close your eyes.” Firmly resolve that you will hire the candidate whose final score is the highest, even if there is another one whom you like better—try to resist your wish to invent broken legs to change the ranking. A vast amount of research offers a promise: you are much more likely to find the best candidate if you use this procedure than if you do what people normally do in such situations, which is to go into the interview unprepared and to make choices by an overall intuitive judgment such as “I looked into his eyes and liked what I saw.”Read more at location 4206
Claims for correct intuitions in an unpredictable situation are self-delusional at best, sometimes worse. In the absence of valid cues, intuitive “hits” are due either to luck or to lies. If you find this conclusion surprising, you still have a lingering belief that intuition is magic. Remember this rule: intuition cannot be trusted in the absence of stable regularities in the environment.Read more at location 4363
Errors in the initial budget are not always innocent. The authors of unrealistic plans are often driven by the desire to get the plan approved—whether by their superiors or by a client—supported by the knowledge that projects are rarely abandoned unfinished merely because of overruns in costs or completion times. In such cases, the greatest responsibility for avoiding the planning fallacy lies with the decision makers who approve the plan. If they do not recognize the need for an outside view, they commit a planning fallacy.Read more at location 4546
When forecasting the outcomes of risky projects, executives too easily fall victim to the planning fallacy. In its grip, they make decisions based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities. They overestimate benefits and underestimate costs. They spin scenarios of success while overlooking the potential for mistakes and miscalculations. As a result, they pursue initiatives that are unlikely to come in on budget or on time or to deliver the expected returns—or even to be completed.Read more at location 4582
Leaders of large businesses sometimes make huge bets in expensive mergers and acquisitions, acting on the mistaken belief that they can manage the assets of another company better than its current owners do. The stock market commonly responds by downgrading the value of the acquiring firm, because experience has shown that efforts to integrate large firms fail more often than they succeed. The misguided acquisitions have been explained by a “hubris hypothesis”: the executives of the acquiring firm are simply less competent than they think they are.Read more at location 4667
It is tempting to explain entrepreneurial optimism by wishful thinking, but emotion is only part of the story. Cognitive biases play an important role, notably the System 1 feature WYSIATI. We focus on our goal, anchor on our plan, and neglect relevant base rates, exposing ourselves to the planning fallacy. We focus on what we want to do and can do, neglecting the plans and skills of others. Both in explaining the past and in predicting the future, we focus on the causal role of skill and neglect the role of luck. We are therefore prone to an illusion of control. We focus on what we know and neglect what we do not know, which makes us overly confident in our beliefs.Read more at location 4695
The procedure is simple: when the organization has almost come to an important decision but has not formally committed itself, Klein proposes gathering for a brief session a group of individuals who are knowledgeable about the decision. The premise of the session is a short speech: “Imagine that we are a year into the future. We implemented the plan as it now exists. The outcome was a disaster. Please take 5 to 10 minutes to write a brief history of that disaster.”Read more at location 4798
The three principles that govern the value of outcomes are illustrated by figure 10. If prospect theory had a flag, this image would be drawn on it. The graph shows the psychological value of gains and losses, which are the “carriers” of value in prospect theory (unlike Bernoulli’s model, in which states of wealth are the carriers of value). The graph has two distinct parts, to the right and to the left of a neutral reference point. A salient feature is that it is S-shaped, which represents diminishing sensitivity for both gains and losses. Finally, the two curves of the S are not symmetrical. The slope of the function changes abruptly at the reference point: the response to losses is stronger than the response to corresponding gains. This is loss aversion.Read more at location 5087
The distinctive feature is that both the shoes the merchant sells you and the money you spend from your budget for shoes are held “for exchange.” They are intended to be traded for other goods. Other goods, such as wine and Super Bowl tickets, are held “for use,” to be consumed or otherwise enjoyed. Your leisure time and the standard of living that your income supports are also not intended for sale or exchange.Read more at location 5306
Probabilities that are extremely low or high (below 1% or above 99%) are a special case. It is difficult to assign a unique decision weight to very rare events, because they are sometimes ignored altogether, effectively assigned a decision weight of zero. On the other hand, when you do not ignore the very rare events, you will certainly overweight them. Most of us spend very little time worrying about nuclear meltdowns or fantasizing about large inheritances from unknown relatives. However, when an unlikely event becomes the focus of attention, we will assign it much more weight than its probability deserves. Furthermore, people are almost completely insensitive to variations of risk among small probabilities. A cancer risk of 0.001% is not easily distinguished from a risk of 0.00001%, although the former would translate to 3,000 cancers for the population of the United States, and the latter to 30.Read more at location 5704
The thought of accepting the large sure loss is too painful, and the hope of complete relief too enticing, to make the sensible decision that it is time to cut one’s losses. This is where businesses that are losing ground to a superior technology waste their remaining assets in futile attempts to catch up. Because defeat is so difficult to accept, the losing side in wars often fights long past the point at which the victory of the other side is certain, and only a matter of time.Read more at location 5762
These findings shed new light on the planning fallacy and other manifestations of optimism. The successful execution of a plan is specific and easy to imagine when one tries to forecast the outcome of a project. In contrast, the alternative of failure is diffuse, because there are innumerable ways for things to go wrong. Entrepreneurs and the investors who evaluate their prospects are prone both to overestimate their chances and to overweight their estimates.Read more at location 5885
The power of format creates opportunities for manipulation, which people with an axe to grind know how to exploit. Slovic and his colleagues cite an article that states that “approximately 1,000 homicides a year are committed nationwide by seriously mentally ill individuals who are not taking their medication.” Another way of expressing the same fact is that “1,000 out of 273,000,000 Americans will die in this manner each year.” Another is that “the annual likelihood of being killed by such an individual is approximately 0.00036%.” Still another: “1,000 Americans will die in this manner each year, or less than one-thirtieth the number who will die of suicide and about one-fourth the number who will die of laryngeal cancer.” Slovic points out that “these advocates are quite open about their motivation: they want to frighten the general public about violence by people with mental disorder, in the hope that this fear will translate into increased funding for mental health services.”Read more at location 5982
