AI transcript
Focus on the separate points, and then when you have the whole profile,
then you can have an intuition and it’s going to be better.
Welcome to The Knowledge Project. I’m your host, Shane Parrish. In a world where knowledge is power,
this podcast is your toolkit for mastering the best of what other people have already figured out,
so you can use their insights in your life.
Before we get into the interview, I want to tell you about a moment that didn’t make it into the episode.
I first came across Daniel Common’s work in the early 2000s. His impact on me and so many people
around the globe has been unbelievable. By the time I sat down with him in his New York City home in
2019, I had so many questions for him. Condon won a Nobel Prize in Economic Sciences in 2002,
yet he never took an economics course. His central message was very simple. If we want to make better
decisions, we need help. Danny died last year on March 27th, 2024. He was 90. This conversation is
now one of the final opportunities to hear directly from one of the most influential thinkers of our time.
I get messages about this episode every week. People come away with new insights on everything from life
to decision making. I re-listened to it recently and it’s timeless. That’s exactly why I’m republishing it.
Consider loss aversion, one of his most important discoveries. Why does losing $100 hurt twice as much
as gaining $100 feels good? The asymmetry affects everything. It affects your stock portfolio, your golf
game. Check your portfolio when it’s down and you’ll start making emotional decisions. A golfer putts better
for power than for birdie. But here’s what happened near the end of our interview. Danny’s phone rang and it
was loud. He’d forget to turn it off. We’re almost done the interview at this point but he answered and
someone obviously wanted him to give a talk or review a book. He ended the call with words that have stayed
with me since then. My rule is I never say yes on the phone. I’ll get back to you tomorrow. I wanted to
discuss that on air but we ran out of time. As I packed up my gear, I asked him about that. This rule was a trick
to avoid saying yes intuitively. It gave him time to think. He’s always bombarded with requests and he
often says yes when he didn’t want to. At first, he would try saying no. That date doesn’t work. That
timeline doesn’t work. But what happened in those moments was it turned into a negotiation. What about
another date? Another timeline? So he hit on this rule. And to me, this is his most practical discovery.
Most people don’t even know about it. This rule lets you reprogram your unconscious mind. Your desired
behavior becomes your default behavior. And that’s incredibly powerful. It changed my life. I now
exercise every day. It’s actually easier than three times a week. The activity, duration, and scope can
change but working out and exercising doesn’t. I think I’ve missed five days in five years at this point.
And I talk about this in my book, Clear Thinking. And the concept has changed so many lives, including
my great friend, Brent Beshore. In episode 196, we talk about this a little. Several parts of this
conversation stuck out when I was re-listening to it. First, we talk about happiness versus satisfaction.
Happiness is feelings. It’s mostly social. Am I with the people who love me and whom I love back?
Satisfaction, on the other hand, is how you feel about your life, your job, your career,
conventional aspects. Danny argued people want satisfaction more than happiness. Second,
changing behavior. Make good behavior easier and bad behavior harder. The insight? All behavior is
equilibrium. Rather than pushing people to change, ask why they aren’t doing it already. Third, behavior
is situational. Want to understand behavior? Look at the situation. When someone acts in ways that don’t
make sense, ask yourself, ask yourself, what would the world have to look like for that behavior to make
sense? Fourth, agents making decisions on your behalf beat you at certain types of decisions. They have no
sunk costs. They have no emotions. Brian Johnson talks about this in episode 188. He turned his health
decisions over to effectively an algorithm because that algorithm makes better decisions than he does.
Fifth, our beliefs are formed by people more than facts. We agree with people we like,
despite the facts. It’s easier to believe a lie from someone you like than a truth from someone you
dislike. We form identity beliefs. Liberal, conservative, Democrat, Republican. They can do no wrong. If they’re
wrong, we’re wrong. And we can’t handle that. Finally, intuition. Danny had talked about this so much,
his answers sounded repetitive. So I framed my question on this to include his typical answer
in the question, forcing him to think a little deeper. Whether this is your first listen or your
third, you’ll come away with ideas that you can use in life.
Daniel, I’m so happy to give it a chance to talk to you.
Well, I’m happy to have you here.
What was your childhood like? What were you like as a child?
Oh, my God. That was a long time ago. I was, I was an early child, as you might expect, I suppose.
I was, I thought I’d be a professor when I was like three or four years old because people told me I would
be because I probably spoke with long words and stuff like that. So, and then the rest of my childhood,
I mean, I was five when World War II began. So, and I was a Jew in France. So, I’ve had a difficult
childhood, but from that point on. But, but I was, was I like, yeah, I was a, I was a nerdy child.
I was quite inept physically. Very fortunately for me, when I’d finally moved to Israel at age 12,
they held me up a grade in them. And that was all right. But that’s, that’s what I was like.
Are there any particular lessons or memories that stand out for you?
There are two of them that I speak about. So, one is that I was, I was a psychologist very early on.
That was, that was very clear. I, I wrote an essay before I was 11. I remember where, because it was,
it was a German counterattack. It was during that period we were in Paris. And I wrote an essay about
faith and religion. And it was a very pompous essay. I had a little book that was, that was titled
what I, what I write about what I think, something pompous like that. But the essay started with
another pompous thing that I quoted Pascal. My, my sister had passed her exams and I had read,
she’s, you know, she’s studied some Pascal and I had read it. And Pascal had said that faith
is God made sensible to the heart. And, you know, little me, I said, how true. That’s what my essay said.
And then, and then, but then I said, but faith is really hard to get. You don’t say it’s God all the time. So, that’s what
that’s what religious pomp is for. Cathedrals, organ music. They give you, and I call that urzat faith,
sort of a substitute faith, because it’s a, it’s a similar feeling. It’s got to do with God. And that’s what you
must do with me. That’s, that’s a psychologist. So, it’s clear that, you know, that was my calling. And so,
that’s one significant memory of my childhood.
So you wanted to be a psychologist?
I think so. I think so. I mean, I, you know, it’s always had that point of view that later, as a
teenager, I was, you know, interested in all the philosophical issues, like, you know, does God
exist? And what’s good and bad? And stuff like that. And why shouldn’t we masturbate? You know, serious
questions. But, but I discovered that, actually, I was less interested in the question of whether or
not God exists, then in why do people believe that he exists? That I thought was interesting. And I
wasn’t particularly interested in the question of what’s good or bad, but I was really interested in
what makes people angry and indignant. So, you know, I’ve had the psychological point of view since,
turns out, since my childhood.
Was there anybody that sort of influenced you to go on to study this? I mean, it’s one thing to have
these dreams as like a 12, 13, 14-year-old boy. It’s another to turn this into, you know, probably
the most eminent career that’s ever happened for a psychologist.
No, not the most eminent career. You know, and I wasn’t sure, actually, that I would do psychology.
And when I took a vocational exam to tell me what I was good at, and psychology and economics stood in
out. But, you know, that was unexpected. And then I took psychology as an undergraduate and mathematics,
at which I was not particularly good. So, and no, it’s not that I knew at the time that, you know,
I had that calling to be a psychologist. It didn’t occur to me. I thought, you know, I thought I’d be a
professor in one thing or another. I mean, I thought I’d be an academic, but not psychology specifically.
You worked with Amos Tversky for a long time. Are there any particular stories that you remember
about working with him that bring a smile to your face?
Almost everything about working with him brings a smile to my face. You know, he was a very unusual
person. Most people who knew them thought that he was the smartest person that I’ve ever met.
And in fact, the famous psychologist, Nick Nesbitt, said that it’s sort of an intelligence test when
you said that when you’re with Amos, how long does it take you to figure out that he’s smarter than you
are. And the faster you figure that out, the smarter you are. So, you know, he was, uh, he was
super bright and very, very funny. He joked a lot. He laughed a lot at his own jokes. And that was
infectious. When I was with him, I was very funny too. More than half of my, the last of my, of my lifetime
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You have an interesting distinction between happiness and satisfaction. Can you walk us through that?
Yeah, sure. I mean, the word happiness is so ambiguous and it means so many things to many people,
but one sensible interpretation of it is that it’s got to do with your emotions, with how you feel,
with the emotional tone of your life, whether it’s a happy life, you know, it’s pleasant to be you.
Life satisfaction is a completely different thing. I mean, life satisfaction is how you feel about your
life when you think about your life. And most of the time, you don’t think about your life, you just live.
But, you know, sometimes you sort of look and that’s when you determine how satisfied you are.
That’s life satisfaction. It’s not satisfaction, it’s life satisfaction.
Should we balance the two? Or how would you think about them? Should we be more happy when we’re younger,
more satisfied when we’re older?
That thought had never occurred to me. When I began to work on this, I started out thinking that
happiness, in that sense of how you feel when you live, that was reality. And that
life satisfaction was just stories that people tell themselves. And the important thing was to be
happy in real time. But later, when we did more research, it turned out that
the circumstances that make people happy and the circumstances that make them satisfied with their
life are not the same. So happiness is mostly social. It’s, you know, it’s being with people
you love and who love you back. That’s, that’s a lot of what happiness is. Life satisfaction is much more
conventional. It’s to be successful. And, you know, so it’s money, education, prestige,
that sort of thing is what life satisfaction is about. So those are two very different things.
I thought that life satisfaction is irrelevant. You know, that’s how I began. And we, we had a research
program where we were, we were trying to, you know, to show that this is the case. But then after a few
years, I realized that what people really want in their life is they don’t seem to care about how happy
they’ll be. They seem to want to be satisfied with their life. They seem to want to have a good story
about their life. And then I was in the position of saying that to define wellbeing in a way that people
didn’t seem to care particularly about. So that was not a tenable position. So I, I dropped back into
saying that I had no idea how to deal with it.
Was this a result of the research? You did some research that was, I think it said above 70,000,
you don’t become happier, but do you become more satisfied?
No. The research I did with Angus Deaton at Princeton, famous economist, we showed that in terms of
happiness, in terms of emotional tone, positive and negative, having a lot of money doesn’t make you
happier. But being poor makes you miserable. So that’s above the threshold that was like $70,
$50,000 approximately in the U.S. Then extra money didn’t make you emotionally happier. But with life
satisfaction, it was a different story. With life satisfaction, that doesn’t satiate. So it’s always
good to have more. Because basically, I think, money is a proxy for success. And it’s a proxy for
subjective success in many cases.
So it’s not necessarily about spending it or doing something with it. It’s just a measure.
Just getting it. I mean, you know, you look at all those people, those billionaires working their heads
off. And they’re clearly not doing this because they need more money. They’re trying to get more
money. And they’re trying to get more money because that would be an indication that they’re good at what
they do. I think mostly it’s a proxy.
Do either of those variables correlate to longer living, happiness, or satisfaction?
Both, apparently. But you know, it’s hard to separate. And I haven’t been followed. You know,
shortly after deciding that I didn’t know what well-being was, I sort of stopped doing research
on this. So I haven’t been following. But I think there’s clear evidence that being effectively happy,
you know, is very good for you. And you do live a little longer, and you live better, and so on.
And life satisfaction works in the same direction. Whether it’s separable, which of them, you know,
is it more important that I don’t?
I want to switch gears a little bit and talk about behavior. And I’d love your insider expansion
upon the idea of we can change behavior. And how do we go about changing our behavior?
Well, you know, I’m not sure I buy the premise. I think changing behavior is extremely difficult.
There are a few tips and, you know, a few guidelines about how to do that. But anybody who is very
optimistic about changing behavior is just deluded. It’s hard to change other people’s behavior. It’s very
hard to change your own. Not simple.
This is what marriage is all about, right?
Yeah, among other things. You know, people, when, when, you know, married people try to
change each other’s behavior.
It’s a lot of dissatisfying.
They are not on their way to a good marriage, I think.
We’d all be happier with lower expectations.
Yes. I mean, and, and even if you have expectation, don’t try to change because, you know,
it’s very unlikely to work in a significant way.
I can think of the common ways that we would sort of go about behavior change and it would be,
you know, making good behaviors more easy or negative behaviors harder.
And that’s the main, the main insight. You know, when you want to influence somebody’s behavior,
that’s a very big insight. I’ve always thought that this is the best psychological idea ever,
you know, so far as I’m concerned. But it’s that when you want somebody to move from A to B in terms of
their behavior, you can think of it that there are two ways of doing it. You can push them or you can ask
the question, “Why aren’t they doing B already?” Which is an unusual question, but you know, why?
So then when you ask, “Why, why not? Why aren’t they doing B?” as they ought to, as they think they ought to,
then you get a list of what’s got to win. That’s the psychologist who my guru and that’s my hero and
many people’s hero. He spoke of restraining forces. I mean, so there are reasons.
why they’re not where you want them to be. So he spoke of behavior as an equilibrium. There are
forces that are pushing you one way, forces that are pushing you the other way. So how loud you speak,
how fast you drive. It’s easy to think of it as an equilibrium. And what we tend to do when we want to
move people from A to B is we push them. We add to the driving forces. And Kurt Lewin’s insight was that
this is not what you should do. You should actually work on the restraining forces and try to make them
weaker. And that’s a beautiful point. And he showed, he had that image that, you know, I’ve had since I was an
undergraduate. And I’m not sure actually whether it was his image or something that I drew from
reading him. But it’s like you have a plank and it’s being held by two sets of springs. You know,
you want it to move one direction. And so you could add another spring that would push it that way, or
could remove one of the springs that are holding it back. And the interesting thing, and that’s the
striking outcome, is when it moves, if it moves because of the driving force you’ve added to the
driving force, then at equilibrium, it will be in a higher state of tension than it was originally.
That is because you’ve compressed one spring and such pushing back harder. But if you remove
a restraining force, at equilibrium, there’ll be less tension in the system. I must have been 20 years
old. I thought that’s just so beautiful. What do you wish that everybody knew about psychology that you
don’t think that they do? If that was class one, what’s class two?
You know, class two, which is a development from class one, you know, it’s the same idea extended.
Class two is that behaviors don’t necessarily reflect the personality, but behaviors have a lot to do with
the situation. And so if people behave in strange ways, look at the situation they’re in and what are
the pressures in the situation that make them act as well. So there is a bias that the social
psychologist, well-known social psychologist, call the fundamental attribution error. And that means
that when you see people acting in some way, you think that it’s because of their personality that they
do it. That may not be the case. It’s quite likely that the situation is making them do it.
I’d like people to know that motivation is complex and that people do good things for a mixture of
good and bad reasons. And they do bad things for a mixture of good and bad reasons. And I think that
there is a point to educating people in psychology is to make them less judgmental. Just have
more empathy and more patience and being judgmental doesn’t get you anywhere.
When you talk about situational, one of the things that comes to mind is it’s so easy for us to give
our friends advice. But if we were in that situation, we might not necessarily see it.
Why is that the case? Why is it so much easier to give other people advice?
I mean, feelings get in the way of clear thinking. There is a phenomenon that we call the endowment effect,
which is that when I’d ask for more money to sell you my sandwich than I’d pay to get it. I mean,
that’s essentially the endowment effect. And our explanation of it, there are many explanations,
but a story I like to tell about it is that it’s more painful to give something up than to get something.
But there is an interesting result that if you have an agent making decisions on somebody’s behalf,
that agent doesn’t have loss of those. So that agent sells and buys at the same price,
which is the economically rational thing to do. Where this goes into policy and governments and
really important things is that governments are like agents or people who think about the good of
society. And agents, they take the economic view. They take the view of what things will be like at
the end. They don’t figure out that there are some people are going to be losing because of the reform
that they make. And it turns out that you can really expect losers, potential losers to fight a lot
harder than potential winners. And that’s the reason that reforms are frequently fair. And that when they
succeed, they’re almost always way more expensive than anticipated. And they’re more expensive because
you have to compensate the losers. And that frequently is not anticipated. So that’s an example of a story
that incorporates behavior change. And the difference between perspective, between being, you know, in the
situation, feeling the pain of giving up the sandwich, and not feeling the pain of giving up the sandwich.
That would have huge public policy sort of implications too, right, that we don’t tend to think about or discuss.
That’s a really interesting angle there. I want to come back to sort of situational decision-making based on
sort of like what we see is all there is. And we have these feelings that we can’t sort of disassociate
with. How does environment play a role like the physical environment in sort of what we decide or does it?
I mean, you know, there are sort of obvious things that we know. If people are hot and bothered and
distracted, and there is a lot of noise and so on, then they’ll think as well. And that we know that’s…
But even there, there are puzzles. I mean, many people think and work a lot better in cafes,
you know, where there is actually ambient noise and activity around them, and it helps them concentrate
better. So there isn’t a very simple story of the environment. But certainly, you can make the
environment tough enough so that people won’t be able to think properly. That’s feasible.
Are there things that we could do to, I guess, push the environment to be more conducive to
to clear thinking, the physical environment in this case?
Oh, there are all sorts of, you know, odd findings, you know, the color of the color of the room.
Some colors are better than others. And you would expect that some colors are more calming than others.
So you wouldn’t want to be in a red room.
Making decisions.
Making decisions.
Making decisions. But, you know, those are extreme and minor effects.
I want to come to intuition and noise later. Is there anything else that stands out that gets in
the way of clear thinking that we can sort of bring to the surface now?
Well, you know, what gets in the way of clear thinking is that we have intuitive views of
almost everything. So as soon as you present a problem to me, I have, you know, I have some
ready-made answer. And what gets in the way of clear thinking are those ready-made answers.
And we can’t help but have them. So that’s one thing that gets in the way. Emotions get in the
way. I would say that independent clear thinking is, to first approximation, impossible. In the sense
that, you know, we believe in things most of the time, not because we have good reasons to believe
them. If you ask me for reasons, I’ll explain you. I’ll always find a reason. But the reasons are not
the causes of our beliefs. We have beliefs because mostly we believe in some people and we
trust them and we adopt their beliefs. So we don’t reach our beliefs by clear thinking,
something, you know, unless you’re a scientist or doing something like that.
But even then, it’s probably a very narrow…
But that’s very narrow. And there is a fair amount of emotion in neuroscientists as well
that gets in the way of clear thinking. You know, commitments to your previous views,
being insulted that somebody thinks he’s smarter than you are. I mean, lots of things get in the way
even when you’re a neuroscientist. So I’d say there is less clear thinking than people like to think.
Is there anything that we can do at the belief formation stage? Like it sounds almost as though
when you say that we’re reading a newspaper, we read this op-ed, and it’s well constructed and fits
with our view of the world. Therefore, we adopt that opinion. And we forget the context that we didn’t
learn it through our own experience or reflection. We learned it sort of from somebody else. So we don’t
know when it’s sort of likely to work or not work. But we just proffer that as our opinion, is there?
That’s how I believe in climate change. You know, I believe in the people who tell me there is climate
change. And the people who don’t believe in climate change, they believe in other people.
So, but similarly, there’s like fake news and all this other stuff that we would have the same
reaction to you. You know, but I’m much more likely to believe fake news on my side than the fake news
on the other side. I mean, it’s true that there is a huge degradation in public discourse in the recent
10, 15 years in the United States. I mean, there used to be an idea that facts matter.
What would be your hypothesis as to why that is playing out? Are they getting into politics?
because I don’t want to talk politics. But like, why is that? Well, I mean, it’s hard to,
it’s hard to answer that question without, without politics, because it’s a general political
polarization has had a very big effect. And the fact that people can choose the sources of information.
Let’s switch gears a little bit and talk about intuition. I think one of the,
the things that strikes me the most about some of the work that you’ve done is the
cases where we’re likely to trust our intuition and when we’re not. And so if I’m, correct me if I’m
getting this wrong. So it’s sort of like a stable environment, repeated attempts and rapid feedback.
It strikes me that most decisions made in organizations do not fit that environment.
And yet we’re making a lot of these decisions on judgment or experience. What are the ways that we can
sort of make better decisions with that in the context?
: Well, in the first place, I think, you know, you shouldn’t expect too much.
: And pat to low expectations. : And pat to low expectations.
: I shouldn’t think too young. You should have low expectations
about improving decisions. I mean, there is, you know, one basic rule is slow down,
especially if you, if you have that immediate conviction, slow down. There are procedures,
you know, there are ways of reaching better, better decisions, but reaching better reverence,
and we can talk about them. : I would love to hear.
: If you really want to improve the quality of decision-making, use algorithms. I mean,
whenever, wherever you can, if you can replace judgments by, by rules and algorithms, they’ll do
better. And there’s big social costs to trusting, allowing algorithm to make decisions, but, but the
decisions will likely to be better. So that’s one thing. If you can’t use algorithms, then you slow
yourself down. And then there are things that you can do for certain types of problems. And there are
different types of problems. So one class of problems, like forecasting problems. A friend,
Phil Tetlock, you know, has that book on super forecasters, where he identifies with people who are
good at forecasting the future, what they do that makes them good. And, you know, he tries to train
people and he can improve people. So that’s one classic problem. I’m interested specifically in
another kind of problem, judgment problems, where basically you’re considering options or you’re
evaluating a situation and you’re trying to give it a score. There, there, there is advice, I think,
on how to do it. For me, it goes back to something I did in the Israeli army when I was like 22 years
old. So that’s a long time ago, like 63 years ago. I was a psychologist in the Israeli army. And I was
assigned the job of setting up an interviewing system for, for the army. That’s ridiculous. But you know,
this was the beginning of the state of Israel. So people were improvising all over the place.
So I had a BA and I was, I think I was the best trained psychologist in the army. My, my boss was a
chemist. Brilliant. But anyway, and the, the existing system was one where people would interview and try to
form an intuitive global image of how well that recruits would do as a combat soldier, which was
the objective of the, the object of the interview. And because I had read a book, I told me, I took a
different tack. And the different tack was, I identified six traits that I sort of made up. And I had them
ask questions and evaluate each of these traits independently and score it and write down the score,
then go on to the next trait. And they had to do it for all six traits. And that was, that’s all I asked
them to do. And the interviewers who were about one year younger than I, or recruits, but very,
very smart, selected for being good at it. They were furious with me. And they were furious with me
because they wanted to exercise their intuition. And I still remember that one of them said,
you’re turning us into robots. So I compromised with them. And I said, okay, you, you do it my way.
And I told them, you try to be reliable, not valid. You know, I’m in charge of validity. You be
reliable, which was pretty arrogant, but that’s, that’s how I presented it. But then when you’re done,
close your eyes and just put down a number of how good a soldier is that guy going to be. And when we
validated the results of the interview, it was a big improvement on what had gone on before. But the
other surprise was that you have an interesting distinction between happiness and satisfaction.
Can you walk us through that? Yeah, sure. I mean, the word happiness is so ambiguous and it means so
many things to many people, but one sensible interpretation of it is that it’s got to do with
your emotions, with how you feel, with the emotional tone of your life, whether it’s a happy life that,
you know, it’s pleasant to be you. Life satisfaction is a completely different thing. I mean, life
satisfaction is how you feel about your life when you think about your life. And most of the time,
you don’t think about your life, you just live. But you know, sometimes you sort of look,
and that’s when you determine how satisfied you are. That’s life satisfaction. It’s not satisfaction.
It’s life satisfaction. Should we balance the two or how would you think about them? Should we be
more happy when we’re younger, more satisfied when we’re older? That thought had never occurred to me
when I began to work on those. So I started out thinking that happiness in that sense of how you feel
when you live. And that was reality. And that life satisfaction was just stories that people tell
themselves. And the important thing was to be happy in real time. But later, when we did more research,
it turned out that the circumstances that make people happy and the circumstances that make them satisfied
with their life are not the same. So happiness is mostly social. It’s, you know, it’s being with people
you love and who love you back. That’s, that’s a lot of what happiness is. Life satisfaction is much more
conventional. It’s to be successful. And you know, so it’s money, education, prestige, that sort of thing,
is what life satisfaction is about. So those are two very different things. I thought that life satisfaction
is irrelevant. You know, that’s how I began. And we, we had a research program where we were,
we were trying to, you know, to show that this is the case. But then after a few years, I realized
that what people really want in their life is they don’t seem to care about how happy they’ll be.
They seem to want to be satisfied with their life. They seem to want to have a good story about their
life. And then I was in the position of saying that to define well-being in a way that people didn’t seem
to care particularly about. So that was not a tenable position. So I, I dropped back into saying that I had no
idea how to deal with it. Was this a result of the research? You did some research that was,
I think it said above 70,000, you don’t become happier, but do you become more satisfied?
No. The research I did with Angus Deaton at Princeton, famous economist, we showed that in terms of happiness,
in terms of emotional tone, positive and negative, having a lot of money doesn’t make you happier,
but being poor makes you miserable. So that’s above the threshold that was like 70,000 dollars
approximately in the US. Then extra money didn’t make you emotionally happier. But with life satisfaction,
it was a different story. With life satisfaction, that doesn’t satiate, so it’s always good to have more.
Because basically I think money is a proxy for success, and it’s a proxy for subjective success in many cases.
So it’s not necessarily about spending it or doing something with it. It’s just a measure.
It’s just getting it. I mean, you know, you look at all those people, all those billionaires working
their heads off, and they’re clearly not doing this because they need more money. They’re trying to get
more money. And they’re trying to get more money because that would be an indication that they’re
good at what they do. I think mostly it’s a proxy.
Do either of those variables correlate to longer living, happiness, or satisfaction?
Both, apparently. But you know, it’s hard to separate. And I haven’t been followed, you know,
shortly after deciding that I didn’t know what well-being was, I sort of stopped doing research
on this. So I haven’t been following. But I think there’s clear evidence that being effectively happy,
you know, is very good for you. And you do live a little longer, and you live better, and so on. And
life satisfaction works in the same direction. Whether it’s separable, which of them, you know,
isn’t more important that I don’t. I want to switch gears a little bit and talk about
behavior. And I’d love your insider expansion upon the idea of we can change behavior, and how do we
go about changing our behavior? Well, you know, I’m not sure I buy the premise. I think changing
behavior is extremely difficult. There are a few tips and, you know, a few guidelines about how to do that.
But anybody who is very optimistic about changing behavior is just looted. It’s hard to change other
people’s behavior. It’s very hard to change your own. Not simple.
This is what marriage is all about, right?
Yeah, among other things. You know, people, when, you know, married people try to
change each other’s behavior.
It’s a lot of dissatisfying.
They are not on their way to a good marriage, I think.
We’d all be happier with lower expectations.
Yes. I mean, and even if you have expectation, don’t try to change,
because, you know, it’s very unlikely to work in a significant way.
I can think of the common ways that we would sort of go about behavior change, and it would be,
you know, making good behaviors more easy or negative behaviors harder.
I think that’s the main, the main insight. You know, when you want to influence somebody’s behavior,
that’s a very big insight. I’ve always thought that this is the best psychological idea ever,
you know, so far as I’m concerned. But it’s that when you want somebody to move from A to B in terms of
their behavior, you can think of it that there are two ways of doing it. You can push them. Or you can
ask the question, why aren’t they doing B already? Which is an unusual question, but you know, why?
So then when you ask why, why not? Why aren’t they doing B as they ought to, as they think they ought to,
then you get a list of what’s going to win. That’s a psychologist who, my guru on this, my hero,
and many people’s hero. He spoke of restraining forces. I mean, so there are reasons why they’re
not where you want them to be. So he spoke of behavior as an equilibrium. There are forces that
are pushing you one way, forces that are pushing you the other way. So how loud you speak, how fast you
drive. It’s easy to think of it as an equilibrium. And what we tend to do when we want to move people
from A to B is we push them. We add to the driving forces. And Kurt Lewin’s insight was that this is
not what you should do. You should actually work on the restraining forces and try to make them weaker.
And that’s a beautiful point. And he showed, he had that image that, you know, I’ve had since I was an
undergraduate. And I’m not sure, actually, whether it was his image or something that I drew from
reading him. But it’s like you have a plank and it’s being held by two sets of springs. You know,
you want it to move one direction. And so you could add another spring that would push it that way,
I could remove one of the springs that are holding it back. And the interesting thing,
and that’s the striking outcome, is when it moves, if it moves because of the driving force,
you’ve added to the driving force, then at equilibrium, it will be in a higher state of
tension than it was originally. That is because you’ve compressed one spring and such pushing back
harder. But if you remove the restraining force at equilibrium, there’ll be less tension on the
system. I must have been 20 years old. I thought that’s just so beautiful.
What do you wish that everybody knew about psychology that you don’t think that they do?
If that was class one, what’s class two?
You know, class two, which is a development from class one, you know, it’s the same idea extended.
Class two is that behaviors don’t necessarily reflect the personality, but behaviors have a lot to do with
the situation. And so if people behave in strange ways, look at the situation they’re in and what are
the pressures in the situation that make them act as well. So there is a bias that the social
psychologists, well-known social psychologists call the fundamental attribution error. And that means
that when you see people acting in some way, you think that it’s because of their personality that they
do it. That may not be the case. It’s quite likely that the situation is making them do it.
I’d like people to know that motivation is complex and that people do good things for a mixture of
good and bad reasons. And they do bad things for a mixture of good and bad reasons. And I think that
there is a point to educating people in psychology is to make them less judgmental. Just have
more empathy and more patience and being judgmental doesn’t get you anywhere.
When you talk about situational, one of the things that comes to mind is it’s so easy for us to
give our friends advice. But if we were in that situation, we might not necessarily see it. Why is that
the case? Why is it so much easier to give other people advice?
I mean, feelings get in the way of clear thinking. There is a phenomenon that we call the endowment effect,
which is that when I’d ask for more money to sell you my sandwich than I’d pay to get it. I mean,
that’s essentially the endowment effect. And our explanation of it, there are many explanations,
but a story I like to tell about it is that it’s more painful to give something up than to get something.
But there is an interesting result that if you have an agent making decisions on somebody’s behalf,
that agent doesn’t have loss of urge. So that agent sells and buys at the same price,
which is the economically rational thing to do. Where this goes into policy and governments and
really important things, that governments are like agents or people who think about the good of society.
And agents, they take the economic view. They take the view of what things will be like at the end.
They don’t figure out that there are some people who are going to be losing because of the reform that
they make. And it turns out that you can really expect losers, potential losers to fight a lot harder
than potential winners. And that’s the reason that reforms are frequently fair. And that when they succeed,
they’re almost always way more expensive than anticipated. And they’re more expensive because
you have to compensate the losers. And that frequently is not anticipated. So that’s an example of a story
about that incorporates behavior change and the difference between perspective, between being in the
the situation, feeling the pain of giving up the sandwich, and not feeling the pain of giving up the
sandwich.
That would have huge public policy sort of implications too, right? That we don’t tend to think about or
discuss. That’s a really interesting angle there. I want to come back to sort of situational decision
making based on sort of like what we see is all there is. And we have these feelings that we can’t sort of
disassociate with. How does environment play a role like the physical environment in sort of what we
decide or does it?
I mean, you know, there are sort of obvious things that we know. If people are hot and bothered and
distracted and there is a lot of noise and so on, then they’ll think as well. That we know. But even
there, there are puzzles. I mean, many people think and work a lot better in cafes, you know, where there is
actually ambient noise and activity around them. And it helps them concentrate better. So there isn’t
a very simple story of the environment, but certainly you can make the environment tough enough so that
people won’t be able to think properly. That’s, that’s feasible.
Are there things that we could do to, I guess, push the environment to be more conducive to
clearer thinking? The physical environment in this case?
Oh, there are all sorts of, you know, odd findings, you know, the color of the
color of the room. Some colors are better than others. And you would expect that some colors are
more calming than others. So you wouldn’t want to be in a red room.
Making decisions. Making decisions. But, you know, those are extreme and minor effects.
I want to come to intuition and noise later. Is there anything else that stands out that
gets in the way of clear thinking that we can sort of bring to the surface now?
Well, you know, what, what gets in the way of clear thinking is that we have,
we have intuitive views of almost everything. So as soon as you present a problem to me,
I have, you know, I have some ready-made answer. And what gets in the way of clear thinking are
those ready-made answers. And we can’t help but have them. So that’s one thing that gets in the
way. Emotions get in the way. And I would say that independent clear thinking is, to first
approximation, impossible. I mean, in the sense that, you know, we believe in things most of the time,
I’m not because we have good reasons to believe them. If you ask me for reasons, I’ll explain you.
I’ll, I’ll always find a reason, but the reasons are not the causes of our beliefs.
We have beliefs because mostly we believe in some people and we trust them and we adopt their beliefs.
So we don’t reach our beliefs by clear thinking something, you know, unless you’re a scientist or
doing something like that.
But even then, it’s probably a very narrow…
But that’s very narrow. And there is a fair amount of emotion in neuroscientists as well
that gets in the way of clear thinking. You know, commitments to your previous views,
being insulted that somebody thinks he’s smarter than you are. I mean,
lots of things get in the way than the neuroscientists. So I’d say there is less
clear thinking than people like to think.
Is there anything that we can do at the belief formation stage? Like, it sounds
almost as though when you say that we’re reading a newspaper, we read this op-ed, and it’s well-constructed
and fits with our view of the world. Therefore, we adopt that opinion. And we forget the context that
we didn’t learn it through our own experience or reflection. We learned it sort of from somebody
else. So we don’t know when it’s sort of likely to work or not work. But we just proffer that as
our opinion is there.
That’s how I believe in climate change. You know, I believe in the people who tell me there is climate
change. And the people who don’t believe in climate change, they believe in other people.
But similarly, there’s like fake news and all this other stuff that we would have the same reaction to.
You know, but I’m much more likely to believe fake news on my side than the fake news on the other
side. I mean, it’s true that there is a huge degradation in public discourse in the recent
10, 15 years in the United States. I mean, there used to be an idea that facts matter.
What would be your hypothesis as to why that is playing out? Are they getting into
politics because I don’t want to talk politics? But like, why is that?
Well, I mean, it’s hard to, it’s hard to answer that question without,
without politics, because it’s a general political polarization has had a very big effect.
And the fact that people can choose the sources of information.
Let’s switch gears a little bit and talk about intuition. I think one of the,
things that strikes me the most about some of the work that you’ve done is the cases where we’re
likely to trust our intuition and when we’re not. And so if I’m, correct me if I’m getting this wrong,
so it’s sort of like a stable environment, repeated attempts and rapid feedback. It strikes me that
most decisions made in organisations do not fit that environment and yet we’re making a lot of these
decisions on judgement or experience. What are the ways that we can sort of make better decisions with that in the context?
Well, in the first place, I think, you know, you shouldn’t expect too much.
And pat to low expectations.
I shouldn’t think too young or should have low expectations about improving decisions. I mean,
there is, you know, one basic rule is slow down, especially if you, if you have that immediate
conviction, slow down. There are procedures, you know, there are ways of reaching better,
better decisions, but reaching better judgment and we can talk about them.
I would love to hear.
If you really want to improve the quality of decision making, use algorithms. I mean,
whenever, wherever you can, if you can replace judgments by, by rules and algorithms, they’ll do
better. And there’s big social costs to trusting, allowing algorithm to make decisions, but, but the
decisions will likely to be better. So that’s one thing. If you can’t use algorithms, then you slow
yourself down. And then there are things that you can do for certain types of problems. And there are
different types of problems. So one class of problems, like forecasting problems, a friend,
Phil Tetlock, you know, has that book on super forecasters, where he identifies with people who
are good at forecasting the future, what they do that makes them good. And, you know, it tries to train
people and we can improve people. So that’s one class of problem. I’m interested specifically
in another kind of problem, judgment problems, where basically you’re considering options or you’re
evaluating a situation and you’re trying to give it a score. There, there, there is advice, I think,
on how to do it. For me, it goes back to something I did in the Israeli army when I was like 22 years
old. So that’s a long time ago, like 63 years ago. I was a psychologist in the Israeli army. And I was
assigned the job of setting up an interviewing system for, for the army. That’s ridiculous. But you know,
this was the beginning of the state of Israel. So people were improvising all over the place. So I
had a BA and I was, I think I was the best trained psychologist in the army. My, my boss was a chemist.
Brilliant. But anyway, and the, the existing system was one where people would interview and try to form an
intuitive global image of how well that recruit would do as a combat soldier, which was the objective,
the object of the interview. And because I had read a book of Paul Neal, I took a different talk. And
the different talk was, I identified six traits that I sort of made up and I had them ask questions and
evaluate each of these traits independently and score it and write down the score, then go on to the
next trait. And they had to do it for all six traits. And that was, that’s all I asked them to do. And
the interviewers who were about one year younger than I, all recruits, but very, very smart, selected
for being good at it. They were furious with me. And they were furious with me because they wanted to
exercise their intuition. And I still remember that one of them said, “You’re turning us into robots.” So I
compromised with them. And I said, “Okay, you do it my way.” And I told them, “You try to be reliable,
not valid. You know, I’m in charge of validity. You be reliable.” Which was pretty arrogant, but that’s,
that’s how I presented it. But then when you’re done, close your eyes and just put down a number of
how good a soldier is that guy going to be. And when we validated the results of the interview,
it was a big improvement on what had gone on before. But the other surprise was that
the final intuitive judgments added, it was good. It was as good as the average of the six straights,
and not the same. It added information. So actually, we ended up with a score that was
half, was determined by the specific ratings, and the intuition got half the way. And that,
by the way, stayed in the Israeli army for well over 50 years. I don’t know whether it’s,
I think it probably, some version of it was still being forced, but around 15 years ago,
a visit of my old base. And, and the commanding officer of the research unit was telling me how
they run the interview. And, and then she said, and then we tell them, “Close your eyes.” So that,
that had stayed for 50 years. Now, the “Close your eyes” and that whole idea is not the basis of the
book that I’m writing. So actually, I have the same idea really, that when you are making decisions,
you should think of options as if they were candidates. So you should break, break it up into
dimensions, evaluate each dimension separately, then look at the profile. And, and the key is,
delay your intuition. Don’t try to form an intuition quickly, which is what we normally do. Focus on the
separate points. And then when you have the whole profile, then you can have an intuition and it’s going to
be better because people make form intuitions too quickly. And the, the rapid intuitions are not
potentially good. So if you delay intuition until you have more information, it’s going to be better.
I’m curious how we delay intuition.
You delay intuition by focusing on the separate problems. So our advice is that if you have, you know,
a board of directors making decisions about an investment, we tell them you do it that way. Take
the separate dimensions and really think about each dimension separately and independently and don’t
allow, you know, if you’re the chair, don’t allow people to give their final judgment. Say, we’ll wait
until we cover the whole thing. I mean, if you find a deal breaker, then you stop. But if you haven’t found
a deal breaker, wait to the end and look at the profile and then your decision is almost certainly going to be better.
Does that include weighting the different aspects of the problem differently or do you highlight that in advance or do you?
Yeah. I mean, it makes you see the trade-offs more clearly. Otherwise, when we don’t follow that discipline,
there is a way in which people form impressions. Very quickly you form an impression and then you spend
most of your time confirming it instead of collecting evidence. And so if accidentally your impression was
in the wrong direction, you’re going to confirm it and you don’t give yourself a chance to correct
it. Independence is the key because otherwise, when you don’t take those precautions, it’s like having a bunch of
witnesses to some crime and allowing those witnesses to talk to each other. They’re going to be less valuable if you’re
interested in the truth than keeping them rigidly separate and collecting what they have to say.
What have you seen work in a repeatable way? It may be a particular organization or across organizations
to not only reliably surface disconfirming evidence, but then place a value on what is surface instead of
being dismissive. Is there a framework for that? Is there?
Well, yeah. There are many, you know, there are many procedures like red team, blue team,
a devil’s advocate. I mean, there have been, you know, many attempts. In general, you know,
if you are the head of a group that makes decisions, one of your missions would be to protect the dissenters
because they’re very valuable and you should make it painless to be sent or as painless as possible.
Well, it’s hard to be sent. It’s painful and costly. So protecting dissenters is important.
I’m curious about the distinction between intuition and judgment. You had mentioned intuition, judgment,
intuitive judgment. Can you walk me through some of like how those differ?
It’s a bit hard to separate and judgment is what you do when you integrate a lot of information informally
into a score of some kind.
I, we speak, we being my co-authors and I in the book we’re writing, we speak of judgment as
measurements. But it’s measurement where the measuring instrument is your mind. But you do it informally.
And because you do it informally, people are going to, are not necessarily going to agree. So wherever we
say it’s a matter for judgment, we’re allowing for differences, for variability.
Now, judgment can be more or less slow, more or less systematic. So at one end, you have pure intuition,
where you allow the judgment to go very quickly and so on. And at the other end, you try to delay
intuition. But ultimately, if you’re making it by judgment, you’re going to have a judgment and it’s
going to be like an intuition and you’re going to go with it. So the more or less deliberate judgment,
intuition is always involved at one point or another.
You’re either sort of like listening to it or fending it off?
Yeah. And our recommendation is fend it off.
Are there ways to judge the quality of somebody’s judgment?
Yeah, sure. I mean, some of them would be unique to the actual scenario,
but what are the sort of other ways that we could?
Well, I mean, you may require people to explain their judgments and evaluating the quality of the
explanation is, you know, whether it’s logical, whether it uses the evidence, whether it uses all
the evidence, whether it is strongly influenced by wishes, whether the conclusion was reached before
the judgments supposedly is made. You know, there are lots of ways for judgment to fail that can be
recognized. So it’s harder to recognize very good judgment, but it’s really easy to see, you know,
what goes wrong. And there are quite a few ways for judgment to go wrong.
And I think some of those ways are the cognitive biases, like overconfidence and sort of using
small or extrapolating from small sample sizes. And one of the interesting things that I’ve heard you
say in interviews before, so correct me if I’m off here, is that you’ve studied cognitive biases
effectively your whole life and you’re no better at avoiding them than anybody else.
Yeah, certainly. Not much better, no.
What hope do the rest of us have?
Not much. I mean, I never, you know, I think, you know, the quality of people’s judgment is affected
by education. But, so in general, you know, more educated people make better judgments, I think,
on average. But people decide I’m going to make better judgments. I don’t think that’s very hopeful.
I’m much more hopeful about organizations because organizations think more slowly and they have
procedures for thinking. And so you can control the procedures. Individual judgment is really hard to fix.
Not impossible.
One of the things that I see people do in response to cognitive biases and trying to account for them
is to sort of make a list of them, almost like a checklist, and then go through that checklist and
explain or rationalize why those things don’t apply in this situation. It also strikes me that the more
intelligent you are, the more stories you’d be able to conjure up about why you’re avoiding this.
I really think that’s not very hopeful because there are so many biases. And the biases work in
different directions anyway. So sometimes you can recognize a situation as one in which
you’re likely to be wrong in a particular way. So that’s like illusions. If you recognize a particular
pattern as something that gives rise to a visual illusion, then you don’t trust your eyes.
You know, you do something else. And the same thing happens when you recognize this is a situation where
I’m likely to make an error. So sometimes you can recognize the importance, for example, of what we’ve called
an anchor. So you’re going to negotiate a price with somebody. They start very high. And that has an effect.
So you know, or you should know, that the person who moves first in a negotiation has an advantage.
Because the first number changes everybody’s view of what is considered plausible. So it moves things
in that direction. That’s a phenomenon. People can learn that. And they can learn to resist it.
So when I was teaching negotiations, I would say, somebody does that to you, comes up with a number
that’s absurd. I would say, lose your temper. Make a scene. Say, I will not start the conversation from
that number. It’s an absurd number. I don’t want to let’s erase that number. So that’s something that,
you know, you know, you can improve if you recognize it. I think people are aware of the fact that you
shouldn’t make a decision about road safety within a short interval of a terrible accident.
So you should allow things to settle down and cool down. There is a more subtle error and harder,
harder to fix. But that, the best prediction, the best guess is always less extreme than your impression.
intuitive prediction. Intuitive prediction is, as we say, not regressive. It doesn’t recognize
regression to the mean. But statistics is statistics. And in statistics, things are less extreme.
Should I give you my favorite example of a bias? Yeah, please. Okay. I have been unable to think of a
better one. But the story is about Julie. That’s part of the story. That’s her name. She is a
graduating senior at university. And I’ll tell you one fact about her, that she read fluently when she
was four. But it’s a GPA. And the interesting thing here is that everybody has a number. As soon as I
told you that thing, her number came to mind. Now, we know where that number came from. We really,
that’s one of the few things that I’m reasonably sure I understand perfectly. And this is that when you
hear she read fluently at age four, you get an impression of how smart she is, of how precocious
she was at age four. And you could put that in percentiles. You know, where did that put her on a
percentile for sort of aptitude, ability? And it’s high. It’s not, you know, if she had read fluently
at age two and a half, it would be more extreme. But age four is pretty high. So say at the 90th percentile.
And then the GPA that comes to your mind is around the 90th percentile in the distribution of GPA.
So you pick something, your prediction is as extreme as your impression.
And it’s idiotic statistically, completely stupid, because clearly the age at which a child learned
to read is not all that diagnostic with respect to GPA. So it’s better than nothing. If you didn’t
know anything, you would predict the mean GPA, whatever it is, 3.1, 3.2. Now, she’s bright,
so probably a little higher, but not 3.7. You don’t want to. So that’s cool. That’s a bias. That’s
non-regressive prediction. And that’s very hard to resist. Sometimes I’m able to resist it,
but never when it’s important. You know, when I’m really involved in something, I don’t think about it,
but sometimes I will recognize, oh, you know, that’s the situation. I should moderate my prediction.
And if you’re conscious of it, that’s an example of one you can sort of talk yourself into.
Yeah. Yeah. You can talk yourself into. Although, you know, you usually will find a way to cheat
and end up with your intuition. It’s remarkable. You know, when you’ve been in academic life for a long
time, so you’ve been in many situations where people discuss a job candidate. And absurdities of that kind
are very common. So somebody, a job candidate gives a talk, and people evaluate the talk, and this is
something happens, you know, at Berkeley when I was teaching there, that somebody gave a talk. It wasn’t
a very good talk. Stammered a bit. Now, that person had teaching prizes, and yet what was said about him
in the discussion? He can’t teach. You know, we heard the talk. So that’s a mistake. But the funny
thing is you can point out to people that that’s a mistake. They still don’t want to hire him because
he gave a lousy talk. So it’s hard to resist. It’s interesting. I think one of the ways I probably
got my job is using psychology in the interview, which is asking why I was there, and then reinforcing
those beliefs throughout the interview. I want to come back just one second to the immediacy of sort
of having a stimulus and then making a decision. So we use the example of roads, and a tragic accident
happens, and you’re rethinking sort of policy or laws around the roads. How much of that do you think
is social pressure? And I’m wondering if we could even extrapolate that a little more to we’re taught
to answer questions on a test right away, right? So we see this question, then we answer it. We’re
taught that we, or maybe it’s reinforced, taught is probably the wrong word, that politicians need to
have a response, an immediate response to, and even if they know the best thing to do is like, okay,
let this settle, take some time. It’s society writ large seems to demand it, like the environment is
not conducive. I think it’s pretty clear that people prefer leaders who are intuitive and who are
overconfident. Leaders who deliberate too much are viewed with suspicion, you know. So I think Obama
Obama was at a certain disadvantage relative to George Bush, you know.
Because he was seen as more deliberate.
Yeah, he was more deliberate. And then when you’re very deliberate, you look as if you don’t know what
you’re doing. But when you act with confidence, so people want leaders who are intuitive, I think,
they’re very much. Provided they agree with me.
I’m just working my way back through some of these rabbit holes that we’ve gone down. You taught
negotiations. I’m curious what would be in your sort of syllabus for negotiations that everybody should
learn about negotiations when it comes to your work in psychology.
Well, you know, that goes back to a theme that we started with, the essence of teaching
negotiations, that negotiations is not about trying to convince the other guy. It’s about trying to
understand them. So again, it’s slowing yourself down. It’s not doing what comes naturally,
because trying to convince them is a prime pressure. Arguments, promises, and threats are always a prime
pressure. And what you really want is understand, you know, what you can do to make it easy for
them to move your way. Very non-intuitive. That’s a surprising thing when you teach negotiation. It’s not
obvious. You know, we are taught to apply pressure. I mean, socialize that way.
You mentioned that there was procedures for thinking in organizations. Are there any that
stand out in your mind that we could use to elevate thinking, and if not elevate,
but give feedback on the quality of thinking to improve it? Well, I think one of the ideas that
people like the most is an idea by Gary Klein, what he calls the premortem. And that’s the universal
winner. People really like that idea. And this is that when you’re about to make a decision,
a group, not quite, because if you’ve made it, it’s too late, but they’re approaching you. And then
you get people in a room who can be the people who are making the decision. And you said, suppose it’s two
years from now. And we made the decision that we’re contemplating. And it turned out to be a disaster.
Now, you have a page in front of you, write the history of that disaster in bullets. That’s the
pre-mortem. And it’s beautiful as an idea. It’s beautiful because when people are coming close to a
decision, it becomes difficult to raise doubts or to raise questions. People who are slowing the group
down when the group is nearing a decision are procedures really, you know, it’s annoying. You
know, you want to get rid of them. And the pre-mortem legitimizes that sort of dissent and that sort of
of doubts not only legitimizes it, you know, it rewards it. And so that’s a very good idea. I don’t,
you know, I don’t think that it’s going to prevent people from making mistakes, big mistakes,
but it could certainly, it will alert people to possible loopholes, to things that they ought to
do to make a safer decision. So that’s a good procedure. And there are many others.
What comes to mind. What comes to mind is, is to make intelligence, I mean,
the collection of, of the information independent of the decision-maker’s wishes. And you really want
to protect the independence of the people collecting the evidence. And I would add to, you know, a procedure
that really people don’t like, but if it were possible to implement it, I think would be good.
And that’s, that when you’re going to be discussing a topic, and it’s done in advance on people in sense
and material to think about the topic, that you may want them to write down their decision, the decision they
are in favor of before the discussion starts. That has many advantages. It’s going to give you a broader
diversity of points of view, because people tend to converge very quickly in a, in a group discussion.
And it forces people to be better prepared. It’s, except people don’t want this.
So I, I don’t know whether it’s even possible to implement it, but clearly, if you could,
it would be a good idea.
What are the reasons people don’t want it?
It’s too much work.
Right. Forces you to do a lot rather than the signaling you can sort of get away with.
Yeah. And then, you know, there’s somebody who is going to prepare the case. And so I glanced at
the material and then, you know, so a lot of meetings are a tremendous, a sink for wasted time.
And improving the quality of meetings would be a big thing.
Do you have any insights on how to do that?
Keeping them short. You know, I’m not a professional at fixing meetings. So I have,
I have a few ideas, but not an incomplete view. The, the question of structuring the meetings to
be discussing topics one at a time, that I think is, is really useful. I’ll give you an example. I mean,
it’s something that I suggested when I was consulting, but for some reason,
people didn’t buy that suggestion. So you, when an investment is being discussed,
say by an investment firm, some staff people, if it’s a big investment, staff people will prepare
a briefing book with chapters. Now, our recommendation would be that the staff should end each chapter with
a score. How does that chapter taken on its own independently of anything else affect the likely
decision? And then you could structure the meeting that discussed this and the meeting of the boards,
say, to discuss these scores one at a time. That has the effect that I was talking about earlier,
making the decision, making the judgments about the dimensions. We call them mediating assessments,
is a drogen tube. The mediating assessments come first, and then you have the profile of them,
and then you make a global judgment. And you can structure it. So if the staff has presented a score,
and you discuss in the board, do we accept their score? You’re forcing people to have a look at
the evidence. And think about why they would accept or reject. And then they feel like they have to
construct an argument that might be less intuitive. That’s it. So, you know, there are ways of doing this,
but if you’re going to be too rigid about it, it won’t work either. I’m curious what other advice
you gave as a consultant that nobody followed. Oh, I mean, virtually all the advice I gave,
people don’t follow. I mean, you know, I think that’s, that’s not, you shouldn’t, you know,
you’re not going to be a consultant if you expect your advice to be taken. You have to give the best advice
you can. What would be other examples of something you think could be widely applicable that you would advise,
you would have advised people and you just sort of like saw them drop the ball?
Well, I mean, you know, I would advise people who make a lot of decisions to keep track their
decisions and of how they turned out so that later you can come and evaluate your procedures and see
whether there is anything that is in common with those decisions that turned out well and didn’t,
not so well and so on. People hate doing this.
Why do you think people hate doing it?
Oh, because, because retrospectively, they may look foolish, some of them or all of them,
or in particular, the leader. So they really don’t like keeping track. I mean, there are exceptions.
Ray Dalio and his firm, and where everything is explained. Bridgewater, yeah. Bridgewater. But in
general, in my, I haven’t consulted with Bridgewater, they don’t mean me. But in general, when I suggested
that, it never went anywhere. What are the variables that you would recommend people keep track of?
Like, what would your decision journal look like?
Oh, I mean, I, my, my decision journal would be a mess.
I don’t, I’m not putting myself as an example, but…
So obviously the outcome, but you’ve got to do that post after.
Yeah, but no, no. You, you would want to say, what were the main arguments, pro and con? What were
the alternatives that were considered?
You know, it doesn’t have to be very detailed, but it should be enough so that you can come later and
debrief yourself.
So do you have a calibration, like what degree of confidence you are?
That would be good. Then, you know, it would depend on something that you could evaluate later.
It strikes me that decision journals and premortems are a way to identify people that are sort of,
perhaps, suppressed by their manager, where you have somebody who’s actually a better,
better at exercising judgment than the person that is, you know, that they’re working for.
And this would be a pain-free sort of way to calibrate that score over time and identify
the quality of judgment in a consistent way.
Oh, yeah. I mean, that strikes me as worth a lot of money to an organization.
Yeah. But, but also very costly. And you, you will see that certainly anything that threatens the
leader is not going to be adopted. And, and leaders may not want something that threatened their
subordinates either. People are really very worried about embarrassment.
You’re writing a book now on noise.
Yeah.
Tell me about noise and decision-making. Can you explain the concept?
Yeah. I can really explain it by saying what, you know, was the beginning of it,
and which was a consulting assignment in an insurance company where we, I had the idea of running a test
to see whether people in a given role who were supposed to be interchangeable agreed with each other.
So, you know, when you come to an insurance company and an underwriter gives you a premium,
the underwriter speaks for the company. And so it’s, you expect that any underwriter,
that it doesn’t matter which underwriter you get to afford a premium. And the company has that
expectation. It shouldn’t make much difference. So we tested that. And they constructed some cases.
And then we had some like 50 underwriters assess a premium for the case.
With the same information.
Hmm?
Yeah. With a really very realistic, we didn’t construct it. They constructed the case.
So, and they conducted the experiment. But now, the interesting question is,
how much variation do you expect there to be? So, we asked the executives the following question.
Suppose you take two underwriters at random. By what percentage do they differ? I mean,
you look at the difference between their premium, divide that by the average premium. What number do you
get? And people expect 10%. By the way, it’s not only the executives in that company. For some reason,
people expect 10%. And it was roughly 50%, 5-0. So that’s, you know, that’s what made me curious about
noise. That and the fact that the company was completely unaware that it had the noise. It took
them completely by surprise. So now we’re writing a book because there’s a lot of noise. So wherever
a rule is that wherever there is judgment, there is noise. And more of it than you think. So that’s the
pattern.
Are there procedures to reduce noise? And conversely, it strikes me that the variation would be good,
but maybe only in an evolutionary concept.
Well, we call that noise is useless variability. I mean, variability can be very useful if you have
a selection mechanism and some feedback. So evolution is built on variability, but of course,
it’s useful, it’s useful. But noise among ambient writers is useless. There’s nothing. Nothing
gets learned. There’s no feedback. It’s just noise. And it’s costly. The first advice, of course, would be
algorithms, as I said earlier. So algorithms are better than people, than judgment. That’s not intuitive,
but it’s really true. And after that, then the procedure that I mentioned earlier for making
decisions in an orderly way by breaking it up into assessments. That’s the best that we can do.
And there is one very important aspect that I haven’t mentioned. And this is training people in what the
scale is. So there is one piece of advice that you’d have for underwriters, that they should always
compare the case to other cases. And if possible, if you can have them share the same frame of
reference with other underwriters, you’re going to cut down on the noise.
Oh, that’s a clever idea, yeah.
And that exists in human resources, where performance evaluation, which is one of the scandals of modern
commerce, how difficult it is. But performance evaluation, they have the thing that’s called
frame of reference training, which is teaching people how to use the scale. There’s a lot of variability in
the scale. And a part of what the super forecasters do, they make judgments in probability units,
and they teach them to use the probability scale. So learning the scale is a very important aspect of
reducing noise.
I know we’re coming up to the end of our time here. What have you changed your mind on in the past 10 years?
Oh, a lot.
Anything big?
Yeah. There’s been a replication crisis in psychology. And some of the stuff that I really
believed in, when I wrote “Thinking Fast and Slow”, some of the evidence has been discredited. So I’ve had to
change my mind.
What are the, what’s the biggest?
Some of the sexiest stuff, priming and unconscious priming, and so it just hasn’t held up in replication.
And I believed it, and I wrote it as if it were true, because the evidence suggested it. And in
fact, I thought that you had to accept it, because that was published evidence. And I should have,
I blame myself for having been a big gullible. That is, I should have known that you can publish
things, even if they’re not true. But I just didn’t think that through. So I changed my mind.
I’m now much more cautious about spectacular findings. I mean, very recently, I’ve come,
I think I have a theory about why psychologists are prone, or social scientists generally are prone to
to exaggerate, to be overconfident about their hypotheses. So I’ve done quite a bit of learn.
What’s the theory?
Well, the theory, the one element of the theory is that all these hypotheses are true. In what sense?
That, you know, if I, there’s a famous study that you mentioned wrinkles to people, and then
you measure the speed at which they walk, and they walk more slowly. Turns out that hasn’t held up in
replication, which is very painful. It’s one of the favorite studies. But actually, you know, that if
you mention wrinkles, and it’s going to have any effect on the speed of walking, it’s not making to make,
it’s not going to make people faster. If it has any influence, it’s going to make them slower. So
directionally, all these hypotheses are true. But what there is, is what people don’t see, is that
then huge number of factors that determine the speed at which individuals walk, and the differences in the
speed of walking between individuals. And that’s noise. And people neglect noise. And then there is
something else, which is, touches on both philosophy and, and psychology. When you have intuitions about
things, there are clear intuitions, and there are strong intuitions. Another thing. So clear intuition is if I
offer you a trip to Rome, or a trip to Rome and an ice cream cone, you know what you prefer. It’s easy. But it’s very
weak, of course. I mean, the amount of money you would pay to get a trip to Rome, a trip to Rome and an ice cream cone,
nothing. But when you are a philosopher, and I should add one thing, to see the clear intuitions,
you have to be in this kind of situation that psychologists call within-subject. That you
have both. You have both with the ice cream cone and without the ice cream cone. So in a within-subject
situation, that’s an easy problem. In a between-subject situation, it’s an impossible problem. But now,
if you’re a philosopher, you’re always in a within-subject situation. But people live in a
between-subject situation. They live, you know, in one condition. And the same thing is true for
psychologists. So psychologists live in a, when they cook up their hypotheses, they’re in a within-subject
situation. But then they make guesses about what will happen between subjects. And they’re completely
lost between clear intuitions and strong intuition. We have no way of calibrating ourselves. So that makes
us wildly overconfident about what we know and reluctant to accept that we may be wrong.
That’s a great place to end this conversation, Danny. Thank you so much.
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Daniel Kahneman won the Nobel Prize for proving we’re not as rational as we think. In this timeless conversation we discuss how to think clearly in a world full of noise, the invisible forces that cloud our judgement, and why more information doesn’t equal better thinking. Kahneman also reveals the mental model he discovered at 22 that still guides elite teams today.
Approximate timestamps:
(00:36) – Episode Introduction
(05:37) – Daniel Kahneman on Childhood and Early Psychology
(12:44) – Influences and Career Path
(15:32) – Working with Amos Tversky
(17:20) – Happiness vs. Life Satisfaction
(21:04) – Changing Behavior: Myths and Realities
(24:38) – Psychological Forces Behind Behavior
(28:02) – Understanding Motivation and Situational Forces
(30:45) – Situational Awareness and Clear Thinking
(34:11) – Intuition, Judgment, and Algorithms
(39:33) – Improving Decision-Making with Structured Processes
(43:26) – Organizational Thinking and Dissent
(46:00) – Judgment Quality and Biases
(50:12) – Teaching Negotiation Through Understanding
(52:14) – Procedures That Elevate Group Thinking
(55:30) – Recording and Reviewing Decisions
(57:58) – The Concept of Noise in Decision-Making
(01:01:14) – Reducing Noise and Improving Accuracy
(01:04:09) – Replication Crisis and Changing Beliefs
(01:08:21) – Why Psychologists Overestimate Their Hypotheses
(01:12:20) – Closing Thoughts and Gratitude
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