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0:01:37 A media ecosystem that focuses on engagement versus enlightenment will get you to whatever
0:01:44 conclusions sanctifies your beliefs. The recent murder of a CEO immediately triggered my reflexive
0:01:50 go-to that this is a function of the struggles that young men face. But here’s the truth.
0:01:59 I don’t know. And neither do you. At least not yet. We don’t have nearly enough information to
0:02:04 draw conclusions, and we live in a society where everyone fast forwards to the end without having
0:02:11 watched the film, believing they know what happened and why. We are increasingly deferring to our
0:02:18 gut and emotions versus slowing our thinking. The Jedi master of the importance of the pace
0:02:25 of our thinking, Daniel Kahneman, passed away earlier this year. Several media outlets have
0:02:31 contacted me regarding the murder of the United Healthcare CEO, and in a nod to Professor Kahneman,
0:02:38 my comment has been, “I don’t know.” The end of the old year and start of the new is a good
0:02:44 time to refocus on what is important. That means stepping back and looking at life not with the
0:02:52 emotional reactive part of our brains, but with the rational side. Daniel Kahneman, the late Israeli
0:03:00 American psychologist, called this “thinking slow.” Inspired by Kahneman’s work, particularly with
0:03:08 longtime collaborator Amos Tversky, about decision-making, I’ve tried to consciously employ
0:03:14 thinking slow to make important decisions. Here’s what I had to say about Kahneman’s ideas
0:03:26 following his death last March. Happy New Year! Think slow as read by George Hahn.
0:03:35 Daniel Kahneman, who died last month, leaves an extraordinary intellectual legacy.
0:03:41 Few people have unpacked our behaviors with greater insight than Kahneman and his longtime
0:03:47 collaborator, Amos Tversky. In the wake of his passing, we’ve been reflecting on the many ways
0:03:53 his work has shaped our thinking. Something I wish I’d figured out when I was younger is that
0:04:00 greatness is in the agency of others. I have often tried to identify a guide or sherpa for different
0:04:06 aspects of my life. Jesus and Muhammad Ali are my yodas around social issues. Love the poor,
0:04:14 be fearless and poetic. And Peter Drucker informs my views on the economy. The purpose of an economy
0:04:20 is to create a middle class, etc. Professor Kahneman helps me navigate the straight between
0:04:28 instinct and decision. Some thoughts. Kahneman studied how humans make decisions,
0:04:35 and the shortcuts our minds take unbeknownst to us. These shortcuts are efficient. They foster a
0:04:40 key skill for survival, the ability to make rapid decisions with incomplete information.
0:04:45 We have to make thousands of decisions every day, and we couldn’t leave the house if we had to
0:04:53 objectively analyze every choice. Breakfast, outfit, route, music, etc. Our efficiency comes at the
0:05:01 cost of accuracy. Many instinctual decisions will be poorly calibrated, i.e. wrong.
0:05:08 To facilitate the requisite speed, our brain buttresses our decisions with artificial confidence.
0:05:15 Kahneman’s body of work demonstrates that we are often wrong, but frequently confident.
0:05:21 These shortcuts and mistakes are present in the structure of our brains and impossible to avoid,
0:05:27 but recognizing them helps us discern between trivial and important decisions
0:05:32 and invest the appropriate intellectual capital. Put another way, take a beat,
0:05:36 and you increase the likelihood of making a better decision.
0:05:44 Though he was a psychologist by training, Kahneman got his Nobel Prize for Economics.
0:05:52 Before him, economists relied on the assumption of a homo-economicus as the prize committee
0:05:56 wrote, “a self-interested being capable of rational decision making.”
0:06:03 But Kahneman, quote, “demonstrated how human decisions may systematically depart
0:06:11 from those predicted by standard economic theory,” unquote. That dry language obscures
0:06:18 an intellectual nuclear detonation. Expectations about human decisions, whether to work at a
0:06:24 certain job, how much to pay for a specific good, are the foundation of economic theory.
0:06:34 Kahneman’s show those expectations were incorrect. One of Kahneman and Tversky’s earliest insights
0:06:41 was the simple observation that we feel the pain of loss more intensely than the pleasure of profit.
0:06:50 It’s irrational to an economist, but we put more value on not losing $100 than we do on gaining
0:06:59 $100. We also have a skewed perception of probable gains and losses. We overestimate
0:07:05 the likelihood of unlikely things. Insurance is a profitable business because people would
0:07:12 rather suffer a series of guaranteed small losses, premiums, to avoid the risk of a single but
0:07:18 unlikely catastrophic loss. The healthy profit margins of insurance companies reflect our tendency
0:07:25 to overestimate the likelihood of calamities. Overestimating an unlikely outcome is also the
0:07:32 secret behind the Lotto, which offers terrible odds. Some examples of how this has influenced my
0:07:38 actions. Note, I am not claiming these are the right way to put Kahneman’s insights to use,
0:07:47 just my way. What I’ve done. I actively limit the number of decisions I have to make to preserve
0:07:54 neuron power for the key ones. I have other people order for me at restaurants. I have a uniform
0:07:59 for work and working out, wearing the same thing every day, and someone else buys my clothes.
0:08:05 I delegate the majority of decisions at ProfG Media. I participate in a one-hour
0:08:10 weekly editorial meeting and check in with my executive producer two times per month on business
0:08:17 issues. I have not planned a vacation in 20 years or put anything on my calendar in 10.
0:08:22 Despite having made more than 30 investments in private firms over the past decade,
0:08:28 I review few documents and rarely even sign them. That’s all handled by council.
0:08:35 I try to reserve the largest possible cash of gray matter for research, thinking,
0:08:43 storytelling, writing, presentations, etc., and investment decisions. Over the next five years,
0:08:49 I plan to outsource all investment decisions so I can focus on storytelling.
0:08:57 Seven years ago, I canceled all my insurance coverage, health, life, property, flood, etc.
0:09:03 I don’t own a car, but when I did, we purchased the minimum amount required by law.
0:09:10 This is a position of privilege. Don’t cancel your health insurance, as there is no disease
0:09:17 or property loss that would cause me financial strain. Since adopting this strategy, I’ve saved
0:09:20 $1.4 million in premiums.
0:09:28 My belief in the market’s collective loss aversion has reshaped my investment portfolio
0:09:36 over the past decade. The majority, 90-plus percent, of my investments used to be in publicly
0:09:46 traded stocks. That share is now less than 20 percent. Instead, I lean into my access to private
0:09:52 companies as I can absorb big losses and withstand illiquidity. Per condominium, there have been
0:10:00 periods of real pain. In the last 12 months, I’ve registered four wipeouts, four investments that
0:10:10 dropped to zero. However, two other investments registered a 4x and a 25x return. My net return
0:10:19 has beaten the market, but it’s been more taxing emotionally than just investing in SPY, as I
0:10:27 have trouble shaking the big losses. Again, making condominium’s point. Prospect theory,
0:10:34 one condominium is Nobel, but he’s best known for his seminal book, Thinking, Fast and Slow.
0:10:42 The titular concept that we have two thinking systems, a fast one for intuitive emotional
0:10:49 insights and a slow one for logical calculated decisions is something that has saved me from
0:11:00 me dozens of times. Our fast thinking system is an incredible tool. It allows us to drive cars,
0:11:08 compare prices, recognize friends at a distance, and play sports. But its availability makes us lazy.
0:11:15 Why do the hard work of thinking through a problem when we can just go with our gut? In any decision
0:11:23 of consequence, it’s good policy to slow down, get out of the stimulus response cycle, and let your
0:11:30 slow thinking catch up. That’s not to say we should disregard our gut. Just don’t let it take the
0:11:37 wheel. Specifically, I try to be vigilant about not letting my fast system make decisions that
0:11:43 merit the attention of my slow system. Often, these are reactions to things that upset me.
0:11:49 Last week, a journalist who’s active on social media posted on threads that Jonathan Haidt and I
0:11:57 were “grifters” and that I do not care about young people. This pissed me off. Feeling threatened,
0:12:03 my lizard brain took over, and I saw the situation as a conflict, a threat to my standing in the
0:12:11 community. That framing, courtesy of my instinctive fast thinking system, dominated my consciousness
0:12:18 for the next four hours, distracting me from my kids and vacation. I drafted an angry response to
0:12:25 counter the threat. Then I shared the situation with several members of my team, able to evaluate
0:12:32 the situation dispassionately. They were universal in their response. “Let it go.”
0:12:41 I was just playing into an attempt to draw attention with ad hominem attacks that algorithms love,
0:12:50 like Trump or Musk. The learning, other than social media, is a cancer. Speaking to others
0:12:59 before acting is a great way to slow your thinking. In 2010, Kahneman and another Nobel
0:13:06 winner, Angus Deaton, published a study which appeared to show conclusively that income was
0:13:15 strongly correlated with happiness at low income levels, but that income above $75,000 had no impact
0:13:23 on happiness. The study was widely celebrated, but in 2021, a much less famous academic,
0:13:29 Matthew Killingsworth at Wharton, published a paper reaching a contrary conclusion based on a
0:13:36 sophisticated smartphone-based happiness tracking system. Rather than ignore the unknown academic
0:13:42 challenging him or using his global fame to undermine the upstart, as is the norm in Congress
0:13:50 or pretty much anywhere else, Kahneman teamed up with Killingsworth. They engaged in a collaboration
0:13:56 alongside a third academic neutral to the dispute, a process Kahneman pioneered.
0:14:03 Working together, they found that Kahneman’s original study had measured the decrease in
0:14:11 unhappiness but hadn’t captured the upside high income people enjoyed. When more carefully measured,
0:14:18 happiness did continue rising with income. However, there were dramatic diminishing returns.
0:14:27 There were real gains to happiness in moving from $100,000 income to $200,000, but to see that same
0:14:39 gain again required another doubling of income to $400,000. Extend the curve and it flattens further.
0:14:47 I believe this should influence tax policy. A substantial increase in the progressivity
0:14:52 of income tax would offer a net positive in overall well-being.
0:15:04 According to the IRS, 26,576 U.S. households reported income of over $10 million in 2020,
0:15:16 totaling $824 billion in income. We collected $210 billion in income tax from these filers,
0:15:25 or 25% of their income. If we collected an additional 25% of just the income over $10
0:15:32 million, there would be little impact on the lifestyle or happiness of these taxpayers.
0:15:41 But the additional $140 billion in revenue could cut child poverty in half $100 billion
0:15:51 and homelessness $20 billion. These investments would generate a massive increase in the well-being
0:16:00 of our commonwealth and a huge economic boon. These societal ills cost us trillions in lost
0:16:09 productivity. Plus, we’d have enough left over to pay for most of NASA $25 billion and rich people
0:16:19 love space. Ideas are yours to play with, disassemble, shape, and apply where needed.
0:16:28 I’ve taken the idea of slowing down and mixed it with atheism and stoicism to enhance my personal
0:16:35 relationships. When my kids are disagreeable, i.e., awful, or my partner is upset or angry,
0:16:43 I often respond as if it’s a threat to my authority or value. I reflexively escalate and get back in
0:16:54 their faces. I now try to disassociate. What I mean by that? I take myself out of myself
0:17:01 and see someone I care about upset. Being an observer versus being in the line of fire
0:17:10 inspires different emotions. When my kid is agitated, I recognize it’s more about what
0:17:15 they are experiencing elsewhere and they know that no matter how unreasonable they are,
0:17:23 I will still love them unconditionally. When my partner is upset, my role is to notice it,
0:17:30 to give witness to their life. Their emotions matter regardless of my ego or the perceived
0:17:35 criticism. I can take arrows, get shot in the face, and never lose sight of my role as their
0:17:42 protector. I am the man of the house. If that sounds like we digress to traditional gender roles,
0:17:52 trust your instincts. I’ve slowed down, thought about it, and determined it works for us.
0:18:08 Life is so rich.