Learn. Share. Evolve…

0:00:07 Delay your intuition. Don’t try to form an intuition quickly, which is what we normally do.
0:00:12 Focus on the separate points, and then when you have the whole profile,
0:00:15 then you can have an intuition and it’s going to be better.
0:00:26 Welcome to The Knowledge Project. I’m your host, Shane Parrish. In a world where knowledge is power,
0:00:30 this podcast is your toolkit for mastering the best of what other people have already figured out,
0:00:33 so you can use their insights in your life.
0:00:42 Before we get into the interview, I want to tell you about a moment that didn’t make it into the episode.
0:00:49 I first came across Daniel Common’s work in the early 2000s. His impact on me and so many people
0:00:55 around the globe has been unbelievable. By the time I sat down with him in his New York City home in
0:01:01 2019, I had so many questions for him. Condon won a Nobel Prize in Economic Sciences in 2002,
0:01:08 yet he never took an economics course. His central message was very simple. If we want to make better
0:01:15 decisions, we need help. Danny died last year on March 27th, 2024. He was 90. This conversation is
0:01:22 now one of the final opportunities to hear directly from one of the most influential thinkers of our time.
0:01:28 I get messages about this episode every week. People come away with new insights on everything from life
0:01:36 to decision making. I re-listened to it recently and it’s timeless. That’s exactly why I’m republishing it.
0:01:42 Consider loss aversion, one of his most important discoveries. Why does losing $100 hurt twice as much
0:01:49 as gaining $100 feels good? The asymmetry affects everything. It affects your stock portfolio, your golf
0:01:55 game. Check your portfolio when it’s down and you’ll start making emotional decisions. A golfer putts better
0:02:02 for power than for birdie. But here’s what happened near the end of our interview. Danny’s phone rang and it
0:02:07 was loud. He’d forget to turn it off. We’re almost done the interview at this point but he answered and
0:02:13 someone obviously wanted him to give a talk or review a book. He ended the call with words that have stayed
0:02:19 with me since then. My rule is I never say yes on the phone. I’ll get back to you tomorrow. I wanted to
0:02:26 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
0:02:32 to avoid saying yes intuitively. It gave him time to think. He’s always bombarded with requests and he
0:02:38 often says yes when he didn’t want to. At first, he would try saying no. That date doesn’t work. That
0:02:43 timeline doesn’t work. But what happened in those moments was it turned into a negotiation. What about
0:02:50 another date? Another timeline? So he hit on this rule. And to me, this is his most practical discovery.
0:02:57 Most people don’t even know about it. This rule lets you reprogram your unconscious mind. Your desired
0:03:03 behavior becomes your default behavior. And that’s incredibly powerful. It changed my life. I now
0:03:08 exercise every day. It’s actually easier than three times a week. The activity, duration, and scope can
0:03:15 change but working out and exercising doesn’t. I think I’ve missed five days in five years at this point.
0:03:20 And I talk about this in my book, Clear Thinking. And the concept has changed so many lives, including
0:03:26 my great friend, Brent Beshore. In episode 196, we talk about this a little. Several parts of this
0:03:31 conversation stuck out when I was re-listening to it. First, we talk about happiness versus satisfaction.
0:03:38 Happiness is feelings. It’s mostly social. Am I with the people who love me and whom I love back?
0:03:43 Satisfaction, on the other hand, is how you feel about your life, your job, your career,
0:03:50 conventional aspects. Danny argued people want satisfaction more than happiness. Second,
0:03:57 changing behavior. Make good behavior easier and bad behavior harder. The insight? All behavior is
0:04:04 equilibrium. Rather than pushing people to change, ask why they aren’t doing it already. Third, behavior
0:04:11 is situational. Want to understand behavior? Look at the situation. When someone acts in ways that don’t
0:04:16 make sense, ask yourself, ask yourself, what would the world have to look like for that behavior to make
0:04:24 sense? Fourth, agents making decisions on your behalf beat you at certain types of decisions. They have no
0:04:31 sunk costs. They have no emotions. Brian Johnson talks about this in episode 188. He turned his health
0:04:38 decisions over to effectively an algorithm because that algorithm makes better decisions than he does.
0:04:44 Fifth, our beliefs are formed by people more than facts. We agree with people we like,
0:04:49 despite the facts. It’s easier to believe a lie from someone you like than a truth from someone you
0:04:57 dislike. We form identity beliefs. Liberal, conservative, Democrat, Republican. They can do no wrong. If they’re
0:05:03 wrong, we’re wrong. And we can’t handle that. Finally, intuition. Danny had talked about this so much,
0:05:08 his answers sounded repetitive. So I framed my question on this to include his typical answer
0:05:15 in the question, forcing him to think a little deeper. Whether this is your first listen or your
0:05:18 third, you’ll come away with ideas that you can use in life.
0:05:40 Daniel, I’m so happy to give it a chance to talk to you.
0:05:43 Well, I’m happy to have you here.
0:05:47 What was your childhood like? What were you like as a child?
0:05:56 Oh, my God. That was a long time ago. I was, I was an early child, as you might expect, I suppose.
0:06:04 I was, I thought I’d be a professor when I was like three or four years old because people told me I would
0:06:12 be because I probably spoke with long words and stuff like that. So, and then the rest of my childhood,
0:06:21 I mean, I was five when World War II began. So, and I was a Jew in France. So, I’ve had a difficult
0:06:28 childhood, but from that point on. But, but I was, was I like, yeah, I was a, I was a nerdy child.
0:06:36 I was quite inept physically. Very fortunately for me, when I’d finally moved to Israel at age 12,
0:06:43 they held me up a grade in them. And that was all right. But that’s, that’s what I was like.
0:06:47 Are there any particular lessons or memories that stand out for you?
0:06:55 There are two of them that I speak about. So, one is that I was, I was a psychologist very early on.
0:07:04 That was, that was very clear. I, I wrote an essay before I was 11. I remember where, because it was,
0:07:11 it was a German counterattack. It was during that period we were in Paris. And I wrote an essay about
0:07:19 faith and religion. And it was a very pompous essay. I had a little book that was, that was titled
0:07:28 what I, what I write about what I think, something pompous like that. But the essay started with
0:07:36 another pompous thing that I quoted Pascal. My, my sister had passed her exams and I had read,
0:07:44 she’s, you know, she’s studied some Pascal and I had read it. And Pascal had said that faith
0:07:56 is God made sensible to the heart. And, you know, little me, I said, how true. That’s what my essay said.
0:08:04 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
0:08:12 that’s what religious pomp is for. Cathedrals, organ music. They give you, and I call that urzat faith,
0:08:21 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
0:08:30 must do with me. That’s, that’s a psychologist. So, it’s clear that, you know, that was my calling. And so,
0:08:35 that’s one significant memory of my childhood.
0:08:36 So you wanted to be a psychologist?
0:08:46 I think so. I think so. I mean, I, you know, it’s always had that point of view that later, as a
0:08:52 teenager, I was, you know, interested in all the philosophical issues, like, you know, does God
0:08:58 exist? And what’s good and bad? And stuff like that. And why shouldn’t we masturbate? You know, serious
0:09:06 questions. But, but I discovered that, actually, I was less interested in the question of whether or
0:09:13 not God exists, then in why do people believe that he exists? That I thought was interesting. And I
0:09:18 wasn’t particularly interested in the question of what’s good or bad, but I was really interested in
0:09:24 what makes people angry and indignant. So, you know, I’ve had the psychological point of view since,
0:09:26 turns out, since my childhood.
0:09:33 Was there anybody that sort of influenced you to go on to study this? I mean, it’s one thing to have
0:09:39 these dreams as like a 12, 13, 14-year-old boy. It’s another to turn this into, you know, probably
0:09:43 the most eminent career that’s ever happened for a psychologist.
0:09:50 No, not the most eminent career. You know, and I wasn’t sure, actually, that I would do psychology.
0:09:59 And when I took a vocational exam to tell me what I was good at, and psychology and economics stood in
0:10:07 out. But, you know, that was unexpected. And then I took psychology as an undergraduate and mathematics,
0:10:13 at which I was not particularly good. So, and no, it’s not that I knew at the time that, you know,
0:10:19 I had that calling to be a psychologist. It didn’t occur to me. I thought, you know, I thought I’d be a
0:10:26 professor in one thing or another. I mean, I thought I’d be an academic, but not psychology specifically.
0:10:32 You worked with Amos Tversky for a long time. Are there any particular stories that you remember
0:10:34 about working with him that bring a smile to your face?
0:10:44 Almost everything about working with him brings a smile to my face. You know, he was a very unusual
0:10:51 person. Most people who knew them thought that he was the smartest person that I’ve ever met.
0:10:57 And in fact, the famous psychologist, Nick Nesbitt, said that it’s sort of an intelligence test when
0:11:03 you said that when you’re with Amos, how long does it take you to figure out that he’s smarter than you
0:11:09 are. And the faster you figure that out, the smarter you are. So, you know, he was, uh, he was
0:11:17 super bright and very, very funny. He joked a lot. He laughed a lot at his own jokes. And that was
0:11:25 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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0:12:49 You have an interesting distinction between happiness and satisfaction. Can you walk us through that?
0:12:58 Yeah, sure. I mean, the word happiness is so ambiguous and it means so many things to many people,
0:13:06 but one sensible interpretation of it is that it’s got to do with your emotions, with how you feel,
0:13:12 with the emotional tone of your life, whether it’s a happy life, you know, it’s pleasant to be you.
0:13:19 Life satisfaction is a completely different thing. I mean, life satisfaction is how you feel about your
0:13:24 life when you think about your life. And most of the time, you don’t think about your life, you just live.
0:13:33 But, you know, sometimes you sort of look and that’s when you determine how satisfied you are.
0:13:38 That’s life satisfaction. It’s not satisfaction, it’s life satisfaction.
0:13:43 Should we balance the two? Or how would you think about them? Should we be more happy when we’re younger,
0:13:44 more satisfied when we’re older?
0:13:51 That thought had never occurred to me. When I began to work on this, I started out thinking that
0:14:00 happiness, in that sense of how you feel when you live, that was reality. And that
0:14:07 life satisfaction was just stories that people tell themselves. And the important thing was to be
0:14:13 happy in real time. But later, when we did more research, it turned out that
0:14:19 the circumstances that make people happy and the circumstances that make them satisfied with their
0:14:25 life are not the same. So happiness is mostly social. It’s, you know, it’s being with people
0:14:33 you love and who love you back. That’s, that’s a lot of what happiness is. Life satisfaction is much more
0:14:39 conventional. It’s to be successful. And, you know, so it’s money, education, prestige,
0:14:46 that sort of thing is what life satisfaction is about. So those are two very different things.
0:14:53 I thought that life satisfaction is irrelevant. You know, that’s how I began. And we, we had a research
0:15:00 program where we were, we were trying to, you know, to show that this is the case. But then after a few
0:15:09 years, I realized that what people really want in their life is they don’t seem to care about how happy
0:15:14 they’ll be. They seem to want to be satisfied with their life. They seem to want to have a good story
0:15:21 about their life. And then I was in the position of saying that to define wellbeing in a way that people
0:15:28 didn’t seem to care particularly about. So that was not a tenable position. So I, I dropped back into
0:15:31 saying that I had no idea how to deal with it.
0:15:37 Was this a result of the research? You did some research that was, I think it said above 70,000,
0:15:40 you don’t become happier, but do you become more satisfied?
0:15:51 No. The research I did with Angus Deaton at Princeton, famous economist, we showed that in terms of
0:15:58 happiness, in terms of emotional tone, positive and negative, having a lot of money doesn’t make you
0:16:06 happier. But being poor makes you miserable. So that’s above the threshold that was like $70,
0:16:15 $50,000 approximately in the U.S. Then extra money didn’t make you emotionally happier. But with life
0:16:21 satisfaction, it was a different story. With life satisfaction, that doesn’t satiate. So it’s always
0:16:29 good to have more. Because basically, I think, money is a proxy for success. And it’s a proxy for
0:16:31 subjective success in many cases.
0:16:35 So it’s not necessarily about spending it or doing something with it. It’s just a measure.
0:16:41 Just getting it. I mean, you know, you look at all those people, those billionaires working their heads
0:16:46 off. And they’re clearly not doing this because they need more money. They’re trying to get more
0:16:51 money. And they’re trying to get more money because that would be an indication that they’re good at what
0:16:54 they do. I think mostly it’s a proxy.
0:16:59 Do either of those variables correlate to longer living, happiness, or satisfaction?
0:17:06 Both, apparently. But you know, it’s hard to separate. And I haven’t been followed. You know,
0:17:14 shortly after deciding that I didn’t know what well-being was, I sort of stopped doing research
0:17:22 on this. So I haven’t been following. But I think there’s clear evidence that being effectively happy,
0:17:27 you know, is very good for you. And you do live a little longer, and you live better, and so on.
0:17:34 And life satisfaction works in the same direction. Whether it’s separable, which of them, you know,
0:17:36 is it more important that I don’t?
0:17:44 I want to switch gears a little bit and talk about behavior. And I’d love your insider expansion
0:17:49 upon the idea of we can change behavior. And how do we go about changing our behavior?
0:17:56 Well, you know, I’m not sure I buy the premise. I think changing behavior is extremely difficult.
0:18:02 There are a few tips and, you know, a few guidelines about how to do that. But anybody who is very
0:18:10 optimistic about changing behavior is just deluded. It’s hard to change other people’s behavior. It’s very
0:18:12 hard to change your own. Not simple.
0:18:14 This is what marriage is all about, right?
0:18:19 Yeah, among other things. You know, people, when, when, you know, married people try to
0:18:21 change each other’s behavior.
0:18:23 It’s a lot of dissatisfying.
0:18:26 They are not on their way to a good marriage, I think.
0:18:28 We’d all be happier with lower expectations.
0:18:34 Yes. I mean, and, and even if you have expectation, don’t try to change because, you know,
0:18:38 it’s very unlikely to work in a significant way.
0:18:43 I can think of the common ways that we would sort of go about behavior change and it would be,
0:18:48 you know, making good behaviors more easy or negative behaviors harder.
0:18:55 And that’s the main, the main insight. You know, when you want to influence somebody’s behavior,
0:19:01 that’s a very big insight. I’ve always thought that this is the best psychological idea ever,
0:19:08 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
0:19:15 their behavior, you can think of it that there are two ways of doing it. You can push them or you can ask
0:19:22 the question, “Why aren’t they doing B already?” Which is an unusual question, but you know, why?
0:19:32 So then when you ask, “Why, why not? Why aren’t they doing B?” as they ought to, as they think they ought to,
0:19:40 then you get a list of what’s got to win. That’s the psychologist who my guru and that’s my hero and
0:19:45 many people’s hero. He spoke of restraining forces. I mean, so there are reasons.
0:19:52 why they’re not where you want them to be. So he spoke of behavior as an equilibrium. There are
0:19:58 forces that are pushing you one way, forces that are pushing you the other way. So how loud you speak,
0:20:06 how fast you drive. It’s easy to think of it as an equilibrium. And what we tend to do when we want to
0:20:17 move people from A to B is we push them. We add to the driving forces. And Kurt Lewin’s insight was that
0:20:23 this is not what you should do. You should actually work on the restraining forces and try to make them
0:20:31 weaker. And that’s a beautiful point. And he showed, he had that image that, you know, I’ve had since I was an
0:20:37 undergraduate. And I’m not sure actually whether it was his image or something that I drew from
0:20:44 reading him. But it’s like you have a plank and it’s being held by two sets of springs. You know,
0:20:50 you want it to move one direction. And so you could add another spring that would push it that way, or
0:20:56 could remove one of the springs that are holding it back. And the interesting thing, and that’s the
0:21:04 striking outcome, is when it moves, if it moves because of the driving force you’ve added to the
0:21:12 driving force, then at equilibrium, it will be in a higher state of tension than it was originally.
0:21:17 That is because you’ve compressed one spring and such pushing back harder. But if you remove
0:21:23 a restraining force, at equilibrium, there’ll be less tension in the system. I must have been 20 years
0:21:30 old. I thought that’s just so beautiful. What do you wish that everybody knew about psychology that you
0:21:34 don’t think that they do? If that was class one, what’s class two?
0:21:41 You know, class two, which is a development from class one, you know, it’s the same idea extended.
0:21:51 Class two is that behaviors don’t necessarily reflect the personality, but behaviors have a lot to do with
0:21:58 the situation. And so if people behave in strange ways, look at the situation they’re in and what are
0:22:05 the pressures in the situation that make them act as well. So there is a bias that the social
0:22:11 psychologist, well-known social psychologist, call the fundamental attribution error. And that means
0:22:17 that when you see people acting in some way, you think that it’s because of their personality that they
0:22:23 do it. That may not be the case. It’s quite likely that the situation is making them do it.
0:22:31 I’d like people to know that motivation is complex and that people do good things for a mixture of
0:22:37 good and bad reasons. And they do bad things for a mixture of good and bad reasons. And I think that
0:22:43 there is a point to educating people in psychology is to make them less judgmental. Just have
0:22:50 more empathy and more patience and being judgmental doesn’t get you anywhere.
0:22:55 When you talk about situational, one of the things that comes to mind is it’s so easy for us to give
0:23:00 our friends advice. But if we were in that situation, we might not necessarily see it.
0:23:04 Why is that the case? Why is it so much easier to give other people advice?
0:23:11 I mean, feelings get in the way of clear thinking. There is a phenomenon that we call the endowment effect,
0:23:18 which is that when I’d ask for more money to sell you my sandwich than I’d pay to get it. I mean,
0:23:24 that’s essentially the endowment effect. And our explanation of it, there are many explanations,
0:23:30 but a story I like to tell about it is that it’s more painful to give something up than to get something.
0:23:37 But there is an interesting result that if you have an agent making decisions on somebody’s behalf,
0:23:43 that agent doesn’t have loss of those. So that agent sells and buys at the same price,
0:23:48 which is the economically rational thing to do. Where this goes into policy and governments and
0:23:54 really important things is that governments are like agents or people who think about the good of
0:24:00 society. And agents, they take the economic view. They take the view of what things will be like at
0:24:06 the end. They don’t figure out that there are some people are going to be losing because of the reform
0:24:13 that they make. And it turns out that you can really expect losers, potential losers to fight a lot
0:24:20 harder than potential winners. And that’s the reason that reforms are frequently fair. And that when they
0:24:27 succeed, they’re almost always way more expensive than anticipated. And they’re more expensive because
0:24:35 you have to compensate the losers. And that frequently is not anticipated. So that’s an example of a story
0:24:46 that incorporates behavior change. And the difference between perspective, between being, you know, in the
0:24:52 situation, feeling the pain of giving up the sandwich, and not feeling the pain of giving up the sandwich.
0:24:59 That would have huge public policy sort of implications too, right, that we don’t tend to think about or discuss.
0:25:05 That’s a really interesting angle there. I want to come back to sort of situational decision-making based on
0:25:10 sort of like what we see is all there is. And we have these feelings that we can’t sort of disassociate
0:25:17 with. How does environment play a role like the physical environment in sort of what we decide or does it?
0:25:25 I mean, you know, there are sort of obvious things that we know. If people are hot and bothered and
0:25:34 distracted, and there is a lot of noise and so on, then they’ll think as well. And that we know that’s…
0:25:39 But even there, there are puzzles. I mean, many people think and work a lot better in cafes,
0:25:46 you know, where there is actually ambient noise and activity around them, and it helps them concentrate
0:25:52 better. So there isn’t a very simple story of the environment. But certainly, you can make the
0:25:58 environment tough enough so that people won’t be able to think properly. That’s feasible.
0:26:05 Are there things that we could do to, I guess, push the environment to be more conducive to
0:26:09 to clear thinking, the physical environment in this case?
0:26:16 Oh, there are all sorts of, you know, odd findings, you know, the color of the color of the room.
0:26:22 Some colors are better than others. And you would expect that some colors are more calming than others.
0:26:25 So you wouldn’t want to be in a red room.
0:26:26 Making decisions.
0:26:26 Making decisions.
0:26:32 Making decisions. But, you know, those are extreme and minor effects.
0:26:38 I want to come to intuition and noise later. Is there anything else that stands out that gets in
0:26:43 the way of clear thinking that we can sort of bring to the surface now?
0:26:51 Well, you know, what gets in the way of clear thinking is that we have intuitive views of
0:26:57 almost everything. So as soon as you present a problem to me, I have, you know, I have some
0:27:02 ready-made answer. And what gets in the way of clear thinking are those ready-made answers.
0:27:08 And we can’t help but have them. So that’s one thing that gets in the way. Emotions get in the
0:27:19 way. I would say that independent clear thinking is, to first approximation, impossible. In the sense
0:27:25 that, you know, we believe in things most of the time, not because we have good reasons to believe
0:27:31 them. If you ask me for reasons, I’ll explain you. I’ll always find a reason. But the reasons are not
0:27:38 the causes of our beliefs. We have beliefs because mostly we believe in some people and we
0:27:45 trust them and we adopt their beliefs. So we don’t reach our beliefs by clear thinking,
0:27:50 something, you know, unless you’re a scientist or doing something like that.
0:27:52 But even then, it’s probably a very narrow…
0:27:57 But that’s very narrow. And there is a fair amount of emotion in neuroscientists as well
0:28:02 that gets in the way of clear thinking. You know, commitments to your previous views,
0:28:08 being insulted that somebody thinks he’s smarter than you are. I mean, lots of things get in the way
0:28:14 even when you’re a neuroscientist. So I’d say there is less clear thinking than people like to think.
0:28:22 Is there anything that we can do at the belief formation stage? Like it sounds almost as though
0:28:29 when you say that we’re reading a newspaper, we read this op-ed, and it’s well constructed and fits
0:28:37 with our view of the world. Therefore, we adopt that opinion. And we forget the context that we didn’t
0:28:42 learn it through our own experience or reflection. We learned it sort of from somebody else. So we don’t
0:28:48 know when it’s sort of likely to work or not work. But we just proffer that as our opinion, is there?
0:28:54 That’s how I believe in climate change. You know, I believe in the people who tell me there is climate
0:28:59 change. And the people who don’t believe in climate change, they believe in other people.
0:29:04 So, but similarly, there’s like fake news and all this other stuff that we would have the same
0:29:12 reaction to you. You know, but I’m much more likely to believe fake news on my side than the fake news
0:29:22 on the other side. I mean, it’s true that there is a huge degradation in public discourse in the recent
0:29:28 10, 15 years in the United States. I mean, there used to be an idea that facts matter.
0:29:33 What would be your hypothesis as to why that is playing out? Are they getting into politics?
0:29:37 because I don’t want to talk politics. But like, why is that? Well, I mean, it’s hard to,
0:29:44 it’s hard to answer that question without, without politics, because it’s a general political
0:29:54 polarization has had a very big effect. And the fact that people can choose the sources of information.
0:30:01 Let’s switch gears a little bit and talk about intuition. I think one of the,
0:30:07 the things that strikes me the most about some of the work that you’ve done is the
0:30:15 cases where we’re likely to trust our intuition and when we’re not. And so if I’m, correct me if I’m
0:30:21 getting this wrong. So it’s sort of like a stable environment, repeated attempts and rapid feedback.
0:30:31 It strikes me that most decisions made in organizations do not fit that environment.
0:30:39 And yet we’re making a lot of these decisions on judgment or experience. What are the ways that we can
0:30:43 sort of make better decisions with that in the context?
0:30:48 : Well, in the first place, I think, you know, you shouldn’t expect too much.
0:30:50 : And pat to low expectations. : And pat to low expectations.
0:30:53 : I shouldn’t think too young. You should have low expectations
0:30:59 about improving decisions. I mean, there is, you know, one basic rule is slow down,
0:31:05 especially if you, if you have that immediate conviction, slow down. There are procedures,
0:31:11 you know, there are ways of reaching better, better decisions, but reaching better reverence,
0:31:13 and we can talk about them. : I would love to hear.
0:31:19 : If you really want to improve the quality of decision-making, use algorithms. I mean,
0:31:27 whenever, wherever you can, if you can replace judgments by, by rules and algorithms, they’ll do
0:31:36 better. And there’s big social costs to trusting, allowing algorithm to make decisions, but, but the
0:31:42 decisions will likely to be better. So that’s one thing. If you can’t use algorithms, then you slow
0:31:48 yourself down. And then there are things that you can do for certain types of problems. And there are
0:31:55 different types of problems. So one class of problems, like forecasting problems. A friend,
0:32:03 Phil Tetlock, you know, has that book on super forecasters, where he identifies with people who are
0:32:10 good at forecasting the future, what they do that makes them good. And, you know, he tries to train
0:32:16 people and he can improve people. So that’s one classic problem. I’m interested specifically in
0:32:23 another kind of problem, judgment problems, where basically you’re considering options or you’re
0:32:30 evaluating a situation and you’re trying to give it a score. There, there, there is advice, I think,
0:32:39 on how to do it. For me, it goes back to something I did in the Israeli army when I was like 22 years
0:32:46 old. So that’s a long time ago, like 63 years ago. I was a psychologist in the Israeli army. And I was
0:32:54 assigned the job of setting up an interviewing system for, for the army. That’s ridiculous. But you know,
0:32:59 this was the beginning of the state of Israel. So people were improvising all over the place.
0:33:06 So I had a BA and I was, I think I was the best trained psychologist in the army. My, my boss was a
0:33:15 chemist. Brilliant. But anyway, and the, the existing system was one where people would interview and try to
0:33:23 form an intuitive global image of how well that recruits would do as a combat soldier, which was
0:33:29 the objective of the, the object of the interview. And because I had read a book, I told me, I took a
0:33:38 different tack. And the different tack was, I identified six traits that I sort of made up. And I had them
0:33:45 ask questions and evaluate each of these traits independently and score it and write down the score,
0:33:51 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
0:33:58 them to do. And the interviewers who were about one year younger than I, or recruits, but very,
0:34:04 very smart, selected for being good at it. They were furious with me. And they were furious with me
0:34:09 because they wanted to exercise their intuition. And I still remember that one of them said,
0:34:16 you’re turning us into robots. So I compromised with them. And I said, okay, you, you do it my way.
0:34:23 And I told them, you try to be reliable, not valid. You know, I’m in charge of validity. You be
0:34:30 reliable, which was pretty arrogant, but that’s, that’s how I presented it. But then when you’re done,
0:34:39 close your eyes and just put down a number of how good a soldier is that guy going to be. And when we
0:34:47 validated the results of the interview, it was a big improvement on what had gone on before. But the
0:34:54 other surprise was that you have an interesting distinction between happiness and satisfaction.
0:35:03 Can you walk us through that? Yeah, sure. I mean, the word happiness is so ambiguous and it means so
0:35:10 many things to many people, but one sensible interpretation of it is that it’s got to do with
0:35:16 your emotions, with how you feel, with the emotional tone of your life, whether it’s a happy life that,
0:35:22 you know, it’s pleasant to be you. Life satisfaction is a completely different thing. I mean, life
0:35:29 satisfaction is how you feel about your life when you think about your life. And most of the time,
0:35:34 you don’t think about your life, you just live. But you know, sometimes you sort of look,
0:35:43 and that’s when you determine how satisfied you are. That’s life satisfaction. It’s not satisfaction.
0:35:48 It’s life satisfaction. Should we balance the two or how would you think about them? Should we be
0:35:53 more happy when we’re younger, more satisfied when we’re older? That thought had never occurred to me
0:36:02 when I began to work on those. So I started out thinking that happiness in that sense of how you feel
0:36:10 when you live. And that was reality. And that life satisfaction was just stories that people tell
0:36:17 themselves. And the important thing was to be happy in real time. But later, when we did more research,
0:36:25 it turned out that the circumstances that make people happy and the circumstances that make them satisfied
0:36:32 with their life are not the same. So happiness is mostly social. It’s, you know, it’s being with people
0:36:39 you love and who love you back. That’s, that’s a lot of what happiness is. Life satisfaction is much more
0:36:48 conventional. It’s to be successful. And you know, so it’s money, education, prestige, that sort of thing,
0:36:55 is what life satisfaction is about. So those are two very different things. I thought that life satisfaction
0:37:00 is irrelevant. You know, that’s how I began. And we, we had a research program where we were,
0:37:07 we were trying to, you know, to show that this is the case. But then after a few years, I realized
0:37:16 that what people really want in their life is they don’t seem to care about how happy they’ll be.
0:37:21 They seem to want to be satisfied with their life. They seem to want to have a good story about their
0:37:28 life. And then I was in the position of saying that to define well-being in a way that people didn’t seem
0:37:36 to care particularly about. So that was not a tenable position. So I, I dropped back into saying that I had no
0:37:41 idea how to deal with it. Was this a result of the research? You did some research that was,
0:37:46 I think it said above 70,000, you don’t become happier, but do you become more satisfied?
0:37:58 No. The research I did with Angus Deaton at Princeton, famous economist, we showed that in terms of happiness,
0:38:05 in terms of emotional tone, positive and negative, having a lot of money doesn’t make you happier,
0:38:13 but being poor makes you miserable. So that’s above the threshold that was like 70,000 dollars
0:38:22 approximately in the US. Then extra money didn’t make you emotionally happier. But with life satisfaction,
0:38:28 it was a different story. With life satisfaction, that doesn’t satiate, so it’s always good to have more.
0:38:38 Because basically I think money is a proxy for success, and it’s a proxy for subjective success in many cases.
0:38:42 So it’s not necessarily about spending it or doing something with it. It’s just a measure.
0:38:47 It’s just getting it. I mean, you know, you look at all those people, all those billionaires working
0:38:53 their heads off, and they’re clearly not doing this because they need more money. They’re trying to get
0:38:57 more money. And they’re trying to get more money because that would be an indication that they’re
0:39:00 good at what they do. I think mostly it’s a proxy.
0:39:05 Do either of those variables correlate to longer living, happiness, or satisfaction?
0:39:13 Both, apparently. But you know, it’s hard to separate. And I haven’t been followed, you know,
0:39:20 shortly after deciding that I didn’t know what well-being was, I sort of stopped doing research
0:39:28 on this. So I haven’t been following. But I think there’s clear evidence that being effectively happy,
0:39:34 you know, is very good for you. And you do live a little longer, and you live better, and so on. And
0:39:40 life satisfaction works in the same direction. Whether it’s separable, which of them, you know,
0:39:45 isn’t more important that I don’t. I want to switch gears a little bit and talk about
0:39:53 behavior. And I’d love your insider expansion upon the idea of we can change behavior, and how do we
0:40:00 go about changing our behavior? Well, you know, I’m not sure I buy the premise. I think changing
0:40:07 behavior is extremely difficult. There are a few tips and, you know, a few guidelines about how to do that.
0:40:14 But anybody who is very optimistic about changing behavior is just looted. It’s hard to change other
0:40:18 people’s behavior. It’s very hard to change your own. Not simple.
0:40:20 This is what marriage is all about, right?
0:40:25 Yeah, among other things. You know, people, when, you know, married people try to
0:40:27 change each other’s behavior.
0:40:29 It’s a lot of dissatisfying.
0:40:32 They are not on their way to a good marriage, I think.
0:40:34 We’d all be happier with lower expectations.
0:40:38 Yes. I mean, and even if you have expectation, don’t try to change,
0:40:44 because, you know, it’s very unlikely to work in a significant way.
0:40:49 I can think of the common ways that we would sort of go about behavior change, and it would be,
0:40:55 you know, making good behaviors more easy or negative behaviors harder.
0:41:02 I think that’s the main, the main insight. You know, when you want to influence somebody’s behavior,
0:41:07 that’s a very big insight. I’ve always thought that this is the best psychological idea ever,
0:41:15 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
0:41:22 their behavior, you can think of it that there are two ways of doing it. You can push them. Or you can
0:41:29 ask the question, why aren’t they doing B already? Which is an unusual question, but you know, why?
0:41:38 So then when you ask why, why not? Why aren’t they doing B as they ought to, as they think they ought to,
0:41:46 then you get a list of what’s going to win. That’s a psychologist who, my guru on this, my hero,
0:41:52 and many people’s hero. He spoke of restraining forces. I mean, so there are reasons why they’re
0:41:59 not where you want them to be. So he spoke of behavior as an equilibrium. There are forces that
0:42:06 are pushing you one way, forces that are pushing you the other way. So how loud you speak, how fast you
0:42:13 drive. It’s easy to think of it as an equilibrium. And what we tend to do when we want to move people
0:42:24 from A to B is we push them. We add to the driving forces. And Kurt Lewin’s insight was that this is
0:42:30 not what you should do. You should actually work on the restraining forces and try to make them weaker.
0:42:37 And that’s a beautiful point. And he showed, he had that image that, you know, I’ve had since I was an
0:42:43 undergraduate. And I’m not sure, actually, whether it was his image or something that I drew from
0:42:50 reading him. But it’s like you have a plank and it’s being held by two sets of springs. You know,
0:42:56 you want it to move one direction. And so you could add another spring that would push it that way,
0:43:01 I could remove one of the springs that are holding it back. And the interesting thing,
0:43:10 and that’s the striking outcome, is when it moves, if it moves because of the driving force,
0:43:15 you’ve added to the driving force, then at equilibrium, it will be in a higher state of
0:43:21 tension than it was originally. That is because you’ve compressed one spring and such pushing back
0:43:28 harder. But if you remove the restraining force at equilibrium, there’ll be less tension on the
0:43:32 system. I must have been 20 years old. I thought that’s just so beautiful.
0:43:38 What do you wish that everybody knew about psychology that you don’t think that they do?
0:43:40 If that was class one, what’s class two?
0:43:48 You know, class two, which is a development from class one, you know, it’s the same idea extended.
0:43:57 Class two is that behaviors don’t necessarily reflect the personality, but behaviors have a lot to do with
0:44:04 the situation. And so if people behave in strange ways, look at the situation they’re in and what are
0:44:11 the pressures in the situation that make them act as well. So there is a bias that the social
0:44:17 psychologists, well-known social psychologists call the fundamental attribution error. And that means
0:44:23 that when you see people acting in some way, you think that it’s because of their personality that they
0:44:29 do it. That may not be the case. It’s quite likely that the situation is making them do it.
0:44:37 I’d like people to know that motivation is complex and that people do good things for a mixture of
0:44:43 good and bad reasons. And they do bad things for a mixture of good and bad reasons. And I think that
0:44:50 there is a point to educating people in psychology is to make them less judgmental. Just have
0:44:56 more empathy and more patience and being judgmental doesn’t get you anywhere.
0:45:01 When you talk about situational, one of the things that comes to mind is it’s so easy for us to
0:45:07 give our friends advice. But if we were in that situation, we might not necessarily see it. Why is that
0:45:11 the case? Why is it so much easier to give other people advice?
0:45:17 I mean, feelings get in the way of clear thinking. There is a phenomenon that we call the endowment effect,
0:45:24 which is that when I’d ask for more money to sell you my sandwich than I’d pay to get it. I mean,
0:45:30 that’s essentially the endowment effect. And our explanation of it, there are many explanations,
0:45:36 but a story I like to tell about it is that it’s more painful to give something up than to get something.
0:45:44 But there is an interesting result that if you have an agent making decisions on somebody’s behalf,
0:45:49 that agent doesn’t have loss of urge. So that agent sells and buys at the same price,
0:45:55 which is the economically rational thing to do. Where this goes into policy and governments and
0:46:01 really important things, that governments are like agents or people who think about the good of society.
0:46:07 And agents, they take the economic view. They take the view of what things will be like at the end.
0:46:13 They don’t figure out that there are some people who are going to be losing because of the reform that
0:46:20 they make. And it turns out that you can really expect losers, potential losers to fight a lot harder
0:46:27 than potential winners. And that’s the reason that reforms are frequently fair. And that when they succeed,
0:46:33 they’re almost always way more expensive than anticipated. And they’re more expensive because
0:46:42 you have to compensate the losers. And that frequently is not anticipated. So that’s an example of a story
0:46:52 about that incorporates behavior change and the difference between perspective, between being in the
0:46:58 the situation, feeling the pain of giving up the sandwich, and not feeling the pain of giving up the
0:46:58 sandwich.
0:47:05 That would have huge public policy sort of implications too, right? That we don’t tend to think about or
0:47:10 discuss. That’s a really interesting angle there. I want to come back to sort of situational decision
0:47:16 making based on sort of like what we see is all there is. And we have these feelings that we can’t sort of
0:47:23 disassociate with. How does environment play a role like the physical environment in sort of what we
0:47:24 decide or does it?
0:47:32 I mean, you know, there are sort of obvious things that we know. If people are hot and bothered and
0:47:41 distracted and there is a lot of noise and so on, then they’ll think as well. That we know. But even
0:47:48 there, there are puzzles. I mean, many people think and work a lot better in cafes, you know, where there is
0:47:54 actually ambient noise and activity around them. And it helps them concentrate better. So there isn’t
0:48:00 a very simple story of the environment, but certainly you can make the environment tough enough so that
0:48:04 people won’t be able to think properly. That’s, that’s feasible.
0:48:11 Are there things that we could do to, I guess, push the environment to be more conducive to
0:48:15 clearer thinking? The physical environment in this case?
0:48:21 Oh, there are all sorts of, you know, odd findings, you know, the color of the
0:48:27 color of the room. Some colors are better than others. And you would expect that some colors are
0:48:31 more calming than others. So you wouldn’t want to be in a red room.
0:48:39 Making decisions. Making decisions. But, you know, those are extreme and minor effects.
0:48:44 I want to come to intuition and noise later. Is there anything else that stands out that
0:48:49 gets in the way of clear thinking that we can sort of bring to the surface now?
0:48:54 Well, you know, what, what gets in the way of clear thinking is that we have,
0:49:01 we have intuitive views of almost everything. So as soon as you present a problem to me,
0:49:07 I have, you know, I have some ready-made answer. And what gets in the way of clear thinking are
0:49:13 those ready-made answers. And we can’t help but have them. So that’s one thing that gets in the
0:49:22 way. Emotions get in the way. And I would say that independent clear thinking is, to first
0:49:29 approximation, impossible. I mean, in the sense that, you know, we believe in things most of the time,
0:49:34 I’m not because we have good reasons to believe them. If you ask me for reasons, I’ll explain you.
0:49:39 I’ll, I’ll always find a reason, but the reasons are not the causes of our beliefs.
0:49:47 We have beliefs because mostly we believe in some people and we trust them and we adopt their beliefs.
0:49:54 So we don’t reach our beliefs by clear thinking something, you know, unless you’re a scientist or
0:49:56 doing something like that.
0:49:59 But even then, it’s probably a very narrow…
0:50:03 But that’s very narrow. And there is a fair amount of emotion in neuroscientists as well
0:50:08 that gets in the way of clear thinking. You know, commitments to your previous views,
0:50:12 being insulted that somebody thinks he’s smarter than you are. I mean,
0:50:18 lots of things get in the way than the neuroscientists. So I’d say there is less
0:50:20 clear thinking than people like to think.
0:50:27 Is there anything that we can do at the belief formation stage? Like, it sounds
0:50:35 almost as though when you say that we’re reading a newspaper, we read this op-ed, and it’s well-constructed
0:50:42 and fits with our view of the world. Therefore, we adopt that opinion. And we forget the context that
0:50:48 we didn’t learn it through our own experience or reflection. We learned it sort of from somebody
0:50:53 else. So we don’t know when it’s sort of likely to work or not work. But we just proffer that as
0:50:54 our opinion is there.
0:51:01 That’s how I believe in climate change. You know, I believe in the people who tell me there is climate
0:51:05 change. And the people who don’t believe in climate change, they believe in other people.
0:51:11 But similarly, there’s like fake news and all this other stuff that we would have the same reaction to.
0:51:19 You know, but I’m much more likely to believe fake news on my side than the fake news on the other
0:51:29 side. I mean, it’s true that there is a huge degradation in public discourse in the recent
0:51:34 10, 15 years in the United States. I mean, there used to be an idea that facts matter.
0:51:39 What would be your hypothesis as to why that is playing out? Are they getting into
0:51:42 politics because I don’t want to talk politics? But like, why is that?
0:51:46 Well, I mean, it’s hard to, it’s hard to answer that question without,
0:51:55 without politics, because it’s a general political polarization has had a very big effect.
0:52:01 And the fact that people can choose the sources of information.
0:52:08 Let’s switch gears a little bit and talk about intuition. I think one of the,
0:52:16 things that strikes me the most about some of the work that you’ve done is the cases where we’re
0:52:22 likely to trust our intuition and when we’re not. And so if I’m, correct me if I’m getting this wrong,
0:52:29 so it’s sort of like a stable environment, repeated attempts and rapid feedback. It strikes me that
0:52:40 most decisions made in organisations do not fit that environment and yet we’re making a lot of these
0:52:49 decisions on judgement or experience. What are the ways that we can sort of make better decisions with that in the context?
0:52:54 Well, in the first place, I think, you know, you shouldn’t expect too much.
0:52:56 And pat to low expectations.
0:53:02 I shouldn’t think too young or should have low expectations about improving decisions. I mean,
0:53:08 there is, you know, one basic rule is slow down, especially if you, if you have that immediate
0:53:13 conviction, slow down. There are procedures, you know, there are ways of reaching better,
0:53:18 better decisions, but reaching better judgment and we can talk about them.
0:53:20 I would love to hear.
0:53:25 If you really want to improve the quality of decision making, use algorithms. I mean,
0:53:33 whenever, wherever you can, if you can replace judgments by, by rules and algorithms, they’ll do
0:53:42 better. And there’s big social costs to trusting, allowing algorithm to make decisions, but, but the
0:53:48 decisions will likely to be better. So that’s one thing. If you can’t use algorithms, then you slow
0:53:54 yourself down. And then there are things that you can do for certain types of problems. And there are
0:54:02 different types of problems. So one class of problems, like forecasting problems, a friend,
0:54:09 Phil Tetlock, you know, has that book on super forecasters, where he identifies with people who
0:54:16 are good at forecasting the future, what they do that makes them good. And, you know, it tries to train
0:54:21 people and we can improve people. So that’s one class of problem. I’m interested specifically
0:54:29 in another kind of problem, judgment problems, where basically you’re considering options or you’re
0:54:36 evaluating a situation and you’re trying to give it a score. There, there, there is advice, I think,
0:54:45 on how to do it. For me, it goes back to something I did in the Israeli army when I was like 22 years
0:54:52 old. So that’s a long time ago, like 63 years ago. I was a psychologist in the Israeli army. And I was
0:55:00 assigned the job of setting up an interviewing system for, for the army. That’s ridiculous. But you know,
0:55:06 this was the beginning of the state of Israel. So people were improvising all over the place. So I
0:55:13 had a BA and I was, I think I was the best trained psychologist in the army. My, my boss was a chemist.
0:55:22 Brilliant. But anyway, and the, the existing system was one where people would interview and try to form an
0:55:30 intuitive global image of how well that recruit would do as a combat soldier, which was the objective,
0:55:37 the object of the interview. And because I had read a book of Paul Neal, I took a different talk. And
0:55:45 the different talk was, I identified six traits that I sort of made up and I had them ask questions and
0:55:52 evaluate each of these traits independently and score it and write down the score, then go on to the
0:55:58 next trait. And they had to do it for all six traits. And that was, that’s all I asked them to do. And
0:56:06 the interviewers who were about one year younger than I, all recruits, but very, very smart, selected
0:56:12 for being good at it. They were furious with me. And they were furious with me because they wanted to
0:56:18 exercise their intuition. And I still remember that one of them said, “You’re turning us into robots.” So I
0:56:26 compromised with them. And I said, “Okay, you do it my way.” And I told them, “You try to be reliable,
0:56:33 not valid. You know, I’m in charge of validity. You be reliable.” Which was pretty arrogant, but that’s,
0:56:41 that’s how I presented it. But then when you’re done, close your eyes and just put down a number of
0:56:49 how good a soldier is that guy going to be. And when we validated the results of the interview,
0:56:55 it was a big improvement on what had gone on before. But the other surprise was that
0:57:05 the final intuitive judgments added, it was good. It was as good as the average of the six straights,
0:57:11 and not the same. It added information. So actually, we ended up with a score that was
0:57:18 half, was determined by the specific ratings, and the intuition got half the way. And that,
0:57:22 by the way, stayed in the Israeli army for well over 50 years. I don’t know whether it’s,
0:57:28 I think it probably, some version of it was still being forced, but around 15 years ago,
0:57:36 a visit of my old base. And, and the commanding officer of the research unit was telling me how
0:57:43 they run the interview. And, and then she said, and then we tell them, “Close your eyes.” So that,
0:57:50 that had stayed for 50 years. Now, the “Close your eyes” and that whole idea is not the basis of the
0:57:57 book that I’m writing. So actually, I have the same idea really, that when you are making decisions,
0:58:03 you should think of options as if they were candidates. So you should break, break it up into
0:58:10 dimensions, evaluate each dimension separately, then look at the profile. And, and the key is,
0:58:19 delay your intuition. Don’t try to form an intuition quickly, which is what we normally do. Focus on the
0:58:25 separate points. And then when you have the whole profile, then you can have an intuition and it’s going to
0:58:32 be better because people make form intuitions too quickly. And the, the rapid intuitions are not
0:58:38 potentially good. So if you delay intuition until you have more information, it’s going to be better.
0:58:40 I’m curious how we delay intuition.
0:58:49 You delay intuition by focusing on the separate problems. So our advice is that if you have, you know,
0:58:56 a board of directors making decisions about an investment, we tell them you do it that way. Take
0:59:04 the separate dimensions and really think about each dimension separately and independently and don’t
0:59:11 allow, you know, if you’re the chair, don’t allow people to give their final judgment. Say, we’ll wait
0:59:18 until we cover the whole thing. I mean, if you find a deal breaker, then you stop. But if you haven’t found
0:59:27 a deal breaker, wait to the end and look at the profile and then your decision is almost certainly going to be better.
0:59:33 Does that include weighting the different aspects of the problem differently or do you highlight that in advance or do you?
0:59:42 Yeah. I mean, it makes you see the trade-offs more clearly. Otherwise, when we don’t follow that discipline,
0:59:50 there is a way in which people form impressions. Very quickly you form an impression and then you spend
0:59:58 most of your time confirming it instead of collecting evidence. And so if accidentally your impression was
1:00:04 in the wrong direction, you’re going to confirm it and you don’t give yourself a chance to correct
1:00:14 it. Independence is the key because otherwise, when you don’t take those precautions, it’s like having a bunch of
1:00:23 witnesses to some crime and allowing those witnesses to talk to each other. They’re going to be less valuable if you’re
1:00:29 interested in the truth than keeping them rigidly separate and collecting what they have to say.
1:00:37 What have you seen work in a repeatable way? It may be a particular organization or across organizations
1:00:48 to not only reliably surface disconfirming evidence, but then place a value on what is surface instead of
1:00:52 being dismissive. Is there a framework for that? Is there?
1:00:58 Well, yeah. There are many, you know, there are many procedures like red team, blue team,
1:01:05 a devil’s advocate. I mean, there have been, you know, many attempts. In general, you know,
1:01:12 if you are the head of a group that makes decisions, one of your missions would be to protect the dissenters
1:01:21 because they’re very valuable and you should make it painless to be sent or as painless as possible.
1:01:29 Well, it’s hard to be sent. It’s painful and costly. So protecting dissenters is important.
1:01:37 I’m curious about the distinction between intuition and judgment. You had mentioned intuition, judgment,
1:01:43 intuitive judgment. Can you walk me through some of like how those differ?
1:01:53 It’s a bit hard to separate and judgment is what you do when you integrate a lot of information informally
1:01:56 into a score of some kind.
1:02:03 I, we speak, we being my co-authors and I in the book we’re writing, we speak of judgment as
1:02:10 measurements. But it’s measurement where the measuring instrument is your mind. But you do it informally.
1:02:17 And because you do it informally, people are going to, are not necessarily going to agree. So wherever we
1:02:22 say it’s a matter for judgment, we’re allowing for differences, for variability.
1:02:32 Now, judgment can be more or less slow, more or less systematic. So at one end, you have pure intuition,
1:02:38 where you allow the judgment to go very quickly and so on. And at the other end, you try to delay
1:02:44 intuition. But ultimately, if you’re making it by judgment, you’re going to have a judgment and it’s
1:02:51 going to be like an intuition and you’re going to go with it. So the more or less deliberate judgment,
1:02:56 intuition is always involved at one point or another.
1:02:59 You’re either sort of like listening to it or fending it off?
1:03:03 Yeah. And our recommendation is fend it off.
1:03:07 Are there ways to judge the quality of somebody’s judgment?
1:03:12 Yeah, sure. I mean, some of them would be unique to the actual scenario,
1:03:15 but what are the sort of other ways that we could?
1:03:22 Well, I mean, you may require people to explain their judgments and evaluating the quality of the
1:03:29 explanation is, you know, whether it’s logical, whether it uses the evidence, whether it uses all
1:03:39 the evidence, whether it is strongly influenced by wishes, whether the conclusion was reached before
1:03:48 the judgments supposedly is made. You know, there are lots of ways for judgment to fail that can be
1:03:53 recognized. So it’s harder to recognize very good judgment, but it’s really easy to see, you know,
1:03:57 what goes wrong. And there are quite a few ways for judgment to go wrong.
1:04:04 And I think some of those ways are the cognitive biases, like overconfidence and sort of using
1:04:11 small or extrapolating from small sample sizes. And one of the interesting things that I’ve heard you
1:04:18 say in interviews before, so correct me if I’m off here, is that you’ve studied cognitive biases
1:04:23 effectively your whole life and you’re no better at avoiding them than anybody else.
1:04:27 Yeah, certainly. Not much better, no.
1:04:29 What hope do the rest of us have?
1:04:37 Not much. I mean, I never, you know, I think, you know, the quality of people’s judgment is affected
1:04:46 by education. But, so in general, you know, more educated people make better judgments, I think,
1:04:53 on average. But people decide I’m going to make better judgments. I don’t think that’s very hopeful.
1:05:01 I’m much more hopeful about organizations because organizations think more slowly and they have
1:05:08 procedures for thinking. And so you can control the procedures. Individual judgment is really hard to fix.
1:05:10 Not impossible.
1:05:16 One of the things that I see people do in response to cognitive biases and trying to account for them
1:05:23 is to sort of make a list of them, almost like a checklist, and then go through that checklist and
1:05:29 explain or rationalize why those things don’t apply in this situation. It also strikes me that the more
1:05:35 intelligent you are, the more stories you’d be able to conjure up about why you’re avoiding this.
1:05:42 I really think that’s not very hopeful because there are so many biases. And the biases work in
1:05:50 different directions anyway. So sometimes you can recognize a situation as one in which
1:05:59 you’re likely to be wrong in a particular way. So that’s like illusions. If you recognize a particular
1:06:05 pattern as something that gives rise to a visual illusion, then you don’t trust your eyes.
1:06:13 You know, you do something else. And the same thing happens when you recognize this is a situation where
1:06:22 I’m likely to make an error. So sometimes you can recognize the importance, for example, of what we’ve called
1:06:31 an anchor. So you’re going to negotiate a price with somebody. They start very high. And that has an effect.
1:06:39 So you know, or you should know, that the person who moves first in a negotiation has an advantage.
1:06:50 Because the first number changes everybody’s view of what is considered plausible. So it moves things
1:06:57 in that direction. That’s a phenomenon. People can learn that. And they can learn to resist it.
1:07:05 So when I was teaching negotiations, I would say, somebody does that to you, comes up with a number
1:07:14 that’s absurd. I would say, lose your temper. Make a scene. Say, I will not start the conversation from
1:07:20 that number. It’s an absurd number. I don’t want to let’s erase that number. So that’s something that,
1:07:27 you know, you know, you can improve if you recognize it. I think people are aware of the fact that you
1:07:34 shouldn’t make a decision about road safety within a short interval of a terrible accident.
1:07:42 So you should allow things to settle down and cool down. There is a more subtle error and harder,
1:07:51 harder to fix. But that, the best prediction, the best guess is always less extreme than your impression.
1:07:56 intuitive prediction. Intuitive prediction is, as we say, not regressive. It doesn’t recognize
1:08:04 regression to the mean. But statistics is statistics. And in statistics, things are less extreme.
1:08:11 Should I give you my favorite example of a bias? Yeah, please. Okay. I have been unable to think of a
1:08:19 better one. But the story is about Julie. That’s part of the story. That’s her name. She is a
1:08:25 graduating senior at university. And I’ll tell you one fact about her, that she read fluently when she
1:08:33 was four. But it’s a GPA. And the interesting thing here is that everybody has a number. As soon as I
1:08:39 told you that thing, her number came to mind. Now, we know where that number came from. We really,
1:08:45 that’s one of the few things that I’m reasonably sure I understand perfectly. And this is that when you
1:08:53 hear she read fluently at age four, you get an impression of how smart she is, of how precocious
1:09:00 she was at age four. And you could put that in percentiles. You know, where did that put her on a
1:09:06 percentile for sort of aptitude, ability? And it’s high. It’s not, you know, if she had read fluently
1:09:13 at age two and a half, it would be more extreme. But age four is pretty high. So say at the 90th percentile.
1:09:23 And then the GPA that comes to your mind is around the 90th percentile in the distribution of GPA.
1:09:28 So you pick something, your prediction is as extreme as your impression.
1:09:40 And it’s idiotic statistically, completely stupid, because clearly the age at which a child learned
1:09:47 to read is not all that diagnostic with respect to GPA. So it’s better than nothing. If you didn’t
1:09:55 know anything, you would predict the mean GPA, whatever it is, 3.1, 3.2. Now, she’s bright,
1:10:04 so probably a little higher, but not 3.7. You don’t want to. So that’s cool. That’s a bias. That’s
1:10:13 non-regressive prediction. And that’s very hard to resist. Sometimes I’m able to resist it,
1:10:19 but never when it’s important. You know, when I’m really involved in something, I don’t think about it,
1:10:25 but sometimes I will recognize, oh, you know, that’s the situation. I should moderate my prediction.
1:10:31 And if you’re conscious of it, that’s an example of one you can sort of talk yourself into.
1:10:38 Yeah. Yeah. You can talk yourself into. Although, you know, you usually will find a way to cheat
1:10:47 and end up with your intuition. It’s remarkable. You know, when you’ve been in academic life for a long
1:10:56 time, so you’ve been in many situations where people discuss a job candidate. And absurdities of that kind
1:11:05 are very common. So somebody, a job candidate gives a talk, and people evaluate the talk, and this is
1:11:11 something happens, you know, at Berkeley when I was teaching there, that somebody gave a talk. It wasn’t
1:11:20 a very good talk. Stammered a bit. Now, that person had teaching prizes, and yet what was said about him
1:11:28 in the discussion? He can’t teach. You know, we heard the talk. So that’s a mistake. But the funny
1:11:33 thing is you can point out to people that that’s a mistake. They still don’t want to hire him because
1:11:40 he gave a lousy talk. So it’s hard to resist. It’s interesting. I think one of the ways I probably
1:11:46 got my job is using psychology in the interview, which is asking why I was there, and then reinforcing
1:11:54 those beliefs throughout the interview. I want to come back just one second to the immediacy of sort
1:12:02 of having a stimulus and then making a decision. So we use the example of roads, and a tragic accident
1:12:08 happens, and you’re rethinking sort of policy or laws around the roads. How much of that do you think
1:12:16 is social pressure? And I’m wondering if we could even extrapolate that a little more to we’re taught
1:12:22 to answer questions on a test right away, right? So we see this question, then we answer it. We’re
1:12:29 taught that we, or maybe it’s reinforced, taught is probably the wrong word, that politicians need to
1:12:35 have a response, an immediate response to, and even if they know the best thing to do is like, okay,
1:12:43 let this settle, take some time. It’s society writ large seems to demand it, like the environment is
1:12:50 not conducive. I think it’s pretty clear that people prefer leaders who are intuitive and who are
1:13:00 overconfident. Leaders who deliberate too much are viewed with suspicion, you know. So I think Obama
1:13:05 Obama was at a certain disadvantage relative to George Bush, you know.
1:13:07 Because he was seen as more deliberate.
1:13:12 Yeah, he was more deliberate. And then when you’re very deliberate, you look as if you don’t know what
1:13:20 you’re doing. But when you act with confidence, so people want leaders who are intuitive, I think,
1:13:24 they’re very much. Provided they agree with me.
1:13:28 I’m just working my way back through some of these rabbit holes that we’ve gone down. You taught
1:13:36 negotiations. I’m curious what would be in your sort of syllabus for negotiations that everybody should
1:13:41 learn about negotiations when it comes to your work in psychology.
1:13:49 Well, you know, that goes back to a theme that we started with, the essence of teaching
1:13:56 negotiations, that negotiations is not about trying to convince the other guy. It’s about trying to
1:14:01 understand them. So again, it’s slowing yourself down. It’s not doing what comes naturally,
1:14:11 because trying to convince them is a prime pressure. Arguments, promises, and threats are always a prime
1:14:17 pressure. And what you really want is understand, you know, what you can do to make it easy for
1:14:25 them to move your way. Very non-intuitive. That’s a surprising thing when you teach negotiation. It’s not
1:14:30 obvious. You know, we are taught to apply pressure. I mean, socialize that way.
1:14:36 You mentioned that there was procedures for thinking in organizations. Are there any that
1:14:43 stand out in your mind that we could use to elevate thinking, and if not elevate,
1:14:49 but give feedback on the quality of thinking to improve it? Well, I think one of the ideas that
1:14:58 people like the most is an idea by Gary Klein, what he calls the premortem. And that’s the universal
1:15:03 winner. People really like that idea. And this is that when you’re about to make a decision,
1:15:10 a group, not quite, because if you’ve made it, it’s too late, but they’re approaching you. And then
1:15:19 you get people in a room who can be the people who are making the decision. And you said, suppose it’s two
1:15:26 years from now. And we made the decision that we’re contemplating. And it turned out to be a disaster.
1:15:32 Now, you have a page in front of you, write the history of that disaster in bullets. That’s the
1:15:40 pre-mortem. And it’s beautiful as an idea. It’s beautiful because when people are coming close to a
1:15:49 decision, it becomes difficult to raise doubts or to raise questions. People who are slowing the group
1:15:56 down when the group is nearing a decision are procedures really, you know, it’s annoying. You
1:16:03 know, you want to get rid of them. And the pre-mortem legitimizes that sort of dissent and that sort of
1:16:11 of doubts not only legitimizes it, you know, it rewards it. And so that’s a very good idea. I don’t,
1:16:17 you know, I don’t think that it’s going to prevent people from making mistakes, big mistakes,
1:16:25 but it could certainly, it will alert people to possible loopholes, to things that they ought to
1:16:30 do to make a safer decision. So that’s a good procedure. And there are many others.
1:16:37 What comes to mind. What comes to mind is, is to make intelligence, I mean,
1:16:46 the collection of, of the information independent of the decision-maker’s wishes. And you really want
1:16:54 to protect the independence of the people collecting the evidence. And I would add to, you know, a procedure
1:17:01 that really people don’t like, but if it were possible to implement it, I think would be good.
1:17:09 And that’s, that when you’re going to be discussing a topic, and it’s done in advance on people in sense
1:17:16 and material to think about the topic, that you may want them to write down their decision, the decision they
1:17:24 are in favor of before the discussion starts. That has many advantages. It’s going to give you a broader
1:17:33 diversity of points of view, because people tend to converge very quickly in a, in a group discussion.
1:17:40 And it forces people to be better prepared. It’s, except people don’t want this.
1:17:47 So I, I don’t know whether it’s even possible to implement it, but clearly, if you could,
1:17:49 it would be a good idea.
1:17:51 What are the reasons people don’t want it?
1:17:52 It’s too much work.
1:17:57 Right. Forces you to do a lot rather than the signaling you can sort of get away with.
1:18:02 Yeah. And then, you know, there’s somebody who is going to prepare the case. And so I glanced at
1:18:13 the material and then, you know, so a lot of meetings are a tremendous, a sink for wasted time.
1:18:17 And improving the quality of meetings would be a big thing.
1:18:19 Do you have any insights on how to do that?
1:18:26 Keeping them short. You know, I’m not a professional at fixing meetings. So I have,
1:18:35 I have a few ideas, but not an incomplete view. The, the question of structuring the meetings to
1:18:43 be discussing topics one at a time, that I think is, is really useful. I’ll give you an example. I mean,
1:18:48 it’s something that I suggested when I was consulting, but for some reason,
1:18:54 people didn’t buy that suggestion. So you, when an investment is being discussed,
1:19:01 say by an investment firm, some staff people, if it’s a big investment, staff people will prepare
1:19:11 a briefing book with chapters. Now, our recommendation would be that the staff should end each chapter with
1:19:19 a score. How does that chapter taken on its own independently of anything else affect the likely
1:19:26 decision? And then you could structure the meeting that discussed this and the meeting of the boards,
1:19:33 say, to discuss these scores one at a time. That has the effect that I was talking about earlier,
1:19:40 making the decision, making the judgments about the dimensions. We call them mediating assessments,
1:19:47 is a drogen tube. The mediating assessments come first, and then you have the profile of them,
1:19:55 and then you make a global judgment. And you can structure it. So if the staff has presented a score,
1:20:03 and you discuss in the board, do we accept their score? You’re forcing people to have a look at
1:20:09 the evidence. And think about why they would accept or reject. And then they feel like they have to
1:20:16 construct an argument that might be less intuitive. That’s it. So, you know, there are ways of doing this,
1:20:24 but if you’re going to be too rigid about it, it won’t work either. I’m curious what other advice
1:20:29 you gave as a consultant that nobody followed. Oh, I mean, virtually all the advice I gave,
1:20:34 people don’t follow. I mean, you know, I think that’s, that’s not, you shouldn’t, you know,
1:20:40 you’re not going to be a consultant if you expect your advice to be taken. You have to give the best advice
1:20:46 you can. What would be other examples of something you think could be widely applicable that you would advise,
1:20:51 you would have advised people and you just sort of like saw them drop the ball?
1:20:58 Well, I mean, you know, I would advise people who make a lot of decisions to keep track their
1:21:09 decisions and of how they turned out so that later you can come and evaluate your procedures and see
1:21:15 whether there is anything that is in common with those decisions that turned out well and didn’t,
1:21:18 not so well and so on. People hate doing this.
1:21:20 Why do you think people hate doing it?
1:21:27 Oh, because, because retrospectively, they may look foolish, some of them or all of them,
1:21:33 or in particular, the leader. So they really don’t like keeping track. I mean, there are exceptions.
1:21:43 Ray Dalio and his firm, and where everything is explained. Bridgewater, yeah. Bridgewater. But in
1:21:51 general, in my, I haven’t consulted with Bridgewater, they don’t mean me. But in general, when I suggested
1:21:56 that, it never went anywhere. What are the variables that you would recommend people keep track of?
1:21:59 Like, what would your decision journal look like?
1:22:02 Oh, I mean, I, my, my decision journal would be a mess.
1:22:08 I don’t, I’m not putting myself as an example, but…
1:22:11 So obviously the outcome, but you’ve got to do that post after.
1:22:20 Yeah, but no, no. You, you would want to say, what were the main arguments, pro and con? What were
1:22:22 the alternatives that were considered?
1:22:29 You know, it doesn’t have to be very detailed, but it should be enough so that you can come later and
1:22:31 debrief yourself.
1:22:34 So do you have a calibration, like what degree of confidence you are?
1:22:40 That would be good. Then, you know, it would depend on something that you could evaluate later.
1:22:49 It strikes me that decision journals and premortems are a way to identify people that are sort of,
1:22:55 perhaps, suppressed by their manager, where you have somebody who’s actually a better,
1:23:01 better at exercising judgment than the person that is, you know, that they’re working for.
1:23:07 And this would be a pain-free sort of way to calibrate that score over time and identify
1:23:11 the quality of judgment in a consistent way.
1:23:16 Oh, yeah. I mean, that strikes me as worth a lot of money to an organization.
1:23:23 Yeah. But, but also very costly. And you, you will see that certainly anything that threatens the
1:23:30 leader is not going to be adopted. And, and leaders may not want something that threatened their
1:23:34 subordinates either. People are really very worried about embarrassment.
1:23:36 You’re writing a book now on noise.
1:23:37 Yeah.
1:23:40 Tell me about noise and decision-making. Can you explain the concept?
1:23:47 Yeah. I can really explain it by saying what, you know, was the beginning of it,
1:23:56 and which was a consulting assignment in an insurance company where we, I had the idea of running a test
1:24:05 to see whether people in a given role who were supposed to be interchangeable agreed with each other.
1:24:11 So, you know, when you come to an insurance company and an underwriter gives you a premium,
1:24:17 the underwriter speaks for the company. And so it’s, you expect that any underwriter,
1:24:23 that it doesn’t matter which underwriter you get to afford a premium. And the company has that
1:24:30 expectation. It shouldn’t make much difference. So we tested that. And they constructed some cases.
1:24:35 And then we had some like 50 underwriters assess a premium for the case.
1:24:37 With the same information.
1:24:37 Hmm?
1:24:43 Yeah. With a really very realistic, we didn’t construct it. They constructed the case.
1:24:48 So, and they conducted the experiment. But now, the interesting question is,
1:24:56 how much variation do you expect there to be? So, we asked the executives the following question.
1:25:01 Suppose you take two underwriters at random. By what percentage do they differ? I mean,
1:25:06 you look at the difference between their premium, divide that by the average premium. What number do you
1:25:14 get? And people expect 10%. By the way, it’s not only the executives in that company. For some reason,
1:25:22 people expect 10%. And it was roughly 50%, 5-0. So that’s, you know, that’s what made me curious about
1:25:28 noise. That and the fact that the company was completely unaware that it had the noise. It took
1:25:35 them completely by surprise. So now we’re writing a book because there’s a lot of noise. So wherever
1:25:43 a rule is that wherever there is judgment, there is noise. And more of it than you think. So that’s the
1:25:44 pattern.
1:25:50 Are there procedures to reduce noise? And conversely, it strikes me that the variation would be good,
1:25:52 but maybe only in an evolutionary concept.
1:26:00 Well, we call that noise is useless variability. I mean, variability can be very useful if you have
1:26:07 a selection mechanism and some feedback. So evolution is built on variability, but of course,
1:26:13 it’s useful, it’s useful. But noise among ambient writers is useless. There’s nothing. Nothing
1:26:22 gets learned. There’s no feedback. It’s just noise. And it’s costly. The first advice, of course, would be
1:26:30 algorithms, as I said earlier. So algorithms are better than people, than judgment. That’s not intuitive,
1:26:40 but it’s really true. And after that, then the procedure that I mentioned earlier for making
1:26:46 decisions in an orderly way by breaking it up into assessments. That’s the best that we can do.
1:26:54 And there is one very important aspect that I haven’t mentioned. And this is training people in what the
1:27:02 scale is. So there is one piece of advice that you’d have for underwriters, that they should always
1:27:12 compare the case to other cases. And if possible, if you can have them share the same frame of
1:27:17 reference with other underwriters, you’re going to cut down on the noise.
1:27:19 Oh, that’s a clever idea, yeah.
1:27:30 And that exists in human resources, where performance evaluation, which is one of the scandals of modern
1:27:36 commerce, how difficult it is. But performance evaluation, they have the thing that’s called
1:27:44 frame of reference training, which is teaching people how to use the scale. There’s a lot of variability in
1:27:52 the scale. And a part of what the super forecasters do, they make judgments in probability units,
1:28:00 and they teach them to use the probability scale. So learning the scale is a very important aspect of
1:28:01 reducing noise.
1:28:07 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?
1:28:08 Oh, a lot.
1:28:09 Anything big?
1:28:17 Yeah. There’s been a replication crisis in psychology. And some of the stuff that I really
1:28:24 believed in, when I wrote “Thinking Fast and Slow”, some of the evidence has been discredited. So I’ve had to
1:28:25 change my mind.
1:28:27 What are the, what’s the biggest?
1:28:35 Some of the sexiest stuff, priming and unconscious priming, and so it just hasn’t held up in replication.
1:28:43 And I believed it, and I wrote it as if it were true, because the evidence suggested it. And in
1:28:52 fact, I thought that you had to accept it, because that was published evidence. And I should have,
1:28:58 I blame myself for having been a big gullible. That is, I should have known that you can publish
1:29:05 things, even if they’re not true. But I just didn’t think that through. So I changed my mind.
1:29:13 I’m now much more cautious about spectacular findings. I mean, very recently, I’ve come,
1:29:21 I think I have a theory about why psychologists are prone, or social scientists generally are prone to
1:29:29 to exaggerate, to be overconfident about their hypotheses. So I’ve done quite a bit of learn.
1:29:30 What’s the theory?
1:29:39 Well, the theory, the one element of the theory is that all these hypotheses are true. In what sense?
1:29:46 That, you know, if I, there’s a famous study that you mentioned wrinkles to people, and then
1:29:52 you measure the speed at which they walk, and they walk more slowly. Turns out that hasn’t held up in
1:29:59 replication, which is very painful. It’s one of the favorite studies. But actually, you know, that if
1:30:04 you mention wrinkles, and it’s going to have any effect on the speed of walking, it’s not making to make,
1:30:09 it’s not going to make people faster. If it has any influence, it’s going to make them slower. So
1:30:19 directionally, all these hypotheses are true. But what there is, is what people don’t see, is that
1:30:28 then huge number of factors that determine the speed at which individuals walk, and the differences in the
1:30:36 speed of walking between individuals. And that’s noise. And people neglect noise. And then there is
1:30:43 something else, which is, touches on both philosophy and, and psychology. When you have intuitions about
1:30:51 things, there are clear intuitions, and there are strong intuitions. Another thing. So clear intuition is if I
1:31:00 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
1:31:06 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,
1:31:15 nothing. But when you are a philosopher, and I should add one thing, to see the clear intuitions,
1:31:20 you have to be in this kind of situation that psychologists call within-subject. That you
1:31:28 have both. You have both with the ice cream cone and without the ice cream cone. So in a within-subject
1:31:34 situation, that’s an easy problem. In a between-subject situation, it’s an impossible problem. But now,
1:31:40 if you’re a philosopher, you’re always in a within-subject situation. But people live in a
1:31:46 between-subject situation. They live, you know, in one condition. And the same thing is true for
1:31:55 psychologists. So psychologists live in a, when they cook up their hypotheses, they’re in a within-subject
1:32:01 situation. But then they make guesses about what will happen between subjects. And they’re completely
1:32:09 lost between clear intuitions and strong intuition. We have no way of calibrating ourselves. So that makes
1:32:17 us wildly overconfident about what we know and reluctant to accept that we may be wrong.
1:32:23 That’s a great place to end this conversation, Danny. Thank you so much.
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