Daniel Kahneman: Thinking, Fast and Slow
A simplifying heuristic - (roughly, a rule of thumb), used as a crutch for the lazy brain when making a difficult judgment.
Availability bias - we choose to select what is often mentioned or easy to recall
Experts use intuition by recognizing the situation and pulling an intuitive solution that is likely to be correct. Amateurs however, would also use intuition to solve the same problem, but the question/problem is more difficult for them. So instead, they answer a related question intuitively, an easier question, like "do I like Ford Cars?" instead of the more complex: "Is Ford stock underpriced?"
Intuitive heuristics - when faced with a difficult question, we often answer an easier one instead, usually without using the substitution.
Intuitive thinking is thinking fast.
System 1: operates automatically and quickly. Sometimes susceptible to biases. Generates impressions, feelings and inclinations which are transformed into beliefs, attitudes and intentions by system 2. Neglects ambiguity and suppresses doubt. Responds more strongly to losses than gains.
System 2: allocates attention to the effortful mental activities. Cannot function without attention. Intense focus can render temporary blindness to stimuli that normally attract attention.
Ex. When focused on finishing a test, you might miss the bell ringing
System 2 is in charge of self-control
Pupils dilate substantially when processing problems. Pupils are sensitive indicators of mental effort.
- Self control and deliberate thought draw on the same limited budget of effort
- System 1 has more influence on behavior when system 2 is busy; you are more likely to choose cake over salad when memorizing complicated math digits.
- People who are cognitively busy are more likely to make selfish choices, use sexist language, and make superficial judgments in social situations.
- Cognitive business can be attained by drinking, a sleepless night, or a math problem.
- Ego depletion - self control and effort are limited; once you employ effort to carry out a certain task, you are less likely to complete the next one.
- Self control effort can be depleted by inhibiting the emotional response to a stirring film or trying to impress others
- Indications of depletion: deviating from one's diet, overspending on impulsive purchases, or reacting aggressively to provocation.
- Ego Depletion is a different mental state than cognitive busyness
- Ego depletion can be undone by ingesting glucose
Cognitive ease - good mood, believe what you hear, trust your intuitions, feel comfortable and familiar. Casual and superficial thinking
Comes from identifying a related experience, clear display, primed idea, or good mood
Cognitive strain - Vigilant and suspicious, invest more effort, make fewer errors, less intuitive/creative
Emotional instability - people who move away from baseline and stay there for an inordinate amount of time. Ex. If someone cuts you off in traffic, it is natural to spike up and grow angry, yet they should not be bugged by that incident an hour later
System 1 is responsible for believing, and system 2 is responsible for disbelieving. So it follows that when system 2 is occupied (by a task of cognitive strain) the participant is more likely to believe false statements as the part of the brain to assert falsity is occupied and distracted.
Confirmation bias - we seek data that is likely to be compatible with the beliefs they currently hold. Ex. If they think you are dumb when you are speaking, they will hone in on your flaws.
The Halo effect - the tendency to like everything about an admired person, including things you have not even observed yet.
Ex. If you like the president’s political views, you probably like his voice and appearance as well, even if you have not heard him give a speech, which in turn makes you like him more.
The Halo Effect increases the weight of first impressions
System 1 cannot account for information it does not have, so when info is scarce, System 1 operates as a machine for jumping to conclusions.
Substitution: the target question is the assessment you intend to produce.
The heuristic question is the simpler question you answer instead.
Ex. Target question/heuristic question:
How happy are you with your life these days?/What is my mood right now?
Heuristic questions provide an off-the-shelf answer with cognitive ease to the difficult questions.
The affect heuristic - The dominance of conclusions over arguments is most pronounced when emotions are involved.
Anchoring as Adjustment - An anchor comes to mind when attempting to answer an unusual or difficult question. You know this anchor is wrong but you know the direction to move from there to find the correct answer. Adjustment from an anchor is an effortful operation. This type of anchoring is a system 2 type
Anchoring as a priming effect - Anchors acting as suggestions, as system 1 tries its best to construct a world where the anchor is the true number, a manifestation of associative coherence.
Campbell’s soup:
A promotion read: “10% off, limit 12 per person” sold an average of 7 cans,
A promotion titled: “10% off, no limit per person” only sold an average of 3.5 cans.
The mention of 12 was an anchor that increased the quantity purchased. It also connoted that the goods were flying off shelves and shoppers should feel urgency about stocking up.
To avoid the effects of anchoring:
When the other party proffers a preposterous bid or anchor of some sort, do not respond with an equally opposite (drastic) bid. Instead:
“Let’s make it clear that if that is their proposal, the negotiations are over. We do not want to start there.”
The science of availability:
Availability heuristic can influence judgment on size or frequency. Instead of answering about the size or frequency of an event, your mind substitutes the question asking how quickly and easily did the instance come to mind.
Ex. Divorces among Hollywood celebrities and sex scandals among politicians attract much attention, so they will come easily to memory. This leads to an increased likelihood to exaggerate the frequency of both Hollywood divorces and political scandals.
Another example of a way to use the availability heuristic to bias judgment is by asking "First, list six instances in which you behaved assertively. Next, evaluate how assertive you are." If asked this, would your view on personal assertiveness be skewed by the first question? Yes. The first question effects the ease which they come to mind. If the initial prompt asked for 12 instances, the assertive assessment would be lower, because there would be less ease recalling so many instances.
This type of persuasion based on ease of recollection is most effective when a person is: in a good mood, engaged in another effortful task simultaneously, or are made to feel powerful (merely reminding people of a time they were powerful increases trust in intuition).
Merely reminding people of a time when they were powerful increases their trust in their own intuition.
Availability cascade - A self-sustaining chain of events. Most likely starting with media reports of a minor event but ends in public panic and potential government action. A media story about risk may catch the attention of a segment of the public, who become aroused and worried. This emotional reaction then becomes a story in itself, in turn causing greater coverage. The danger is increasingly exaggerated as the media compete for more extravagant attention-grabbing headlines. The issue then can become politically important because it is on everyone's mind, and the response of the political system is based upon the intensity of public sentiment. Think about how to use this to get investors, how to get your story out and go viral.
Hindsight Bias - Your inability to reconstruct past beliefs will inevitably cause you to underestimate the extent to which you are surprised by past events
The Planning Fallacy - plans and forecasts are usually unrealistically close to the best-case scenario, and could be substantially improved by consulting the statistics of similar cases.
Participants were willing to pay the same amount of money to save 2,000, 20,000, or 200,000 birds from drowning in oil ponds.
The number of birds made very little difference.
The participants reacted to the prototype—the awful image of helpless birds drowning in thick oil.
The almost complete neglect of quantity in such emotional contexts has been confirmed many times.
Extreme outcomes (both high and low) are more likely to be found in small samples. Large samples are more precise.
Plausibility trumps probability.
People are more likely to rate Linda as a “bank teller and a feminist” than merely a “bank teller” because the first response seems more plausible due to her description.
But this is fallacious in terms of raw probability.