Thinking fast and slow: Conclusions

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In this conclusion, system 2 is presented as “fictious Econs, who live in the land of theory” while system 1 is “real human beings”. However, the the real, experiencing self is both system 1 and system 2. Most of this final chapter is a development of that idea: humans are both system 1 and system 2.

This final chapter works more like a “future research” ending remarks on an academic journal paper than applications for living a better life, which is a pity.

Two selves

The main bias here is how we neglect duration and value more “a short period of intense joy over a long period of moderate happiness” which lead us to make unwise decisions on how to live our live, missing opportunities for a long happy period if there might be a poor ending. However, the stories we tell ourselves about our lives also matter, so any policy aiming at improving the citizens of a country wellbeing should consider both.

Econs and Humans

Here Kahneman discusses the idea of rationality itself and point out how divergent is the common sense interpretation of rationality versus the idea of it that economists have. Here lies the more relevant contributions of Kahneman’s work: to point out how mislead economics is and all the different things that need to be considered in order to make economics a little more realistic, considering real human beings and not mathematical abstractions.

Let me quote Kahneman on the subject:

“I often cringe when my work with Amos is credited with demonstrating that human choices are irrational, when in fact our research only showed that Humans are not well described by the rational-agent model”

That doesn’t mean that humans do not need any help and our decisions are perfect. In the following pages, things get a little more interesting as Kahneman gets political and states how a libertarian vision of human beings, as put forward by the Chicago School of Economics is basicly flawed, as it is based in such a limited and non realistic view of rationality.

Instead a behavioral school of economics will point out of the need of a state regulation to equalize mistakes people make due to the biases described in the book. The Chicago School of Economics does not face such a problem, because they believe in a mythical rational human being that can’t be found in the real world.

Kahneman is not completely clear about his own beliefs, but he seems to favor some sort of “nudge” program in which citizens are nudged to take the “best option” for them by making it the default.  Therefore the state has two main roles against biases: first to guarantee that “best options” are offered by default and second to protect humans from con artists that may use biases in order to exploit our weaknesses.

This is a very relevant dicussion, a key one, and I wish that Kahneman had devoted more time to it, instead of bugging us to death with lab experiments.

Two Systems

Here Kahneman develops the main idea of this conclusion, how humans are very complex and fascinating mixture of system 1 and system 2, and gives a more fair description of system 1 and how our intuition, besides of being a source of biases, is also the responsible of lots of things we do rightly and effortlessly. However sometimes it does very wrong things, and we have to be aware of it.

This section looks mostly like a way of distancing himself from Gigerenzer view of “bounded rationality”, done in a oblique way stating that “the heuristic answer is not necessarily simpler or more frugal” playing with Gigerenzer’s paper (and book) “Fast and Frugal Heuristics”.

When considering the applications of all this knowledge in our daily life, Kahneman is -fortunately- very realistic. It is very difficult to change the way System 1 behaves. We have to put a lot of effort into it.

The main mechanism for detect such biases is simple, we have to recognize that our mind is trying a shortcut to solve a very complex problem, slow down and bring on System 2 to make a more detailed analysis of the problem.

But this is not easy, as  Kahneman states:

Except for some effects that I attribute mostly to age, my intuitive thinking is just as prone to overconfidence, extreme predictions and the planning fallacy as it was beofre I made a study of these issues.

And this is because:

The voice of reason may be much fainter than the loud and clear voice of an erroneous intuition, and questioning your intuitions is unpleasant when you face the stress of a big decision. More doubt is the last thing you want when you are in trouble.

Other tools than can helpful

  • Organizations making decisions instead of indidivuals, as they have to think and process decisions more slowly
  • To have  a richer language so we can label errors and biases in a more detailed manner.

Like humans beings, this book is a peculiar mix of system 1 and system 2, good, helpful intuitions on how humans see the world, and boring academic discussions that are only relevant to other academics. It is not the best book I’ve ever read, and certainly not the most entertaining one, but I’ve learned quite a lot things about how other people and myself take decisions and analyze the world, and overall I am happy to have read it.

 

 

Thinking, Fast and Slow. 38 Thinking About Live

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Well, well, well, we came to the last chapter of the book (Only the conclusions chapter left). I personally have to say that this book has taught me what mental depletion means. In a practical way.

The chapter begins bringing us hope. It begins with a chart about marriage happiness and, for a moment, I thought that we will be given behavioral based marital advice. But not, the chart is used only to illustrate theoretical points already presented in the book, basically that we substitute particular thoughts for a general evaluation when considering our general satisfaction with life. That married and non married people are similarly happy. It is simply that recently married people “think” that they are happier.

This is such an weird way of thinking that Kahneman himself begins to realize it and talks about a “hybrid approach”. What do you exactly mean by “someone thinks that he is happy but he is not”? I understand the mechanical definition of it but it still smells weird. Perceived satisfaction with life, which can be relative to our goals, character, biases, etc, is a very real reality in our minds.

From this point on, we talk about happiness. First we are told that is genetically based. That there are people happier than others in the same circumstances. We all new that.

Then we center in the focusing illusion and its part in the now well known limitations that we humans have in make predictions about our future emotional states. This is a real source of disappointment and incorrect planning in life and it should be taken into account very seriously. Avoiding or weakening the power of “miswanting” is something we should work at in our lives.

However to go to a guy with a colostomy who declares that he would do everything to get rid of it and try to convince him, using actual experience tests of his life, that he is not at all unhappy, is going to prove complicated.

And since this is the last chapter I will review: Mister Kanheman, how could you write such a BORING book with so many interesting things to say is something that future generations will study in humanities departments.

 

Thinking Fast and slow: 37 Experienced Well Being

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In this chapter Kahneman revises our idea of well being, based on the idea of flow, developed by psychologist Mihaly Csikszentmihalyi. The main idea is to substitute the idea of a “general well being” which is clearly too ambiguous to be of any help, by the idea of “experienced well being” making people to recall their experiences in a given day (Day Reconstruction Method or DRM).

The main aim of this chapter is to argue for this “experienced well being” as a better way to mesure well being and inform policies in order to assure a better well being of citizens.

The results described are not very espectacular. Some of them are common sense: suffering is unevenly distributed and some people seem to have no worries in a whole day while other people spend most of their time in emotional distress and pain. Active hobbies are better than passive leisure like watching TV. Having children generates more stress but produce a higher life evaluation. Some are a little less evident, like the fact that people with better education tend to report higher stress, or that religion does not help to reduce depression or worry. Severe poverty also amplifies bad effects, beyond the mere economical facts, and illness has a more negative effect in people under extreme poverty.

Probably, the most quoted and surprising result is how experienced well being grows with salary but only to a point. When you pass the $ 75.000 income in high cost areas there is no relevant increase in experienced well being. Money gives happiness, but only to a certain point. Then it is irrelevant for that.

When developing his studies, Kahneman used  DRM because  “Experience sampling is expensive and burdensome.” BUt now it is not anymore. You can design an app and ask thousands of volunteers to participate in a research on well being. This has actually been done in several experiments but results are quite similar to those obtained by Kahneman and his team, as far as I can tell.

Thinking, Fast and Slow. 35 Two Selves

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This chapter presents a curious bias. Our memories of past experiences do not correspond exactly to what we actually were experiencing while living them but are essentially focused on the the maximal intensities of pain/pleasure and the final moments of the experience. The total duration is neglected. The result of this is a contradiction between the self reported level of pain/pleasure when currently undergoing the experience and the memory that we have of it afterwards.

And this has a very powerful consequence. Since we will be making future decisions based on our memories of past events (we do not have any other information to resort to), in the case of discrepancies between the “experienced” and the “remembered”, we are going to take erroneous decisions. That is, we will choose options that will provide less pleasure/more pain than the alternatives. Take that, homo economicous!

Isn’t it funny?

Thinking Fast and Slow: 36 Life as a Story

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Well… This chapter is like really well… boring.

My rephrasing: Some friends of Kahneman, after watching “Total Recall” decided to make a pointless experiment about how important are memories when evaluating former experiences. He put them in his book so they get some extra credit. Plus the chapter starts with a little digression on the Traviatta so he also sound cool and intelectual. Meh!

 

Thinking, Fast and Slow. 34 Frames and Reality

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We are presented here with another bias, the Frame Bias. The author also uses this chapter, I guess that by no other reason than this being the last chapter of part 4, to defend the existence of humans as a different species from Econs. The chapter ends up with a sort of bitter complain because economics is not accepting the truth coming from the behavioral psychology fast enough.

This is one of my main caveats about this book. When reading it, it is good advice to separate very carefully two kind of insights. On one side, there are genuinely new and helpful ideas that help us to know ourselves better and than can help us to avoid costly mistakes in life (at least in theory). On the other side, there is a lot in it that only makes sense as a rebuttal of a set of outlandish ideas of economists living in another universe. It doesn’t interest me at all if it is not true, as mainstream economists believe, that cows are spherical. Let’s take a good book on marketing and I suspect (I don’t know the field) that there will be much more information and fun about real human economic behavior than here. This is a book about a fight between scholars for respect and prestige, written in scholar language and I am happy that we are finally nearing the end.

About the frame bias, this is something we all intuitively know. We respond differently to equal or very similar questions depending on the way they are presented to us. In the chapter, some interesting examples are explained, although I don’t understand the miles per gallon story. Beth consumes less petrol than Adam, makes a move to consume even less with a reduction of 25%. Adam consumes a lot, makes a reduction of only 14% and ends up consuming more than twice what Beth consumed before the correction. In what possible sense Adam action is more significant than Beth’s? Because the absolute amount of petrol saved is bigger?

Thinking Fast and Slow: 33 Reversals

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In this chapter we are presented with a different type of bias: how we humans make a different decision depending on whether we can compare two different outcomes or not. When we are presented with two different situations to evaluate, the way we decide is highly influenced by the way the information is presented. In tone of the first experiments described people will choose a safer bet to a riskier one if presented together even if the riskier bet can give you more money. However if they are presented separated and one has to state what is the minimum amount of money that would desire to put on the safer, people tend to put a lot more money in the riskier bet.

Of course, such results are devastating for the  Morgenstern/von Neuman model which suppose that choices human make are “rational” and consistent, but it should worry us too that systematic inconsistency in the way we make decisions, as it is presented in several experiments related to trials and juries.

And we can forget very basic facts. In another experiment, if people are asked to give a donation to save dolphins from pollution or to save farmworkers from skin cancer, alone, people tend to give more people for the dolphins cause. The emotional impact of an endagered dolphin is greater than a farmer getting skin cancer; after all, they are supposed to work under the sun… However, when they are presented together people give more money to farmers. After all, they are human, and dolphins are not.

The main reason for such a discrepancy is the fact that when we have to choose among several choices it is more likely that system 2 activates.  So this chapter give us an interesting heuristics: when suspecting that one is under a rushed evaluation from system 1, consider other choices and force system 2 to show up. I think I’ll start right now to use it.

 

Thinking, Fast and Slow. 32 Keeping Score

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Money is important but not per se but because of its role as a proxy for feelings of accomplishment. Behavior in real humans is not dictated by rational calculations of gains and loses but for the pursue of emotional satisfaction. And emotions have their particularities and are sometimes coincident with the mythical rational man and sometimes not.

In this chapter we read about some psychological traits that are everywhere and which are very relevant in everyday life and that are quite well known. We are talking about the “sunken cost” effect that prevents you from stop loosing time and money in bad projects. We have the “disposition effect” that forces you to sell good performing investments and retain the losers. We have an asymmetry about the regret we feel when our actions had bad consequences in opposition to how we feel when our omissions had bad consequences. We don’t feel so much pain when we are bad after following the norm compared to what we feel when we are bad after braking the norm.

That’s how we are and if it is difficult to overcome this feelings oneself, to try to fight them in the people around when discussing joint actions that affect you is impossible. And that brings us to the interesting discussion that closes the chapter. These all are biases that decrease our overall practical and financial success. Sometimes they can seriously damage our health and life expectancy (we are over medicated and over treated because of this biases). However, it may be simply impossible to fight them. We hate losing money in a transaction in the same way that we like sugar. It is something physiological. You can’t help it. Maybe you just have to accept it and try to optimize your emotional well-being even knowing that you are harming your portfolio, wealth and health.

And that reminds me that I have always defended it as the most important argument in favor of having kids: it is what everybody does. If when you are old you discover that you made a mistake doing what everybody does, you are going to overcome it and be quite happy nevertheless. However, if your mistake was going against the norm, you are going to suffer strongly.