Psychologist and Nobel Laureate Daniel Kahneman discusses his new book, Thinking, Fast and Slow and why our gut instincts are usually wrong.
Self-study activity:
Watch the video and say whether the statements below are true or false. The activity is suitable for Advanced students.
1 Daniel Kahneman is not an economist.
2 The answer to what's 2+2 falls into the slow thinking.
3 The reporter has read Dr Kahneman's book.
4 Intuition falls into the fast thinking.
5 Meat 90% fat-free is more expensive than meat 10% fat.
6 People are obsessed with terrorism.
7 Most people think they cannot be wrong in their ideas.
8 We know less than we really think.
9 Dr Kahneman got the Nobel Prize because he influenced some people in economics.
Hi, I’m Belinda Luscombe. I’m an editor-at-large at Time Magazine. Daniel Kahneman has wom the Nobel Prize for economics even though he’s actually a psychologist. He has a new book called Thinking Fast and Slow. And we’re going to talk, probably knowing me, reasonably slowly today, about that for ten questions. Welcome Professor Kahneman.
I’m glad to be here.
Now, in the book you frame the way we think into two different systems. There’s the fast system, system one, and system two, the slow thinking. Can you explain the difference?
Yes, I mean, you know everybody is aware of that. There are things that just come to your mind, you know, if I say 2+2, the answer comes to your mind. You don’t have to decide to do it, it just happens. But if I say, you know, what’s the product of 17 times 24, probably nothing comes to your mind.
409.
You’ve got to generate.
But I read your book. It’s actually 408.
So, but, yeah, but you pulled that out of memory and even that was an effort.
Are there people who best represents like, you know, public figures that you can think of... this guy is typical of like, slow thinking and this is typical of, of fast? Or is it within all of us?
I mean, you know, you can compare the current president and, and his predecessor. And one of them...
The current president, being much more judicious.
...much, well, you know, I mean certainly much more reflective and much more deliberate. And the previous one quite explicitly trusting his intuition, trusting his gut, and very much following what system one was telling him what to do.
What then are the most common decision-making mistakes involving this?
We are biased to like some people and to dislike other people. We are biased by, by words so that, you know, you are not going to have the same attitude towards a cold cut of mean if it’s described as 10% fat or as 90% fat-free. People are actually willing to pay more for the latter.
You don’t seem in the book, just from a surface reading, to be like a huge fan of intuition. Is it idiotic to go with your gut?
No, it depends, it really depends on the situation. I mean, there are conditions where you know that you are very likely to make a mistake. If somebody has just put a number and you are negotiating and somebody has mentioned a number, you should be very wary because that number looks more reasonable the moment it has come on the table. So there are mistake that people do. You can recognize the circumstances under which those mistakes occur.
Of all the demonstrations your, your book lists a lot of really fantastic demonstrations that you did to illustrate this blindness we have to our own biases, what is your favourite?
During the period when there was a fair amount of terrorist activity in Europe, people were asked to consider travel insurance. There were two conditions, and they were asked to, how much would you pay for a policy that pays $100,000 in case of death for any reason. And other people were asked, how much would you pay for a policy that pays $100,000 for death in a terrorism incident. And people pay more for the second than for the first.
Even though it’s less likely.
Even though it’s much less likely but, of course, they are not comparing the two. They are seeing only one of them, and so they are more afraid. People are certainly more afraid, more frightened by the idea of dying in a terrorist accident than they’re frightened by the idea of dying. And the willingness to pay simply reflects fear.
What are the biggest mistakes that people make in thinking about themselves?
Well, in the first place they think that other people have biases but that they don’t. So they’re, well, normally blind about their own blindness. We’re generally very overconfident in our opinions and in our impressions and judgements. Many people, not all, but the people that make the most difference to the lives of other people are very optimistic. And they have an illusion of control. And then there’s the illusion, which is very important, that the world is more knowable. I mean, we exaggerate how knowable the world is. So, for example, you know we think there are people who knew that there was going to be a recession or, you know, a severe event. And I’m skeptical because I think they didn’t know it, they thought it and then it happened. But there were other equally knowledgeable, equally intelligent people who knew the same thing and didn’t think there was going to be a recession. So we use the word know in peculiar ways and that’s strengthened the illusion that we understand the world when we really don’t.
I’m aware that you have a Nobel Prize for Economics but do you think the field of economics has been responsive enough to your discoveries and theories?
Well, you know, I’m a psychologist and not an economist and I am actually very surprised that they have been as responsive as they have been, I mean, Behaviour Economics is now definitely part of the establishment. It’s a dominant approach in some of the best departments of Economics in the country.
So which Nobel are you going for next?
Well, no, you know, I mean, what happened to us was an accident and, it’s you know, it’s basically we did psychology and we influenced some people in economics and I hope that the people that we influenced that the get the Nobel Prize in Economics. So I have very strong favourites in that field but otherwise I don’t have any other recommendations to the Nobel community.
Dr Kahneman, thank you so much for being here.
Thank you.
KEY:
1T 2F 3T 4T 5F 6T 7T 8T 9T
