Thursday, August 06, 2015

Kahneman wants to eliminate overconfidence

The London Guardian reports:
Daniel Kahneman is ... a man whose experimental findings have shifted our understanding of thought on its axis – someone described by Steven Pinker as “the world’s most influential living psychologist”.

His 2011 book, Thinking, Fast and Slow, a primer on a career’s worth of psychological inquiry, won the US National Academy of Sciences book award, and the enthusiastic approval of his peers. It tells the story of “two systems” of thought, one automatic and intuitive, the realm of systematic biases, the other conscious and deliberative. It is a challenging work, clearly written but stuffed even so with difficult problems and counter-intuitive explanations. Despite that, it has sold millions of copies around the world. Nassim Nicholas Taleb, professor of risk engineering and author of The Black Swan, places it “in the same league as The Wealth of Nations by Adam Smith and The Interpretation of Dreams by Sigmund Freud”.
There is a backhanded compliment. The Smith book was a great classic. Freud's book is widely regarded as pseudoscientific nonsense.

Kahneman is most famous for arguing that stereotyping can lead to faulty estimates of probabilities, such as in this example:
When told of a student, Tom, who has a preference for neat and tidy systems and a penchant for sci-fi, most of us guess that he’s studying computer sciences and not a humanities subject. This is despite the fact that the group studying the latter is far larger.
Somehow he has convinced the world that this is a profound example of a cognitive bias. The above guess is only wrong if you make certain additional assumptions.
Not even he believes that the various flaws that bedevil decision-making can be successfully corrected. The most damaging of these is overconfidence: the kind of optimism that leads governments to believe that wars are quickly winnable and capital projects will come in on budget despite statistics predicting exactly the opposite. It is the bias he says he would most like to eliminate if he had a magic wand.
Yes, governments can over-estimate what a war can accomplish. But they might be under-estimating it just as often, for all I know.

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