Master of the mind and the quiz he wants you to fail
With markets behaving more or less in a mano depressive fashion, it is a good time to read interesting articles, unless you are caught wrong in the market. The master of the mind on the human decision making, and the quiz he wants us to fail. Vanity Fair on Kahneman, and how humans think, perceive and make decisions;
Plainly put, a “heuristic” is a tool we use to simplify the decision-making process. For example, if you’re driving in the United Kingdom for the first time and don’t know the traffic laws, heuristics might help you correctly assume that a green light means go and a red light means stop. By applying what you already know about driving in America, you won’t have to waste hours reading up on England’s traffic laws. However, that same heuristic could prove harmful if you start driving in the right-hand lane, against traffic. Research psychologist Daniel Kahneman—Nobel Prize winner, and the subject of Michael Lewis’s article in this month’s issue, “The King of Human Error”—spent a great part of his life’s work discovering and cataloging the heuristics people use. Specifically, he concentrated on the situations where they lead us astray.
By nature, heuristics are both useful and inaccurate; our minds have developed them to deal with a wide-ranging set of problems. In Kahneman’s forthcoming book, Thinking, Fast and Slow, he separates the thinking process into two types—System 1, in which efficiency comes at the cost of accuracy, and System 2, which requires a lot of focus and can sometimes prevent System 1 from making mistakes. When you’re asked what “2 + 2” equals, System 1 takes over, but when you’re asked what “17 x 24” equals, System 2 takes the reins. The questions in this quiz are designed to trigger System 1, which relies heavily on intuition to provide us with answers that we perceive to be correct. Whenever you find yourself “going with your gut,” that’s System 1—often standing in the way of rational thought. It’s no wonder that the word “heuristic” has its root in the word “eureka.” Go ahead and take this quiz, based (loosely) on Kahneman’s four decades of research; follow your gut and see just how wrong you are. Full reading here.
Don’t forget to read the King of Human Error.