Daniel Kahneman

I first heard Nobel-prize-winning Daniel Kahneman at TED a couple of years ago, when he talked about the difference between experience and the memory of experience (see my post here and watch the TED video here).  Kahneman is a great thinker, and delightful to listen to.  He introduces ideas in a very gentle, intuitive way and takes rather simple and intuitive concepts and formalizes them.  As you reflect on these ideas, their significance grows and sheds light on other things you've observed.  So I signed up quickly for his talk in the Rotman Speaker Series this week. 

In this talk, Kahneman was presenting ideas from his book Thinking, Fast and Slow.  He described two modes of thinking, which he calls System 1 and System 2.

System 1 is all about fast thinking; in the blink of an eye we exploit our past experience, our intuitive reactions and our emotions to come to an answer.  We make all kinds of decisions without even knowing we're making them, using our automatic thinking processes.  It's good to have System 1 thinking, because it would be too exhausting to think through everything with System 2.  For instance, we judge a person's mood by looking at their expression unconsciously and automatically.  We handle the myriad decisions around driving a car in a sort of auto-pilot mode.  When someone says 2+2, we immediately respond 4.

System 2 is more deliberative and thoughtful.  It is more logical.  We are aware that we are thinking.  But it takes much more energy and time.  We would use System 2 to come up with an answer to 17x24. 

Kahneman points out that people are lazy, and we often use the effortless System 1 to answer a question, avoiding the thoughtful effort of thinking it through with System 2.  Take the old chestnut question about a bat and a ball:

A bat and a ball together cost $1.10.

The bat costs $1.00 more than the ball.

How much does the ball cost?

Most people whip out the answer ten cents, without taking time to check the answer, which is patently wrong.  Ten cents is a System 1 answer, given instinctively and without thinking.  Since System 1 thinking is easy, we often don’t apply System 2 thinking when we should and we don’t even use it to check our System 1 thinking.  Kahneman pointed out that giving the wrong answer to that question is not a case of ignorance – even students at MIT get it wrong about 50% of the time, and at some universities up to 85% get it wrong.

When a question is really hard, and demands effortful System 2 thinking, we often substitute an easier question and use System 1 to answer that question.  He described an experiment where students were asked “How happy are you?”  It’s a fairly hard question to come up with an answer to how happy you are because it involves so many factors.  After answering this question, students were asked “How many dates did you have last month?”  This is a relatively easy, quantitative question with a single answer. When asked in this order, there was no correlation between the answers to the two questions.  However, if the students were asked first about the number of dates and then about how happy they were, there was a high correlation.  The students were using number of dates as a proxy for the happiness question – in other words switching to an easier question and using System 1 to answer it.

System 1 is extremely weak at dealing with statistics – it prefers to deal in stories.  And the more coherent the story, the more (unfounded) confidence we have in our System 1  conclusions.  Kahneman described an experiment where people were asked the following two questions before taking a trip, around a time when there had been significant news about terrorist activities:

How much would you pay for travel insurance that pays $100,000 in case of death for any reason?

How much would you pay for travel insurance that pays $100,000 in case of death in a terrorist incident?

People are willing to pay more for the second type of insurance.  The explanation is that System 1 thinking is involved in the second question – the words ‘terrorist incident’ arouse emotions that cause us to make an intuitive System 1 response, although paying more for the second insurance than the first insurance is not a rational decision.

Kahneman told a cute story about himself.  He ran into a colleague in a small hotel in Australia, and was greatly surprised at the coincidence.  What’s the probability, after all?  Two weeks later he met the same colleague at the theatre in London.  Clearly the second incident had even lower probability.  But Kahneman observed he was less surprised in London – he’d already laid in the experience that he tended to meet this colleague in unusual places.  His reaction was based on System 1.

People in marketing understand this dichotomy.  For better or for worse, appealing to System 1's intuition and emotion can be more compelling than appealing to System 2's logic.  The same is true for fundraising: a pure System 2 appeal is not likely to be effective for most people.

For me, Kahneman’s message was rather discouraging.  It put more scientific evidence around what we often observe when people make decisions solely on emotion, undeterred by facts, whether in response to a politician or a commercial.  When Kahneman was asked how one might train children to be more reflective and use System 2  thinking more often, his only suggestion was to lead by example.   So, get out there and use System 2 thinking as often as possible.

TED gets 'off the chart' ratings

Lest some of you think I am unduly euphoric after a TED conference, I would hasten to assure you I belong to a large club. In a post-conference survey, 44% of Long Beach attendees rated TED as fantastic. An equal number gave it an even higher rating of 'off the charts'. Guess which box I ticked!

By the way, if my recent post on Kahneman's talk intrigued you, it's now online at the TED site.

Information is Power

TEDsters were joined this year by TED Associates in 75 countries watching a live stream of the conference. We were treated to a surprise talk by David Cameron streamed live from the London associate event. It was fitting to have this talk immediately after Kahneman because Cameron, like Obama, has sought policy input from behavioural economists.Cameron (click here to see his talk online) focused on the challenge of improving society without spending more money. He argued that the way to improve wellbeing was to give power to the people. And the formula for devolving that power was through transparency, choice and accountability, including making lots of data available online. Free access to information allows people to turn it into information.

We heard of this theme of open information from Tim Berners-Lee last year at TED when he talked to us about a new age for the Web, when numerical data would be linked the way text has been. When you have the raw data, you can freely manipulate it and integrate different data sets to elucidate relationships.

Berners-Lee discussed an example of just how quickly this can happen - just two days after the UK Department of Transport published data on the locations of bicycle accidents in Britain, The Times had published an interactive zoomable map showing the locations.

The US and the UK have already started to publish such data, in the interests of open government, and many have hopes for improved political accountability through these efforts.

Berners Lee closed with a stunning time-lapse of Open Street Map's map of Port au Prince. OpenStreetMap.org provides a completely open source world map, where users can update and enrich data, just like in Wikipedia. Before the disaster, there was paltry information on Port auPrince, but volunteers fleshed out the map very quickly. Note the locations of the symbols for the encampments for the homeless on the map below.

Kahneman on Happiness

It’s a TED tradition to open the conference with a Nobel Prize winner, and this year it was Daniel Kahneman, the founder of behavioural economics, which is certainly the science du jour these days. Kahneman has written many books on happiness and took us through how difficult it is to measure. In this opening Mindshift session, he said there are two separate measures of happiness, the happiness you actually experience versus the happiness you remember of that experience.

We experience events that result in happiness as they occur. That happiness is felt by our 'experiencing self'. Later, we remember these events, and our 'remembering self' feels happiness. The happiness of our remembering self might be either greater or lesser than that of our experiencing self. He uses the simple example of enjoying a lovely musical recording, which ends with an ugly screech at the end. The experiencing self would have had several minutes of happiness with a few seconds of displeasure at the end. However, the entire memory of the event will be coloured by those last few seconds. The remembering self is a powerful filter for our experiences.

Kahneman described research on people undergoing colonoscopies, who give feedback about their varying discomfort level in real time. This measures the response of their experiencing self. Later they were queried about the procedure, essentially querying the remembering self. Their memory of the discomfort depended almost entirely on how they felt at the end. So extending the treatment artificially so that it ends with low pain, determines the patients’ assessment of their overall pain, no matter their total experience.

During a two-week vacation, you’ll experience twice as much happiness as during a one-week vacation, but you don’t remember twice as much happiness. In fact, there is only a .5 correlation between the happiness of the experiencing and remembering self. So our happiness (which is about memories) is not equal to well-being (which has to do with experiences).

This has an impact on anyone trying to determine policies which will increase well-being: do you try to maximize well-being (the experience) or the remembered happiness (which is how, say, the voters will judge you). In US research, people’s ‘happiness’ rises as incomes rise to $60,000, and then plateaus, even thought you could argue that well-being continues to rise. The lack of money can make you unhappy, but beyond a relatively modest point, more doesn’t make you happier.

Judging by the number of later speakers who referred to the difference between the experiencing and remembering self, this was an insight that resonated with a lot of people.