(this post and a second part was originally made about 9 months ago in a different forum, wanted to include on this blog)
No, I am not trying to depress you, I am making bad decisions too. You see, I have been reading Daniel Kahneman’s book, “Thinking, Fast and Slow.” For those who are not familiar with Daniel Kahneman, he is a behavioral psychologist, and a famous one at that. He is the only person to win the Nobel Prize for Economics without actually being an economist. He applies his work to key areas of study like business, making him a very unique and insightful individual. It is because of his work, for example, that we know that individuals irrationally protect against losses more than they try to achieve gains.
Anyway, in the book he describes many of the studies of his life’s work – famous findings that have led to great insight into decision making and other aspects of how we think. Here are two great insights from the book:
- Experts rarely are better at predicting things in their domain of expertise than non-experts.
- We are way too easily influenced by bad information.
That first one might be a bit shocking, or it might not have sunk in, so let me repeat it: EXPERTS ARE RARELY BETTER AT PREDICTING THINGS IN THEIR DOMAIN OF EXPERTISE THAN NON-EXPERTS.
Besides the obvious things you should be thinking (like you need to fire your stockbroker), this fact has immense implications. For example, if we want the answer to a complex problem that deals with uncertainty, we may be better off asking a group than a known individual expert (like crowdsourcing). Or, did you know that decisions which require heavy amounts of intuition (such as what someone else might be thinking or feeling, or quick decisions about whether someone is friend or foe) are better made when in a good mood. Alternatively, better decisions usually result from a bad mood when the decisions require heavy analysis and consideration of multiple options. Most importantly, experts are often wrong because they simply over-estimate their own skill – validated by everyone calling them an expert. So we should work together as a team to ensure that we don’t individually get too confident.
The second one is interesting too. Examples in the book include the need to somehow explain every day’s increase or decrease in the stock market (which we blindly believe when we hear it). Or problems our minds have with anchoring – for example, if I ask you two questions: 1) Did Gandhi died before or after age 144 (quite obviously “before”), then 2) how old Gandhi was when he died, you will give me a higher answer than someone who was only asked the second question. Or if you were on a jury, you would believe the lawyer who simply said his/her argument more than the other attorney – in studies, words that are presented to subjects more often are rated more favorably than less said words, even when asked about in a totally unrelated context.
If you aren’t scared about your decision making ability after reading this, you should be! For me the moral of this story is that we need to work together to ensure we make good decisions, because left to our own devices, we are going to struggle. For those of us who are leaders, we need to find ways to ensure diverse opinions from our teams are heard, and seek out feedback and information. For all of us, we need to speak up when we have an idea that goes against the grain, because we may just be right!