An Appreciation of Daniel Kahneman and a Brief Introduction to His Work on Cognitive Biases

Dear Reader,

Ever since writing my piece “On Critical Thinking and Better Thinking,” I have wanted to figure out how, exactly, to go about thinking more skillfully. I needed some direction. Fortunately, while writing that piece, I discovered two Wikipedia lists: one on cognitive biases and the other on logical fallacies. Several of these entries cited Daniel Kahneman. With Kahneman’s recent death, I figured that it's as good a time as any to start digging into these lists.

Best,

Al

An Appreciation of Daniel Kahneman and a Brief Introduction to His Work on Cognitive Biases

Ship Pollux stranded off Tel-Aviv coast, 1934 (Wikimedia Commons)

We lost one of our great thinkers in psychology and economics this Spring. Daniel Kahneman, born in Tel Aviv in 1934, passed at age 90. 

Called an “avid pessimist” by his friend Richard Thaler, Kahneman defined his temperament, according to Thaler, as “rational because he would not be disappointed as much with the outcomes of life.” (Wikipedia)

Psychologist Steven Pinker puts a more upbeat spin on Kahneman: "His central message could not be more important, namely, that human reason left to its own devices is apt to engage in a number of fallacies and systematic errors, so if we want to make better decisions in our personal lives and as a society, we ought to be aware of these biases and seek workarounds. That's a powerful and important discovery.” (Wikipedia)

Kahneman’s early experiences living in Paris, under Nazi occupation, brought out in him an interest in psychology, as he observed first-hand some of the bizarreness of human behaviour. As he recounted in his Nobel Prize biographical piece:

It must have been late 1941 or early 1942. Jews were required to wear the Star of David and to obey a 6 p.m. curfew. I had gone to play with a Christian friend and had stayed too late. I turned my brown sweater inside out to walk the few blocks home. As I was walking down an empty street, I saw a German soldier approaching. He was wearing the black uniform that I had been told to fear more than others – the one worn by specially recruited SS soldiers. As I came closer to him, trying to walk fast, I noticed that he was looking at me intently. Then he beckoned me over, picked me up, and hugged me. I was terrified that he would notice the star inside my sweater. He was speaking to me with great emotion, in German. When he put me down, he opened his wallet, showed me a picture of a boy, and gave me some money. I went home more certain than ever that my mother was right: people were endlessly complicated and interesting. (Nobel Prize Bio, 2002)

Source: Bundesarchiv via Wikimedia Commons

Kahneman became a trailblazer in the study of cognitive biases and for many years he worked very closely with his primary collaborator, Amos Tversky. Their long friendship and working relationship was the subject of Michael Lewis’ book, The Undoing Project.

He was awarded the Nobel Prize in 2002 for his groundbreaking work in the psychology of judgement, decision-making, and uncertainty. Those of us interested in better thinking and decision-making can look to his contributions in several related areas, including  anchoring bias, and prospect theory.

ANCHORING BIAS

In 1974, Kahneman and Teversky spent a year ensconced in their Jerusalem office developing their concept of anchoring bias,  “the tendency to rely too heavily—to ‘anchor’—on one trait or piece of information when making decisions (usually the first piece of information acquired on that subject).” (Wikipedia)

The first opinion on a matter that we are exposed to, the first number offered during a negotiation, or the first information found during research, can have an oversized effect on our appraisal of information, or our take on an issue. This can be true even if that first piece of information is inaccurate, wrong, or goes against our interests.

Anchoring can have negative effects on our thinking in several ways, including: distorted perceptions, impaired judgement, and limited exploration. These are explained well in a Forbes magazine piece, from which I quote:

Distorted Perceptions: Anchoring can distort our perception of value, leading to overestimations or underestimations. In negotiations, for instance, the initial price offered can significantly influence the perceived fairness of the deal, regardless of the actual market value.

Impaired Judgement: Anchoring affects our ability to judge the probability and outcomes of future events accurately. In financial forecasting, for instance, initial estimates can unduly influence subsequent predictions, leading to flawed investment strategies.

Limited Exploration: When anchored to a particular piece of information, individuals may fail to explore other options or alternatives fully. This can lead to suboptimal decisions, as better choices are overlooked in favour of those that align with the initial anchor.

It is not easy to overcome cognitive biases. As with other bad thinking, the first logical step is to make yourself aware that the problem exists and to develop a habit of unflinching self-assessment. This takes practice! Sometimes, there is no bigger fool than oneself. Sometimes skillful decision-making takes time. Use the time available to consider alternative takes on a matter. Deliberately move beyond the first idea, viewpoint, or offer. To do this you will want to create psychological distance by practising detachment. Bring in others for their opinions and understanding of the situation. Commit to hearing what they have to say and try to integrate what they have offered to counteract your instincts (as your instincts, under the tendency towards anchoring, may be leading you wrong).

PROSPECT THEORY

Kahneman and Tversky then got back to work, and through the mid to late 1970s developed prospect theory. 

In short, prospect theory looks at the disproportionate way that we typically feel about loss versus gain. Simply put, the bad feeling that we get after losing $50 is much stronger than the good feeling we get after winning $50. When we have the choice we default to avoiding loss rather than pursuing a potential gain. For most people, risk aversion is our default tendency. This leads us towards choices that seem to offer more certainty in their outcomes. Kahneman explained that gains and losses are deeply tied to immediate emotional reactions. This emotional response overrules logic and affects our decision-making in ways that we are unconscious of. 

There are several lessons that we can draw from prospect theory. Amongst them are:

• How we frame things to ourselves, and to others, and how things are framed to us by others, matters a great deal.

• Knowledge of prospect theory can serve you when carrying out negotiations. Be strategic when you frame a situation or a choice by emphasizing gains and de-emphasizing losses.

If you want to dig into Kahneman’s work, his books Thinking Fast and Slow and Noise are widely available at bookstores and libraries everywhere and are written for a general audience.

Thank you for reading. I apologize for bringing this piece out so late this month. I will strive to put together a long-form Q&A and get it out in a few weeks. If you have questions regarding fitness training, philosophy, or related matters, please send them in.