Tyler Cowen Interviews Daniel Kahneman

by Tom Carroll

Economist Tyler Cowen interviews Daniel Kahneman (well worth a listen) renowned psychologist and winner of the 2002 Nobel Memorial Prize in economic sciences. I first learned about Daniel Kahneman when I read his 2011 book Thinking, Fast and Slow (NY Times book review), detailing his research and experiments demonstrating the impact of intuitive thinking and cognitive bias on our behavior.

In his conversation with Tyler he demonstrated the deep consideration he has given to a wide range of topics and his comfort with not knowing all of the answers.  Here are some great quotes from the interview:

Referring to a paper on happiness he authored with Alan Krueger:

Altogether, I don’t think that people maximize happiness in that sense. And that’s one of the reasons that I actually left the field of happiness, in that I was very interested in maximizing experience, but this doesn’t seem to be what people want to do. They actually want to maximize their satisfaction with themselves and with their lives. And that leads in completely different directions than the maximization of happiness.

On happiness feeling good:

Yeah, happiness feels good in the moment. But it’s in the moment. What you’re left with are your memories. And that’s a very striking thing — that memories stay with you, and the reality of life is gone in an instant. So memory has a disproportionate weight because it’s with us. It stays with us. It’s the only thing we get to keep.

On investing in memories:

We certainly invest heavily, heavily in memories. Vacations for many people are investment in the formation and maintenance of memories. There is a lot of investment. Whether it’s too much or too little, it probably depends a lot on people’s amount of consumption of memory that people engage in.

I, for one, am certainly biased. But I do not consume my memories a lot. And I almost never go back to photographs, not deliberately. If I stumble on something, it will move me. But the idea of going back to relive a vacation — that’s not what I do, so I have little empathy for this.

and my favorite on improving the quality of judgement:

My advice is divide and conquer. That is, there is one thing that we know that improves the quality of judgment, I think. And this is to delay intuition…..

So I think delaying intuition is a very good idea. Delaying intuition until the facts are in, at hand, and looking at dimensions of the problem separately and independently is a better use of information….

I don’t think CEOs encounter many problems where they have intuitive expertise. They haven’t had the opportunity to acquire it, so they better slow down.

Break the decision up. It’s not so much a matter of time because you don’t want people to get paralyzed by analysis. But it’s a matter of planning how you’re going to make the decision, and making it in stages, and not acting without an intuitive certainty that you are doing the right thing. But just delay it until all the information is available.