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Bp thinkingfastslow (2)
System 1 is our fast, automatic thinking which relies on mental shortcuts and biases. System 2 is our slow, effortful, logical thinking. Daniel Kahneman introduced the concept of cognitive biases that influence our judgments and decisions in irrational ways. Examples include anchoring bias where we rely too heavily on the first information we receive, availability bias where we judge likelihood based on what we can easily recall, and planning fallacy where we underestimate costs and overestimate benefits of projects. It is difficult but important to recognize our cognitive biases so we can avoid making mistakes in judgment and decision-making.
Bp thinkingfastslow (2)
- 1. Cognitive Biases What youshould know & What can you do about it? 3/26/2014 1Footer Text
- 2. Thinking, Fast andSlow - Daniel Kahneman • Psychology and economics come together o Most scientific economic models of human decisions assume people to behave rationally. Most psychological theory does not. 2
- 3. What is thefeeling this person presenting 3
- 4. Do the math? 4 WhichLine is longer, second longest, shortest?
- 5. System 1 andSystem 2 • System 1, is our fast, automatic, impulsive, intuitive and largely unconscious mode. • It is System 1 that detects hostility in a voice and effortlessly completes the phrase “bread and. . . . ” • System 2, in Kahneman’s scheme, is our slow, deliberate, capable of reasoning, cautious, analytical and consciously effortful mode of reasoning about the world. • It is System 2 that swings into action when we have to fill out a tax form or park a car in a narrow space. • System 2 is lazy and any work it has to do it will try not to. 5
- 6. Do the math? 6 Abat and a ball cost a total of $1.10. The bat costs $1 more than the ball. How much does the ball cost?
- 7. Count number ofpasses white team makes 7
- 8. Priming Effect • Ideomotoreffect - influencing of an action by the idea • Florida Example 8
- 9. Priming effect 9 • HonestyBox – drop money in for milk used • Suggested prices are posted • Banners appear • Purely symbolic reminder of being watched prodded people into improved behavior. As we expect at this point, the effect occurs without any awareness.
- 10. Cognitive Strain 10 • Youmake less mistakes when you’re forced to read small print or make your mind work. • Cognitive strain, whatever its source, mobilizes System 2, which is more likely to reject the intuitive answer suggested by System 1. • Ego Depletion – Effort of will or self-control is tiring; if you have had to force yourself to do something, you are less willing or less able to exert self-control when the next challenge comes around.
- 11. Anchoring 11 Was Gandhi moreor less than 144 years old when he died? How old was Gandhi when he died?
- 12. Anchoring 12 • Anchoring Effect- occurs when people consider a particular value for an unknown quantity before estimating that quantity. • We have a tendency to be influenced by irrelevant numbers • Buying something that’s negotiable? Be careful!
- 13. Sunk Cost Fallacy 13 •Sunk Cost - The decision to invest additional resources in a losing account, when better investments are available
- 14. Patterns 14 BBBGGG GGGGGG BGBBGB • Are thesequences equally likely?
- 15. Availability of Info/ Bad Events / Rare Events 15 • A salient event that attracts your attention will be easily retrieved from memory and more relevant to your decision making. • Availability heuristic - mental shortcut that occurs when people make judgments about the probability of events by how easy it is to think of examples • If you can think of it, it must be important • How is information shown?
- 16. Planning Fallacy /Optimistic Bias / Predicting the Future 16 • The planning fallacy is the tendency to overestimate benefits and underestimate costs, impelling people to take on risky projects. o In 2002, American kitchen remodeling was expected on average to cost $18,658, but actually cost $38,769 • You can explain the past therefore you can predict the future
- 17. Prospect Theory /Loss Aversion 17 • You are offered a gamble on the toss of a coin. If the coin shows tails, you lose $100. If the coin shows heads, you win $150. Do you take it?
- 18. Conclusion 18 • It’s veryhard to change your mind / Flexibility in thinking • If you don’t examine (impressions/feelings/inclinations) they will become beliefs • When can you trust intuition?