Summary
The way we think can be explained with two systems: System 1 and System 2. Perceived reality is largely based on unconscious assumptions which aren't always right, but are still used and passed down socially because they require minimal effort and illicit a feeling of control. For critical decisions we are focusing on, we employ system 2, our logical side, but this requires effort and we avoid- generally favoring efficiency. In everyday life we make poor decisions based on our perceived expertise, ego, and optimism- our biases- by relying on system 1.
Confidence means someone has constructed a coherent story in mind, not necessarily that they know the truth. For example, many experts are confident in their ability to predict long term outcomes but they are often statistically as wrong as a random guess(ex. Wall Street believes in expert stock traders despite unpredictability of stock prices). Instead of relying on experts who could not possibly know the long-term, we should use conventional wisdom and make it into an algorithm to predict long-terms- people miss many telling cues when relying on intuition. People should learn where the limits of their intuitive reliability and if they have not been in a sufficiently regular environment with which they could reasonably predict an event, they should look to statistics. We crave confidence regardless of its incorrectness.
How the book relates
The book connected with the class mostly because it explains why we should not trust ourselves in most entrepreneurial cases and should have evidence and reason for our business decisions
Activity
I would take an exercise from the book called Postmortem:
When it seems like a business decision has been made, imagine yourself 3-5 in the future and take 5-10 minutes writing a history of the disaster resulting from that decision. This is meant to help break groupthink, reduce optimistic biases, and establish a realistic account of the ways a business decision could go wrong (ex. Spending beyond budget, spending more time than originally predicted)
Aha Moments
What shocked me most about the book was when it presented the statistics of the effectiveness of interviews. Since the process rarely gives immediate feedback on decisions, the interviewee frequently makes a poor judgement call on the candidate because it is largely based on unconscious processes which are biased. The book suggests that instead of relying on the interviewer to give a general judgement, the employer should select around 6 traits to assess, only ask questions that will return factual results for one trait at a time and rate the person's answer from a scale of 0-2 after answering each question. Statistically, this will give better long-term results. This was a surprise to me because I don't know how many companies use this method when interviewing- none of the companies I have interviewed with have used this method
Additional
Pupils
dilate more when a person is facing a difficult task on the edge of their competency to do it and when people see something beautiful.
Focusing on what you are doing makes it more pleasurable- ex. eating
The confidence versus correctness stuff is fascinating – I’ve read things about it before, and I wouldn’t be surprised if those readings came out of this book raising them. Nate Silver’s book I read a few years back The Signal and the Noise which was about predictions talked a lot about how we don’t evaluate most prediction makers on how well they do – as compared to how they make it. What a critical flaw in society.
ReplyDeleteAnd yeah – the tradition interview is apparently quite terrible – in terms of effectiveness. It seems like there are so many better ways, but besides moving to multiple interviewers, or going to fully preset “objective” interviews (which have their own set of rather serious problems) so little has changed.
This is the same book I read so I believe I can give a good review. When I read the book I looked at it from the stance of evolutionary biology helping to explain most of the concepts. Basically, consider that in nature humans are meant to make assumption to survive. However, into days society people must use logic most often. Considering that most people struggle with pure logic such as math and science but find assumption based processes to be second nature such as art and athletics where you are predicting your competitors next move or recognizing patterns. These fit well with the two systems we have for interpreting the world we live in. Your way of explaining works as a direct interpretation of the book. I just thought there is more to it.
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