Daniel Kahneman on when to trust intuitive judgment

If I had to summarize Thinking, Fast & Slow up in one sentence: human intuition shouldn't be trusted when it comes to statistics problems, because humans aren't naturally statistical thinkers.

All of the research in the behavioral economics category shows this pattern very well. GPA distribution among populations is statistically quantifiable. Due to human cognitive biases, however, it appears to be a problem that has an obvious answer by intuition, and that answer is wrong.

The specific three qualities that are outlined as giving way to intuition boil down to having a large body of evidence and a very tight feedback loop, which statistics does not have but things like emotion reading do have. If you get the emotions of your significant other wrong you'll immediately see the repercussions. Casually misjudging someone on the street because of statistics will never see you being corrected.

But really, I think you should just read the book. This article doesn't even come close to doing behavioral economics justice.

2) He's defining 'good information' a little bit more precisely though - how do you know your information is "good?" Everyone will say they've got good information if you ask them, right?

"We never had storms like this 5 years ago, or when I was a kid. Things are getting really bad"

All your data points don’t have to come from one person. If the same advice is being repeated by multiple people who have sold a business (e.g. find product market fit), then it becomes valid.

Reading to your kids is good for them

Isn’t there actual science backing this claim up? Regardless, there’s a population of anecdotal evidence.

The other takeaway is that you don't have nearly as much evidence as you think. I mean who wouldn't think that kids who learn to speak early have high GPAs?

I’m surprised that was your reaction. Mine was confusion because it seemed blatantly obvious that such a small signal was nowhere near enough information to make an accurate prediction.

why is the "big final" any different from any other game?

It condenses the major findings on behavioral psychology from 21st century into an accessible paperback.

Stock markets are a lot more than just "not sufficiently regular"; they actively remove all regularity from themselves (that being the byproduct of how markets calibrate prices of things—regularity is the signal that makes people money, and so it gets exploited away.)

Or, to put that in more precise words: https://www.lesswrong.com/posts/h24JGbmweNpWZfBkM/markets-ar...

I have to imagine chess players are more certain as to whether they got a move wrong rather than whether they got it right?

Let's say the overall average GPA is 3 (or 3.1 for women):

https://blog.prepscholar.com/whats-the-average-high-school-g...

Then you would expect that to swamp the information that this person was an early reader. You might let the early reader have a slight effect.

It can be really easy to forget if one gets on too much of a "science!" kick, but there's plenty of decisions we have to make in life without "science" backing it up; arguably the majority. It's a poor choice to then just throw your hands up and say "well, if I can't use this most reliable decision mechanism, I just won't decide!", which is, both superficially amusingly and profoundly, a decision anyhow.

I know, it sounds obvious when I say it. And it's the sort of error only a particularly sort of educated person could even make, so it's not the world's most common error. But it's definitely an error. And it's not always as blatant as all that; one you can see with some frequency on HN are people insisting that we have to do our programming with more attention paid to science, when in fact there basically isn't any. Maybe that's a problem. Maybe that's something "we" should spend more money on solving. But in the meantime, that's not a reason to throw our hands up and give up; we just have to do our best, and I think the evidence supports the idea that we can learn a lot about our field and get better over the course of decades, even if there isn't a "scientifically-grounded course" for doing so and all we have to go on is modestly-trained intuition (that definitely fails Khaneman's standards here, so the sloppier, conventional "intuition" not his precise one).

People have known this, er, intuitively for some time. Kahneman gives us an handle on why it is: it lets us develop an intuition for the software we are working on.

It is similar with mathematicians. A mathematician may smell a rat in a proof like a programmer a bad pattern in code, but you can only really trust their intuition in their specialty field.

E.g. web frontend programmer intuition won't do in backend, desktop UI, mobile, HPC, video game coding, embedded programming, real time applications or safety critical software.

This does not preclude polyglots and polymaths or generalists.

How valuable that intuition is and whether it is transferrable to other system is another question.

Basically, consider it a form of Bayesian learning models. The difference is that with humans if the feedback comes too late, we will reject the signal as we have trouble separating actions and consequences.

I can conceptually explain why some commonly bad practices like hard coding variables or not using looping constructs for repetitive statements are to those that keep doing it, but I can’t give quick feedback showing precisely how tough it is to make changes around the code or to even understand it to those that write it because they have developed intuition about their codebase and are now mentally somewhere between Stockholm Syndrome and defensiveness.

For example, in the stock market it's not even clear to me what the total scope of effects is, immediate or not, that any single action I take as a private investor will have on the market. Before I even can start to learn about the effectiveness of the changes that my actions produce, I am hamstrung by an inability to see an immediate, comprehensive effect to each action.

original vote plus: 6 upvotes - 15 minutes

edit: 7 upvotes - 1 hour

    Is that intuition, no.

DK discovered that the successful outcomes of the senior bankers were random rather than based on skill or experience. His report was not well received.

Daniel Kahneman. (Photo: Bloomberg) Daniel Kahneman. (Photo: Bloomberg) Can intuition play a role in investing? According to Daniel Kahneman, a Nobel Memorial Prize-winning behavioral economist, no.

During a speech given at the World Business Forum in New York City, Kahneman explained when people can trust their intuitive judgement and when they should be wary of it.

“Intuition is defined as knowing without knowing how you know,” he explained. “That’s the wrong definition. Because by that definition, you cannot have the wrong intuition. It presupposes that we know, and there is really a prejudice in favor of intuition. We like intuitions to be right.”

According to Kahneman, a better definition — or a more precise one — would be that “intuition is thinking that you know without knowing why you do.” By this definition, the intuition could be right or it could be wrong, he added.

Because, according to Kahneman, intuition can often be wrong. To show an example of this, Kahneman had the crowd guess the GPA of a college senior he called Julie. He told the crowd one fact about Julie — that she read fluently at a young age — and then asked them to judge how good of a student she had been.

From research, Kahneman, who wrote The New York Times bestseller “Thinking, Fast and Slow,” said that most people guess that Julie has around a 3.7 GPA.

“You might think that this is a good answer,” he said. “It’s a terrible answer. It’s an intuition, and it’s absolutely wrong. If you were to do it statistically, you would do it completely differently. Actually, the age that people read is very little information about what student they will be 20 years later.”

According to Kahneman, this is an example of an intuition that is generated automatically with high confidence, and it’s wrong statistically.

“In general, confidence is a very poor cue to accuracy. Because intuitions come to your mind with considerable confidence and there is no guarantee they’re right.”

There are certain times when intuition can be correct. For instance, Kahneman explained, chess players and married couples generally have accurate intuition.

“Intuitions of master chess players when they look at the board [and make a move], they’re accurate,” he said. “Everybody who’s been married could guess their wife’s or their husband’s mood by one word on the telephone. That’s an intuition and it’s generally very good, and very accurate.”

According to Kahneman, who’s studied when one can trust intuition and when one cannot, there are three conditions that need to be met in order to trust one’s intuition.

The first is that there has to be some regularity in the world that someone can pick up and learn.

“So, chess players certainly have it. Married people certainly have it,” Kahnemen explained.

However, he added, people who pick stocks in the stock market do not have it.

“Because, the stock market is not sufficiently regular to support developing that kind of expert intuition,” he explained.

The second condition for accurate intuition is “a lot of practice,” according to Kahneman.

And the third condition is immediate feedback. Kahneman said that “you have to know almost immediately whether you got it right or got it wrong.”

When those three kinds of conditions are satisfied, people develop expert intuition.

“But unless those three conditions are satisfied, the mere fact that you have an idea and nothing else comes to mind and you feel a great deal of confidence — absolutely does not guarantee accuracy,” he added.

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Emily Zulz Emily Zulz Emily joined the ThinkAdvisor team as a reporter in the summer of 2014. She previously worked as a reporter for The Daily Journal in Kankakee, Illinois for a year and as a reporter and editor for The Daily Eastern News in Charleston, Illinois for two and a half years. Prior to joining ThinkAdvisor, Emily worked on Groupon’s editorial team in Chicago as a fact checker for three years. She graduated cum laude with a BA in journalism from Eastern Illinois University, and she has been the recipient of two journalism awards for her news reporting at daily newspapers.