Secret stars star sessions models5/2/2024 ![]() (That’s all handled by counsel.) I try to reserve the largest possible cache of gray matter for research, thinking, storytelling (writing, presentations, etc.), and investment decisions. Despite having made more than 30 investments in private firms over the past decade, I review few documents, and rarely even sign them. I have not planned a vacation in 20 years or put anything on my calendar in 10. ![]() I delegate the majority of decisions at Prof G Media - I participate in a one-hour weekly editorial meeting and check in with my executive producer 2x per month on business issues. I have other people order for me at restaurants I have a uniform for work/working out, wearing the same thing every day, and someone else buys my clothes. I actively limit the number of decisions I have to make to preserve neuron power for the key ones. (Note: I am not claiming these are the right way to put Kahneman’s insights to use, just my way.) What I’ve done: Some examples of how this has influenced my actions. Overestimating an unlikely outcome is also the secret behind the lotto, which offers terrible odds. The healthy profit margins of insurance companies reflect our tendency to overestimate the likelihood of calamities. Insurance is a profitable business because people would rather suffer a series of guaranteed small losses (premiums) to avoid the risk of a single but unlikely catastrophic loss. We also have a skewed perception of probable gains and losses: We overestimate the likelihood of unlikely things. It’s irrational to an economist, but we put more value on not losing $100 than we do on gaining $100. One of Kahneman and Tversky’s earliest insights was the simple observation that we feel the pain of loss more intensely than the pleasure of profit. Kahneman showed those expectations were incorrect.Loss Aversion Expectations about human decisions - whether to work at a certain job, how much to pay for a specific good - are the foundation of economic theory. But Kahneman “demonstrated how human decisions may systematically depart from those predicted by standard economic theory.” That dry language obscures an intellectual nuclear detonation. Before him, economists “relied on the assumption of a ‘ homo œconomicus,’” as the prize committee wrote, a self-interested being capable of rational decision-making. Though he was a psychologist by training, Kahneman got his Nobel Prize for economics. Put another way, take a beat and you increase the likelihood of making a better decision. These shortcuts and mistakes are present in the structure of our brains, and impossible to avoid, but recognizing them helps us discern between trivial and important decisions and invest the appropriate intellectual capital. ![]() Kahneman’s body of work demonstrates that we are often wrong but frequently confident. To facilitate the requisite speed, our brain buttresses our decisions with artificial confidence. Our efficiency comes at the cost of accuracy: Many instinctual decisions will be poorly calibrated (i.e., wrong). We have to make thousands of decisions every day, and we couldn’t leave the house if we had to objectively analyze every choice: breakfast, outfit, route, music, etc. These shortcuts are efficient they foster a key skill for survival, the ability to make rapid decisions with incomplete information. Kahneman studied how humans make decisions, and the shortcuts our minds take, unbeknownst to us. Professor Kahneman helps me navigate the strait between instinct and decision. Jesus and Muhammed Ali are my Yodas around social issues (love the poor, be fearless and poetic) and Peter Drucker informs my views on the economy (the purpose of an economy is to create a middle class), etc. I have often tried to identify a guide or sherpa for different aspects of my life. Something I wish I’d figured out when I was younger is that greatness is in the agency of others. In the wake of his passing, we’ve been reflecting on the many ways his work has shaped our thinking. Few people have unpacked our behaviors with greater insight than Kahneman and his longtime collaborator, Amos Tversky. Vote for us here, and I will surround you with white light.ĭaniel Kahneman, who died last month, leaves an extraordinary intellectual legacy. No Mercy / No Malice has been nominated for a Webby Award.
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