Biases and Illusions when making judgements

Question 1

The illusion of understanding

Answer 1

We like to construct simple narratives based on what has happened even if we don’t understand what is going on

we have difficulty considering things that didn’t happen but might have, we believe our narratives explain what happened

Question 2

Hindsight bias

Answer 2

Nixons visit to china, will he or won’t he meet Mao?
probabilities of 15 events estimated before he went to china, people reconstructed their predictions after he returned, the events that had happened, prob had gone up, events had not happened, prob went down

Question 3

Outcome bias

Answer 3

Events and the choices that led to them happening are judged by their actual outcomes, not by whether the decisions were good ones when they were made

Question 4

The illusion of validity

Answer 4

Kahneman assessed officer potential of recruits by observing them in a leaderless group challenge, their judgements were confident but they were useless, as shown on feedback about how they performed

however, their feedback didn’t affect confidence in judgements they made later on

confidence reflect ease of making a judgement

Question 5

The illusion of skill

Answer 5

Some experts are not actually experts

analysis of stock traders by brokers, on average the bought stock did worse than the sold stock by 3.2%, brokers who made least trades tended to do better because they don’t know much

Question 6

Skill and prediction

Answer 6

Landmark study of clinical vs statistical prediction
simple statistical prediction does better than clinical in 60% of cases and it does as well in the other 40%

predicted prices of fine Bordeaux on the basis of three measures of weather in the vintage year - did much better

Question 7

Prediction using multiple regression

Answer 7

The robust beauty of improper linear models in decision making - statistical prediction words well just be looking at the predictors - if they are equally weighted

Question 8

The Apgar test for worrying poor breathing in new borns

Answer 8

Had to score each criteria, predicting if they have poor breathing. The 5 components are equally weighted

Question 9

The limits of intuition

Answer 9

Confidence is not a guide to it’s validity - most people think they have a good intuition

Question 10

What are the two crucial conditions needed to improve judgements?

Answer 10

Regular environments (making judgements on the regular and getting feedback)
practise in those environments 

medical professionals don’t do well as they get no feedback
weather forecasts- they get feedback, so realise what was wrong

Question 11

Inside and outside views

Answer 11

Kahneman was involved in a government project to develop a curriculum and textbook for judgement and decision making, after planning, team judged project to take 1.5-2 years to finish. A member of the team with admin experience reported that 40% similar projects were abandoned and the others took 7-10 years to complete

the project took 8 years - experts were wrong, overview was correct

scottish parliament building - forecast to cost 40m, eventually cost over 400m

Question 12

Optimistic bias

Answer 12

We tend to have a bias to being optimistic, which is not justified by the facts and leads to:
planning fallacy
belief in a benign world
belief in the ability to forecast future

however, optimistic tend to do better in life, more influential and to be healthier