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Chapter 34 highlights a number of critical ideas that are germane in today’s environment. Kahneman begins the chapter with the statement that classic economists’ beliefs and preferences are reality bound. Meaning that “objects of the choices are states of the world, which are not affected by the words chosen to describe them.” Stated differently, classic economic theory sees decisions as a set of equations and does not account for the emotion (System 1 thinking) that words generate in decision making. Kahneman uses the results of the 2006 World Cup. In the finals, France lost and Italy won. Both statements describe the same event. They are equivalent, but if you were rooting for France, saying France lost will evoke different emotions and memories than saying Italy won. System 1 thinking generates different meanings based on human emotions and bias. In 2020 manipulating people by evoking System 1 thinking is called spin.
The punchline of this chapter is while a choice might be economically equivalent, the words used to explain the choice can make them not equivalent. As every salesperson knows, emotions sell. In the movie Megamind, Megamind (voiced by Will Ferrell) stated that the difference between a villain and supervillain is PRESENTATION. Kahneman uses the term ‘framing’ to describe presentation in decision-making scenarios. In the article, The Fear Equation, (AARP The Magazine, p28) Doug Shadel quotes Roy Baumeister (author of The Power of Bad)“ the mind is hardwired to react more strongly to negative than positive things.” Framing can be used as a tool to guide decisions.
Kahneman’s advice is never to passively accept decision problems as they are framed. Step back, invoke System 2 thinking (remove the emotions and do the math) and discover which of your decisions or preferences is generated by the framing rather than reality.
We will hold the poll for the next book in the Re-read Series open Saturday 11 January 2020. Remember to vote early and often.
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The previous installment of Re-read Saturday is:
Week 33: Reversals – http://bit.ly/363hrqe
Or start at the beginning
Week 1: Logistics and Introduction – http://bit.ly/2UL4D6h
January 13, 2020 at 9:27 am
I note that in this chapter, Kahneman references the 2008 book by Richard Thaler and Cass Sunstein, “Nudge: Improving Decisions about Health, Wealth, and Happiness”. Thaler and Sunstein are widely credited with creating this idea, but I have found evidence – in fact, a full description of the nudge concept, using the exact same name and terminology – that it was actually thought up as early as 1969 by a civil servant working in the devolved government in Northern Ireland, by the name of Walter Willis.
It was only ever described in print in a small-press private circulation magazine published that year in New York; I’ve seen no evidence that either Thaler or Sunstein ever saw that, and at this stage it would probably be impossible to access what circulation records there might be (if, indeed, any ever existed) to see how the idea got passed on. I suspect it submerged into the collective unconscious and only surfaced some 35-40 years later in a conversation with one of the authors that went “I read somewhere about an idea…”