I'm reading Danny Kahneman's book "Thinking Fast and Slow". It is definitely a good read and worthwhile for just about anyone. It is especially important for people who make large, infrequent decisions with slow time to feedback.
I just have to point out one comical inconsistency in the book... it sort of proves that Kahneman himself is prone to mixed thinking.
Early in the book he talks about regression to the mean, or what is also sometimes called "mean reversion". The central concept of regression to the mean is that there is a mixture of skill and luck in any outcome. Holding skill relatively constant from contest to contest or trial to trial or decision to decision, that leaves luck as the big difference from one chance to the next. If somebody just had a great outcome, it was very likely that they were lucky on that outcome. Just playing the odds, that means it's also very likely that they will do worse on the next outcome. The reverse applies for bad outcomes.
He then tells a great story about a flight instructor, that you can find anywhere if you're interested. He also cautions the reader not to build a plausible, explanatory and causal story to explain the shift in performance. He beats up on sports-casters, experts of all kinds and so on for building up a story to explain why high-performers often do less well after a spectacular success.
A few chapters later in the book, he starts talking about optimists. He spends a while talking about the benefits and dangers of optimism. He talks for a while about how award-winning CEOs tend to lead their companies to underperform the market. He builds a plausible, causal story about how the over-confidence of CEOs that have done well leads them to make overconfident decisions, such as acquisitions and extreme risk-taking behaviors. His story sounds a lot like the sort of story he was lambasting earlier for sports stars.
:)
No comments:
Post a Comment