“I have heard of too many people who “knew well before it happened that
the 2008 financial crisis was inevitable.” This sentence contains a highly
objectionable word, which should be removed from our vocabulary in
discussions of major events. The word is, of course, knew. Some people
thought well in advance that there would be a crisis, but they did not know
it. They now say they knew it because the crisis did in fact happen. This is
a misuse of an important concept. In everyday language, we apply the
word know only when what was known is true and can be shown to be true.
We can know something only if it is both true and knowable. But the people
who thought there would be a crisis (and there are fewer of them than now
remember thinking it) could not conclusively show it at the time. Many
intelligent and well-informed people were keenly interested in the future of
the economy and did not believe a catastrophe was imminent; I infer from
this fact that the crisis was not knowable. What is perverse about the use
of know in this context is not that some individuals get credit for prescience
that they do not deserve. It is that the language implies that the world is
more knowable than it is. It helps perpetuate a pernicious illusion.”
“We can infer from the speed with which people respond to questions about
their life, and from the effects of current mood on their responses, that they
do not engage in a careful examination when they evaluate their life. They
must be using heuristics, which are examples of both substitution and
WYSIATI. Although their view of their life was influenced by a question
about dating or by a coin on the copying machine, the participants in these
studies did not forget that there is more to life than dating or feeling lucky.
The concept of happiness is not suddenly changed by finding a dime, but
System 1 readily substitutes a small part of it for the whole of it.
Any aspect of life to which attention is directed will loom large in a global
evaluation. This is the essence of the focusing illusion, which can be described
in a single sentence:
Nothing in life is as important as you think it is when you are thinking about it.”
“The remembering self is a construction of System 2. However, the distinctive features of the way it evaluates episodes and lives are characteristics of our memory. Duration neglect and the peak-end rule originate in System 1 and do not necessarily correspond to the values ofSystem 2. We believe that duration is important, but our memory tells us it is not. The rules that govern the evaluation of the past are poor guides for decision making, because time does matter. The central fact of our existence is that time is the ultimate finite resource, but the remembering self ignores that reality. The neglect of duration combined with the peak-end rule causes a bias that favors a short period of intense joy over a long period of moderate happiness. The mirror image of the same bias makes us fear a short period of intense but tolerable suffering more than we fear a much longer period of moderate pain. Duration neglect also makes us prone to accept a long period of mild unpleasantness because the end will be better, and it favors giving up an opportunity for a long happy period if it is likely to have a poor ending. To drive the same idea to the point of discomfort, consider the common admonition, “Don’t do it, you will regret it.” The advice sounds wise because anticipated regret is the verdict of the remembering self and we are inclined to accept such judgments as final and conclusive. We should not forget, however, that the perspective of the remembering self is not always correct. An objective observer of the hedonimeter profile, with the interests of the experiencing self in mind,might well offer different advice. The remembering self’s neglect of duration, its exaggerated emphasis on peaks and ends, and its susceptibility to hindsight combine to yield distorted reflections of our actual experience.
In contrast, the duration-weighted conception of well-being treats all moments of life alike, memorable or not. Some moments end up weighted more than others, either because they are memorable or because they are important. The time that people spend dwelling on a memorable moment should be included in its duration, adding to its weight. A moment can also gain importance by altering the experience of subsequent moments. For example, an hour spent practicing the violin may enhance the experience of many hours of playing or listening to music years later. Similarly, a brief awful event that causes PTSD should be weighted by the total duration of the long-term misery it causes. In the duration-weighted perspective, we can determine only after the fact that a moment is memorable or meaningful. The statements “I will always remember…” or “this is a meaningful moment” should be taken as promises or predictions, which can be false—and often are—even when uttered with complete sincerity. It is a good bet that many of the things we say we will always remember will be long forgotten ten years later.
The logic of duration weighting is compelling, but it cannot be considered a complete theory of well-being because individuals identify with their remembering self and care about their story. A theory of well-being that ignores what people want cannot be sustained. On the other hand, a theory that ignores what actually happens in people’s lives and focuses exclusively on what they think about their life is not tenable either.”
Econs and Humans
“For Economists, the only test of rationality is not whether a person’s beliefs and preferences are reasonable, but whether they are internally consistent. A rational person can believe in ghosts so long as all her other beliefs are consistent with the existence of ghosts. A rational person can prefer being hated over being loved, so long as his preferences are consistent. Rationality is logical coherence—reasonable or not.
Econs are rational by this definition, but there is overwhelming evidence that Humans cannot be. An Econ would not be susceptible to priming, WYSIATI, narrow framing, the inside view, or preference reversals, which Humans cannot consistently avoid.
The definition of rationality as coherence is impossibly restrictive; it demands adherence to rules of logic that a finite mind is not able to implement. Reasonable people cannot be rational by that definition, but they should not be branded as irrational for that reason. Irrational is a strong word, which connotes impulsivity, emotionality, and a stubborn resistance to reasonable argument.
In a nation of Econs, government should keep out of the way, allowing the Econs to act as they choose, so long as they do not harm others. If a motorcycle rider chooses to ride without a helmet, a libertarian will support his right to do so. Citizens know what they are doing, even when they choose not to save for their old age, or when they expose themselves to addictive substances. There is sometimes a hard edge to this position:elderly people who did not save enough for retirement get little more sympathy than someone who complains about the bill after consuming a large meal at a restaurant. Much is therefore at stake in the debate between the Chicago school and the behavioral economists, who reject the extreme form of the rational-agent model.
Freedom is not a contested value; all the participants in the debate are in favor of it. But life is more complex for behavioral economists than for believers in human rationality. No behavioral economist favors a state that will force its citizens to eat a balanced diet and to watch only television programs that are good for the soul. For behavioral economists, however, freedom has a cost,which is borne by individuals who make bad choices, and by a society that feels obligated to help them. The decision of whether or not to protect individuals against their mistakes therefore presents a dilemma for behavioral economists. The economists of the Chicago school do not face that problem, because rational agents do not make mistakes. For adherents of this school, freedom is free of charge. ”
Two Systems
“The attentive System 2 is who we think we are. System 2 articulates judgments and makes choices, but it often endorses or rationalizes ideas and feelings that were generated by System 1. You may not know that you are optimistic about a project because something about its leader reminds you of your beloved sister, or that you dislike a person who looks vaguely like your dentist. If asked for an explanation, however, you will search your memory for presentable reasons and will certainly find some. Moreover,you will believe the story you make up.
Memory also holds the vast repertory of skills we have acquired in a lifetime of practice, which automatically produce adequate solutions to challenges as they arise, from walking around a large stone on the path to averting the incipient outburst of a customer. The acquisition of skills requires a regular environment, an adequate opportunity to practice, and rapid and unequivocal feedback about the correctness of thoughts and actions. When these conditions are fulfilled, skill eventually develops, and the intuitive judgments and choices that quickly come to mind will mostly be accurate. All this is the work of System 1, which means it occurs automatically and fast. A marker of skilled performance is the ability to deal with vast amounts of information swiftly and efficiently.
The way to block errors that originate in System 1 is simple in principle:recognize the signs that you are in a cognitive minefield, slow down, and ask for reinforcement from System 2.
Unfortunately, this sensible procedure is least likely to be applied when it is needed most.We would all like to have a warning bell that rings loudly whenever we are about to make a serious error, but no such bell is available, and cognitive illusions are generally more difficult to recognize than perceptual illusions.The voice of reason may be much fainter than the loud and clear voice of an erroneous intuition, and questioning your intuitions is unpleasant when you face the stress of a big decision. More doubt is the last thing you want when you are in trouble. The upshot is that it is much easier to identify a minefield when you observe others wandering into it than when you are about to do so. Observers are less cognitively busy and more open to information than actors.
Organizations are better than individuals when it comes to avoiding errors, because they naturally think more slowly and have the power to impose orderly procedures. Organizations can institute and enforce the application of useful checklists, as well as more elaborate exercises, such as reference-class forecasting and the premortem. At least in part by providing a distinctive vocabulary, organizations can also encourage a culture in which people watch out for one another as they approach minefields.
There is a direct link from more precise gossip at the water cooler to better decisions. Decision makers are sometimes better able to imagine the voices of present gossipers and future critics than to hear the hesitant voice of their own doubts. They will make better choices when they trust their critics to be sophisticated and fair, and when they expect their decision to be judged by how it was made, not only by how it turned out.”
Tarek Naim's Blog 
It’s sort of resonates in a way. .
When people give the illusion that they are so knowledgeable. .
But it’s more a pumped up look they throw off..
Reality is they are not..
Like an act!!!
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