A book I’m reading now: Thinking, Fast and Slow
I’ve generally moved writing book reviews to my
but this is a case where I think the book has a lot of bearing on topics we discuss here. I’d go so far as to say it is one of the most important books I’ve ever read…although it tells you why it won’t have as much impact on you as it might. 😉
by Daniel Kahneman, who won the Nobel Prize for economics.
This is not really a book about economics, though.
It’s about how you (and other people) think.
I have to say, I read quite a few books like this. This one is not only largely counter-intuitive, it’s backed up by science. I love when the author writes an exercise to prove something…and then (largely accurately) tells me how I felt doing it!
I’m 53% through it, and there have already been several concepts that may change my life.
As many of you know, I’m a trainer. I also do process improvement.
Let me give you one example of something that shows that a lot of what we do at work may not be doing what we think (in the process improvement part).
Some of you will know this, but it is “regression to the mean”.
Here’s the basic idea:
Let’s say that there is something that you are doing which has a significant “luck” element. We’ll call it “luck”, but let’s consider it something that can randomly help you or hurt you (like…the wind when you are playing golf).
We’ll say that the task is 25% dependent on luck (which is lower than is often the case).
I’ll propose a task: getting to work on time. 75% of that is controllable by the employee…leaving on time, knowing the route, having the car fueled up, and so on. 25% of it is just luck: traffic accidents, road closures…again, that’s probably a small percentage.
You look at one month’s worth of data.
You identify a group that is 100% on time, and a group that is 50% on time.
You give the people who are 100% on time a bonus, to reward their good behavior.
The 50% group? They get remedial training.
The next time you measure that 50% group, you see that they are on time 75% of the time! What a great improvement, right?
Both of those groups could have already been performing their part of the task perfectly…75% success was due to that.
Then, there was that “luck” 25%.
The people you helped? They just happened to be incredibly unlucky during that month.
The 100% group? They might have been incredibly lucky.
You are going to feel like you helped the poor group…but if you looked at the good group, they probably also slipped towards 75%. They just aren’t going to be that incredibly lucky two months in a row.
The lucky people and unlucky people both move back towards the middle (because their luck doesn’t stay as extreme)…that’s what “regression to the mean” indicates.
I’m sure a lot of consultants make big bucks because of regression to the mean. What company would ask them to measure the 100% crowd again? They just want them to concentrate on the “remedial” group.
That’s just one idea.
Another really important one, which affects how people feel about Kindle updates, is that people feel loss a lot more than they do gain.
Economists tend to expect people to act rationally. If you can profit by doing something, they expect you to do it.
That’s not the way people actually behave.
Suppose I gave you a choice.
You can flip a coin: heads, you pay me $10. Tails, I pay you $10.01.
The odds are, you don’t want that deal. The loss feels much worse than the one penny gain.
Logically, you should want to flip the coin, right? You could come out ahead…it’s just as likely as you losing the $10.
What if it was heads you pay me $10, tails, I pay you $20?
Would that do it?
It would be much more likely to do it for most people.
The odds, though, are still the same of winning or losing as the first offer.
What if it was $10 loss possibility, and $100 winning opportunity?
Another big thing Kahneman is talking about is reference points…you judge the value of something by your own history, not just as an isolated element.
If I gave you a thousand dollars, and then offered the first bet, you’d be much more likely to take it.
Because you already think you came out $1,000 ahead. Your reference point for the deal is where you were before we started dealing, not after the $1,000.
There is a lot, lot more to this!
What I’m going to do is recommend the book to you…both to you, and for you to give as a gift.
While I tend to get something valuable out of every book I read, I rarely do that.
I will say that the book took a while to get into more practical things. There is a lot of necessary explanation about the “two systems” of thought that you have…and I’ve found myself referring to that idea just in day to day conversations!
I’m writing about this now because, well, you might want to read it before I finish it. 🙂
One more thing: at time of writing, it is $2.99 in the USA Kindle store! That might not last.
If you have read it (or do read it), I’d be interested to know what you think. This is non-fiction, so spoilers aren’t like they are in fiction. 🙂
New! Try the free ILMK magazine at Flipboard!
* I am linking to the same thing at the regular Amazon site, and at AmazonSmile. When you shop at AmazonSmile, half a percent of your purchase price on eligible items goes to a non-profit you choose. It will feel just like shopping at Amazon: you’ll be using your same account. The one thing for you that is different is that you pick a non-profit the first time you go (which you can change whenever you want)…and the good feeling you’ll get. Shop ’til you help!
This post by Bufo Calvin originally appeared in the I Love My Kindle blog. To support this or other blogs/organizations, buy Amazon Gift Cards from a link on the site, then use those to buy your items. There will be no cost to you, and a benefit to them.