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OPTIMAL_MIST
January 31, 2014
February 2, 2014
Reviewing some Daniel Kahneman
quotes on the subject of
optimism, he seems unusually Daniel Kahneman,
murky, and all over the place... "Thinking, Fast and Slow" (2011)
FAST_SLOW_AND_SLOWER
Can we be optimistic that
our bias toward optimism is
on balance a positive thing, GALEF_VS_THE_DELUSION_DELUSION
or could it be that it's
just another delusion, DOUBLE_THE_NEGATIVE
another cognitive bias
that needs to be rooted out?
"Most of us view the world as more
benign than it really is, our own
attributes as more favorable than they
truly are, and the goals we adopt as It may even be dubious
more achievable than they are likely to assert that we do have an
to be. We also tend to exaggerate our optimism bias... actually we
ability to forecast the future, which ourselves are all over the
fosters optimistic overconfidence. In map, insanely optimistic in
terms of its consequences for some areas, and insanely
decisions, the optimistic bias may pessimistic in others.
well be the most significant of the
cognitive bias." Anyone who commutes by
car is a crazed optimist.
p. 255, Start of Chapter 24
"the engine of capitalism" Anyone who worries about
dying in a terrorist attack
is a crazed pessimist.
Kahneman seems to be convinced The intersection of
that the optimistic bias is those two sets covers
both the dynamic engine of much of the United States.
capitalism, and a great flaw
in economic decision making
that leads to irrational
bubbles and collapses...
"... optimism is highly valued, "The consequence of competition
socially and in the market; neglect is excess entry: more
people and firms reward the competitors enter the market than the
providers of dangerously market can profitably sustain, so
misleading information more than their average outcome is a loss. The
they reward truth tellers. One outcome is disappointing for the
of the lessons of the financial typical entrant in the market, but
crisis that led to the Great the effect on the economy as a whole
Recession is that there are could well be positive. In fact,
periods in which competition, Giovanni Dosi and Dan Lovallo call
among experts and among entrepreneurial firms that fail but
organizations, creates powerful signal new markets to more qualified
forces that favor a collective competitors 'optimistic martyrs'--
blindness to risk and good for the economy but bad for
uncertainty." -- p.262 their investors." -- p. 261
"The optimistic risk taking of
entrepreneurs surely contributes to
the economic dynamism of a
capitalistic society, even if most
risk takers end up disappointed."
-- p.259
Isn't it an obvious point that a
system that relies on delusional
behavior is a flawed system? It's
difficult to believe that any good
can come of this insanity, and
certainly we've seen some remarkably
perverse results of late...
"... Should the government provide
loans to would be entrepreneurs who
probably will bankrupt themselves in a
few years? Many behavior economists
are comfortable with the 'libertarian
paternalistic' procedures that help
people increase their savings rate
beyond what they would do on their
own." -- p.259
"The main benefit of optimism is resilience
in the face of setbacks. According to
Martin Seligman, the founder of positive GALEF_VS_THE_DELUSION_DELUSION
psychology, an 'optimistic explanation
style' contributes to resilience by
defending one's self-image. In essence,
the optimistic style can be taught, at
least to some extent, and Seligman has Any human facility that
documented the effects of training on can be enhanced through
various occupations that are characterized training is of interest...
by a high rate of failures, such as
cold-call sales of insurance ..." It's too bad that this
-- p.263 one is more like an
enhanced delusion...
From the section "the premortem: a partial
remedy" (p. 264, hardcover):
"Can overconfident optimism be overcome by
training? I am not optimistic. There
have been numerous attempts to train
people to state confidence intervals that I'd be interested in
reflect the imprecision of their hearing about some
judgments, with only a few reports of of the failures--
modest success. An often cited example is
that geologists at Royal Dutch Shell A successful training
became less overconfident in their program could be very
assessments of possible drilling sites useful. You could have
after training with multiple past cases some sort of certify-
for which the outcome was known. In other cation program, perhaps
situations, overconfidence was mitigated make it a standard
(but not eliminated) when judges were part of an MBA...
encouraged to consider competing
hypotheses." SUPERFORECASTING
"Organizations may be better able
to tame optimism and individuals Precisely, this is the
than individuals are." real trick: Construct
social organizations
smarter than the
individuals that make
them up.
"The best idea for doing so was contributed
by Gary Klein, my 'adversarial collaborator'
who generally defends intuitive decision
making against claims of bias and is
typically hostile to algorithms. He labels
his proposal the _premortem_. The procedure
is simple: when the organization has almost
come to an important decision but has not
formally committed itself. Klein proposes
gathering for a brief session a group of
individuals who are knowledgeable about the
decision. The premise of the session is a
short speech: 'Imagine that we are a year
into the future. We implemented the plan as
it now exists. The outcome was a disaster.
Please take 5 to 10 minutes to write a
brief history of that disaster.'"
Well okay, that sounds
like a *good* idea,
is it really the *best*?
You can see why management
would like it, it seems
fairly cheap and easy to
implement.
It's sounds like part of
the "scenario planning"
concept promoted by
Peter Schwartz, which
encourages people to
consider at least one
"pessimistic" scenario.
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