As read by George Hahn. https://www.profgalloway.com/think-slow-2/ Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What is the focus of the Decoder Thursday series?
In every company, there's a whole system of decision makers, challenges, and strategies, shaping the future of business at every level. That's why we're running a special three-part Decoder Thursday series, looking at how some of the biggest companies in the world are adapting, innovating, and rethinking their playbooks.
We're asking enterprise leaders about some of the toughest questions they're facing today, revealing the tensions, risks, and breakthroughs happening behind closed doors. Check out Decoder, wherever you get your podcasts. This special series from The Verge is presented by Adobe Express.
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What's up, y'all? It's Kenny Beecham. We are currently watching the best playoff basketball since I can't even remember when. This is what we've been waiting for all season long. And on my show, Small Ball, I'll be breaking down the series matchups, major performances, in-game coaching decisions, and game strategy and so much more for the most exciting time of the NBA calendar.
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A media ecosystem that focuses on engagement versus enlightenment will get you to whatever conclusion sanctifies your beliefs. The recent murder of a CEO immediately triggered my reflexive go-to that this is a function of the struggles that young men face. But here's the truth. I don't know. And neither do you. At least not yet.
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Chapter 2: What insights does Daniel Kahneman provide on decision-making?
We don't have nearly enough information to draw conclusions, and we live in a society where everyone fast-forwards to the end without having watched the film, believing they know what happened and why. We are increasingly deferring to our gut and emotions versus slowing our thinking. The Jedi master of the importance of the pace of our thinking, Daniel Kahneman, passed away earlier this year.
Several media outlets have contacted me regarding the murder of the UnitedHealthcare CEO, and in a nod to Professor Kahneman, my comment has been, I don't know. The end of the old year and start of the new is a good time to refocus on what is important. That means stepping back and looking at life not with the emotional, reactive part of our brains, but with the rational side.
Daniel Kahneman said, the late Israeli-American psychologist, called this thinking slow. Inspired by Kahneman's work, particularly with longtime collaborator Amos Tversky, about decision-making, I've tried to consciously employ thinking slow to make important decisions. Here's what I had to say about Kahneman's ideas following his death last March. Happy New Year.
Chapter 3: How can we apply 'thinking slow' in our daily lives?
Think slow, as read by George Hahn. Daniel Kahneman, who died last month, leaves an extraordinary intellectual legacy. Few people have unpacked our behaviors with greater insight than Kahneman and his longtime collaborator, Amos Tversky. In the wake of his passing, we've been reflecting on the many ways his work has shaped our thinking.
Something I wish I'd figured out when I was younger is that greatness is in the agency of others. I have often tried to identify a guide or Sherpa for different aspects of my life. Jesus and Muhammad Ali are my Yodas around social issues. Love the poor, be fearless and poetic. And Peter Drucker informs my views on the economy. The purpose of an economy is to create a middle class, etc.
Professor Kahneman helps me navigate the strait between instinct and decision. Some thoughts. Kahneman studied how humans make decisions and the shortcuts our minds take unbeknownst to us. These shortcuts are efficient. They foster a key skill for survival, the ability to make rapid decisions with incomplete information.
We have to make thousands of decisions every day, and we couldn't leave the house if we had to objectively analyze every choice. Breakfast, outfit, route, music, etc. Our efficiency comes at the cost of accuracy. Many instinctual decisions will be poorly calibrated, i.e. wrong. To facilitate the requisite speed, our brain buttresses our decisions with artificial confidence.
Kahneman's body of work demonstrates that we are often wrong, but frequently confident. These shortcuts and mistakes are present in the structure of our brains and impossible to avoid. But recognizing them helps us discern between trivial and important decisions and invest the appropriate intellectual capital.
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Chapter 4: What are the implications of Kahneman's work on economic theory?
Put another way, take a beat and you increase the likelihood of making a better decision. Though he was a psychologist by training, Kahneman got his Nobel Prize for economics. Before him, economists relied on the assumption of a homo economicus, as the prize committee wrote, a self-interested being capable of rational decision-making.
But Kahneman, quote, demonstrated how human decisions may systematically depart from those predicted by standard economic theory, unquote. That dry language obscures an intellectual nuclear detonation. Expectations about human decisions, whether to work at a certain job, how much to pay for a specific good, are the foundation of economic theory. Kahneman showed those expectations were incorrect.
One of Kahneman and Tversky's earliest insights was the simple observation that we feel the pain of loss more intensely than the pleasure of profit. It's irrational to an economist, but we put more value on not losing $100 than we do on gaining $100. We also have a skewed perception of probable gains and losses. We overestimate the likelihood of unlikely things.
Chapter 5: How do emotions influence decision-making?
Insurance is a profitable business because people would rather suffer a series of guaranteed small losses, premiums, to avoid the risk of a single but unlikely catastrophic loss. The healthy profit margins of insurance companies reflect our tendency to overestimate the likelihood of calamities. Overestimating an unlikely outcome is also the secret behind the lotto, which offers terrible odds.
Some examples of how this has influenced my actions. Note, I am not claiming these are the right way to put Kahneman's insights to use, just my way. What I've done. I actively limit the number of decisions I have to make to preserve neuron power for the key ones. I have other people order for me at restaurants. I have a uniform for work and working out, wearing the same thing every day.
And someone else buys my clothes. I delegate the majority of decisions at Prof G Media. I participate in a one-hour weekly editorial meeting and check in with my executive producer two times per month on business issues. I have not planned a vacation in 20 years or put anything on my calendar in 10.
Despite having made more than 30 investments in private firms over the past decade, I review few documents and rarely even sign them. That's all handled by counsel. I try to reserve the largest possible cache of gray matter for research, thinking, storytelling, writing, presentations, etc., and investment decisions.
Over the next five years, I plan to outsource all investment decisions so I can focus on storytelling. Seven years ago, I canceled all my insurance coverage, health, life, property, flood, etc. I don't own a car, but when I did, we purchased the minimum amount required by law. This is a position of privilege.
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Chapter 6: What personal strategies can help limit decision fatigue?
Don't cancel your health insurance, as there is no disease or property loss that would cause me financial strain. Since adopting this strategy, I've saved $1.4 million in premiums. My belief in the market's collective loss aversion has reshaped my investment portfolio over the past decade. The majority, 90 plus percent, of my investments used to be in publicly traded stocks.
That share is now less than 20%. Instead, I lean into my access to private companies as I can absorb big losses and withstand illiquidity. Per Kahneman, there have been periods of real pain. In the last 12 months, I've registered four wipeouts, four investments that dropped to zero. However... Two other investments registered a 4x and a 25x return.
My net return has beaten the market, but it's been more taxing, emotionally, than just investing in SPY, as I have trouble shaking the big losses. Again, making Kahneman's point. Prospect theory won Kahneman his Nobel, but he's best known for his seminal book, Thinking, Fast and Slow.
The titular concept that we have two thinking systems, a fast one for intuitive emotional insights and a slow one for logical calculated decisions, is something that has saved me from me dozens of times. Our fast thinking system is an incredible tool. It allows us to drive cars, compare prices, recognize friends at a distance, and play sports. But its availability makes us lazy.
Why do the hard work of thinking through a problem when we can just go with our gut? In any decision of consequence, it's good policy to slow down, get out of the stimulus response cycle, and let your slow thinking catch up. That's not to say we should disregard our gut. Just don't let it take the wheel.
Specifically, I try to be vigilant about not letting my fast system make decisions that merit the attention of my slow system. Often these are reactions to things that upset me. Last week, a journalist who's active on social media posted on threads that Jonathan Haidt and I were grifters and that I do not care about young people. This pissed me off.
Feeling threatened, my lizard brain took over, and I saw the situation as a conflict, a threat to my standing in the community. That framing, courtesy of my instinctive, fast-thinking system, dominated my consciousness for the next four hours, distracting me from my kids and vacation. I drafted an angry response to counter the threat. Then I shared the situation with several members of my team.
Able to evaluate the situation dispassionately, they were universal in their response. Let it go. I was just playing into an attempt to draw attention with ad hominem attacks that algorithms love, like Trump or Musk. The learning, other than social media, is a cancer. Speaking to others before acting is a great way to slow your thinking.
In 2010, Kahneman and another Nobel winner, Angus Deaton, published a study which appeared to show conclusively that income was strongly correlated with happiness at low income levels, but that income above $75,000 had no impact on happiness.
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