@Google Talks is proud to welcome hero of psychology, Daniel Kahneman.

Daniel Kahneman, recipient of the Nobel Prize in Economic Sciences for his seminal work in psychology that challenged the rational model of judgment and decision making, is one of our most important thinkers. His ideas have had a profound and widely regarded impact on many fields—including economics, medicine, and politics—but until now, he has never brought together his many years of research and thinking in one book.

In the highly anticipated Thinking, Fast and Slow, Kahneman takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. Kahneman exposes the extraordinary capabilities—and also the faults and biases—of fast thinking, and reveals the pervasive influence of intuitive impressions on our thoughts and behavior. The impact of loss aversion and overconfidence on corporate strategies, the difficulties of predicting what will make us happy in the future, the challenges of properly framing risks at work and at home, the profound effect of cognitive biases on everything from playing the stock market to planning the next vacation—each of these can be understood only by knowing how the two systems work together to shape our judgments and decisions.

Engaging the reader in a lively conversation about how we think, Kahneman reveals where we can and cannot trust our intuitions and how we can tap into the benefits of slow thinking. He offers practical and enlightening insights into how choices are made in both our business and our personal lives—and how we can use different techniques to guard against the mental glitches that often get us into trouble. Thinking, Fast and Slow will transform the way you think about thinking.

It is my great pleasure to introduce Professor Kahneman today.

And I just want to give you a brief background on his outstanding career.

He started in 1954, received his bachelor's in experimental psychology and mathematics from the Hebrew University in Jerusalem.

In 1961, he was awarded his PhD from University of California, Berkeley, right across the bay in experimental psychology.

In 1979, he and his co-author Amos Tversky published their seminal paper on prospect theory, which started to change the way that people reframed the argument around gains, losses, and decision-making under uncertainty.

Several years later, in 2002, Professor Kahneman was awarded the Nobel Prize largely for the work on prospect theory.

And Nobel Prizes I think are always impressive.

His perhaps more so because there actually isn't a Nobel Prize in psychology.

He had to win his Nobel Prize in economics.

And as far as I know, I think there's only 1 other person, 1 other psychologist, who has won a Nobel Prize and that's Ivan Pavlov.

He may be a physiologist, we could argue about that.

Years later, in 2007, psychologists tried to reclaim Professor Kahneman as 1 of our own when the American Psychological Association awarded him a Lifetime Distinguished Contribution Award.

And today he is a senior scholar at the Woodrow Wilson School of Public and International Affairs at Princeton University.

And he's here to talk about his new book, Thinking Fast and Slow.

And Google's mission, which we all know, is to take the world's information and to make it more useful and universally accessible.

And all information, all knowledge is important, but I think some, again, is more important than others because the information that he'll present today, I think it's very personal.

And if you listen carefully and really understand what he says, it's gonna change the way that you think about yourself and the world around you.

So please join me in welcoming Professor Kahneman to Google.

Well, I think intuition has been discussed a lot in recent years, and I'll be talking about intuition.

There are 2 camps in this discussion, naturally.

And of course, many people here will have read Malcolm Gladwell's Blink, which although it's not an unconditional defense of intuition, certainly gave people the impression that Sometimes we magically know things without knowing why we know them.

Within the discipline of psychology and judgment and decision making there is a group and it's headed by a very interesting figure called Gary Klein who wrote a book that I recommend.

It's Sources of Power is the 1 of his books that I would recommend the most warmly.

And they are great believers in expert intuition.

On the other side, there are skeptics about intuition in general and including expert intuition.

And I have long been counted as 1 of the skeptics because my early work with Emma Stavroski was about intuitive errors and flaws and biases of intuitive thinking.

Today you find that discussion in many places, for example in medicine among the popular writers, 2 writers, both of whom write for the New Yorker, Jerome Groopman and Atul Gawande, and they clearly differ.

Atul Gawande is in favor of formal systems, very skeptical about human judgment and wanting to improve it all the time.

And Jerome Groupman being in fact, although he doesn't quite admit it, he really likes good old-fashioned medical intuition.

Of course he would like the physicians well-educated, But he doesn't like formal system.

And the issue in medicine is the issue of what is the role of evidence-based medicine, and how do you allocate functions between that and intuition?

The background, actually, part of the background for what I'll talk today is a strange collaboration in which I engaged for about 8 years with Gary Klein, whom I mentioned.

So he is the guru of a group of people who really, I wouldn't say they despise what I do but they certainly don't like what I do because they think that the emphasis on biases of judgment has drawn an unjustly unfavorable picture of the human mind.

So 7 or 8 years ago I invited him and we worked together for a number of years trying to figure out what are the boundaries?

Where is intuition marvelous and where is it flawed and can we tell?

And We wrote a paper at the end of 6 or 7 years with a lot of vicissitudes that we went through since we basically don't agree.

We wrote a paper the title of which was on a failure to disagree because on the substance I think we know and we both agree where you can trust intuition and where you cannot.

He still hates the idea of biases and doesn't think that errors of experts are very funny, and I think that errors of experts are quite funny.

There are 2 modes of thinking that all of us are familiar with.

And there is 1 mode, 1 way for thoughts that come to mind.

I mean, you know about this lady that she's angry just as quickly as you know that her hair is dark.

And it's interesting to dwell a bit about this.

This is not something, the judgment that she's angry or the impression that she's angry doesn't feel like something you did.

We have the basic experience is a passive experience in those judgments.

When we see the world we don't decide to see it.

It is true of impressions and it is true in general what we call intuitive thinking.

It comes from somewhere and we are not the author of it.

Now there is another way that thoughts come to mind and here I suppose essentially nothing came to your mind but the answer is

To produce the 408 requires a completely different kind of operation.

You have to retrieve a program that you learned in school.

You've got to pay attention successively to partial products and so on and keep things in mind and keep the whole program in mind.

And there are many indications that this is hard work.

1 is that physiology indicates that this is hard work.

This is something that I studied many, many years ago.

The pupil really, on a program like that, if you're going to do it in your head, your pupil will dilate.

And it will stay dilated as long as you're working.

And it will sort of collapse back to normal size either when you quit or when you find the answer.

So this is another way thoughts come to mind and this is definitely not the intuitive way.

Here we are, we feel a sense of agency, we feel something deliberate is happening And a very important aspect of it, this is effortful.

And what psychologists mean by effort is basically, if you want a quick introduction to what effort is, this is something you cannot do while making a left turn into traffic.

And the reason is that there is limited capacity to exert effort.

And if you're in, engage that capacity of those resources in 1 task, less is available for another task.

Now, there is another function of system 2 and here I'm going to tell you a riddle.

And of course, how much does the ball cost?

How many people know this riddle, by the way?

The point about this riddle is that the number came to your mind and the number is 10 cents and everybody just, I think, you know, maybe here, maybe there are exceptions, very few exceptions people confess that the number 10 cents immediately came to mind.

I mean, 10 cents and the dollar 10 is a dollar 20, so that's not the solution.

But what is interesting here is that at Princeton, at MIT, at Harvard, and I don't know about Stanford or Caltech, but about 50% of students ask this question of undergraduates say 10 cents.

And we learned something very interesting when somebody says 10 cents.

Because if they had checked, they wouldn't say 10 cents.

So there is a sense of confidence that people have, that these people in particular have, and it brings us to another function of what I'll call System 2.

It performs those automatic activities, and System 2 is the effortful 1, the 1 that's the deliberate 1.

And the reason that I classify this as a system 2 operation is that self-control and controlling your attention and deliberate exertion of effort are impaired when by other activities.

So if for example, to give you a trivial example, If somebody is asked to retain 7 digits in their head and is then given a choice between chocolate cake, sinful chocolate cake, and virtuous fruit salad, they are more likely to choose the chocolate cake than they would if they were asked without 7 digits in their head.

It takes some effort to control your impulses, even such mild impulses as a preference for chocolate.

So You should be aware of that difference between system 1 operations, the automatic ones, and system 2 operations, the deliberate ones.

So Driving is a skill and any skilled activity, measure of skill, is that things begin to happen automatically.

So you can drive and conduct a conversation.

You cannot make a left turn into traffic but by and large we can drive and talk.

Braking, when there is any sign of danger, braking is completely automatic.

That is, you can notice while you are braking that you first respond, so that the response is immediate, it is fully automatic.

Now in some places, not here, where people drive in snow or ice, they learn about skids.

And then occasionally You'll find yourself as a driver in a skid and then system 2 will be mobilized because in a skid you're not supposed to do anything that comes naturally to you.

You shouldn't brake and you shouldn't steer away from the skid.

You should leave the brakes alone and steer into the skid.

Now when people have a lot of practice with skids, that too becomes automatic.

So 1 thing that we can tell about system 1 and system 2, those 2 types of operations, is some of the basic innate operations, functions that we have such as perceiving things, having emotional reactions to things.

We don't choose to do it, it just happens to us.

That is when we get to be skilled at something it becomes automatic and it demands fewer resources and we get to be very good at it.

Now the issue of intuition, and here I'm not sure that, but I suspect that Malcolm Gladwell really did us a disservice by giving that sense that there is a magic to intuition.

There really is no magic at all, and we should understand how it works.

Intuition and Herbert Simon, who was a psychologist, then an economist, then a political scientist, then a Nobel laureate.

Herbert Simon gave a very good definition of what intuition is.

There is really no difference between the physician recognizing a disease, you know, a particular disease from a facial expression or something, And a little child learning pointing to something and saying doggy.

The little child has no idea what the clues are but he just said, he just knows this is dog without knowing why he knows.

And once you think about it this way, this really demystifies intuition to a very considerable extent.

And it also leads you to a sort of a solution to the problem that Gary Klein and I were trying to solve.

When can you trust intuition and when can't you?

And then it becomes an issue of is the world regular enough so that you can learn to recognize things?

Or, And then did that particular individual have an opportunity to learn the regularities of the world?

And so the world of chess players is highly regular.

And statistically even the world of poker players is regular.

And the mind is so set that if there are rules in the environment and we're exposed to them for a long time, and we get immediate feedback on what is right and wrong, or fairly immediate feedback, We will acquire those rules.

Even if we're not physicians and we're not chess players, master chess players, I recognize my wife's mood from 1 word on the telephone.

There are people that you know very well.

All of us recognize a dangerous driver on the next lane.

We get cues and we don't necessarily know what is the cue but that this person is driving erratically and could do something dangerous.

And this is a lot of reinforced practice and we're very good at that.

We can learn about those, there are differences among experts, among professionals, in the level of expertise that they have.

And they depend in the level of intuitive expertise that they can develop.

So for example, compare anesthesiologists to radiologists.

Anesthesiologists get very good feedback, and immediate feedback, whenever they do anything wrong.

They have all those measurements that are in real time and they get the feedback.

Radiologists get really miserable feedback about whether they're right or wrong.

So you could expect an anesthesiologist to develop intuition much more than you would expect radiologists to develop intuition.

And so that is part of the answer about intuitive expertise.

We don't need to disagree about that because we know pretty much when intuitive expertise is likely to develop.

And as I said, we also, that means that intuitive expertise is not going to develop in a chaotic universe or in a chaotic world.

So for example, I personally do not believe in it, that stock pickers, people who pick stocks to invest in, can develop intuition.

Because simply the market takes care of it, there isn't enough regularity in what's going to happen to prices for intuitions to develop.

We also know about political forecasters.

When they forecast long term, they are really no better than, you know, a dart-throwing monkey.

And they're certainly not better than the average reader of the New York Times.

In intuitions, and the reason it's not the pundits' fault, and that research has been done with pundits and with CIA analysts and with regional experts, it is really not their fault that they can't predict the long-range future 10 or 15 years.

They're quite good at short-term predictions.

They're really not very good at all in long-term predictions.

And if the world is not predictable, you are not going to predict it.

When there are marginal situations where there is some predictability but poor formulas do better than individuals.

That is the domain where formulas beat individuals regularly is a domain of fairly low predictability because when there are weak cues people are not very good at picking them up and are not good at using them consistently.

But formulas can be generated on the basis of experience and they will do a better job than individual judgment.

Now I've introduced you to system 1 and system 2, and I've told you something about skill and about skill in system 1.

Now I'd like to point out something that we sometimes have intuitions and that applies to political forecasters and to stock pickers and to all of us.

We quite frequently have intuitions that are false.

And they come up and come to mind, and they are subjectively undistinguishable from expert intuition.

So I'm now talking of people who have intuitions that are not based on expertise.

And they come, they're system 1 in the sense that they are effortless and automatic.

And that is what I'm going to try to illuminate, shed some light on in the rest of the talk.

And first of all, let me get 1 thing clear because I might forget.

I use System 1 and System 2, those terms, they're very shocking terms in my discipline.

Because every psychologist gets taught fairly early, you're not supposed to explain what happens in the mind by invoking little agents inside the mind and explain what the mind does by what the little agents do.

Those are homunculi and that's a bad word in psychology.

I'm going to use system 1 and system 2 absolutely as homunculi.

First of all, well, I'm warning you, those are fictitious characters.

I don't believe that there is such a thing as system 1 and system 2.

Don't look for them in the brain because they are not 2 systems in the brain of which 1 does 1 and the other does the other.

So why am I using this terrible language?

I'm using it because I think that is helpful.

And to explain the background of that decision of why I use System 1 and System 2, I refer you to a very good book that I really recommend because it's, in addition to its being formative, it's very entertaining.

It's by Joshua Furr and it's called Moonwalking with Einstein and it came out earlier this year.

And what the book is about, Joshua Furr went, he's a science writer, and he went to the memory championship of the United States.

You might not know there is such a thing, but there is.

So people memorized decks of cards and a very, very long list of things and performed feats that we think are completely extraordinary.

Joshua Furr decided to find out what happens and a year later he was actually the champion, the memory champion of the United States.

And Basically the story which was known to the Greeks in some form is that memory is very, very good at some things and terrible at other things.

We're really not good at remembering lists.

Memory is superb at remembering routes through space.

That evolution has endowed us with an ability to remember routes and not lists.

If you mentally you have a list and you want to remember the list, then you create a mental route and you distribute the items on your list along the route and then when you want to remember the deck of cards or whatever it is, Then you go through your route and you pick out the items 1 after the other because that you can do.

It turns out that something very similar happens in another context.

People are very good thinking about agents.

The mind is set really beautifully to think about agents.

Agents have traits, agents have behaviors.

We form global impressions of their personalities.

We are really not very good at remembering sentences where the subject of the sentence is an abstract notion.

So just remember whenever I say system 1 does X, What I mean is that X is a mental activity that can be performed automatically and without effort.

You'll remember a lot more about System 1 if you think of it as doing things than if you think of those mental activities.

It helps me think and I think it helps other people understand.

Okay, so let me introduce you to System 1.

I'll begin with a study, just an extreme case.

This study was done at the university in the UK, and like in many, the Department of Biology, actually.

And like many places in the UK, they have a small room, which is a tea room or coffee room, where people can make themselves tea or coffee and get some biscuits and there is an honesty box and they pay into the honesty box.

And somebody had the bright idea of sticking a poster on right on top of the honesty box and of changing the poster once a week.

And so this is week 1 and that's the poster.

Now what is remarkable about this is this is something that happens to people.

They have no idea it's happening to them.

In fact, they have no idea about the posters.

They're barely aware that there are posters there.

They certainly don't know that the posters change systematically.

They have no idea that the posters influence their behavior.

Those things we, a lot is happening in our mind that we're not fully aware of.

And there is a link between eyes and being watched, and being watched and not wanting to do bad things or wanting to do good things.

All of this is deep in our associative memory and it gets activated.

You see eyes, especially those large eyes on week 1, and it does something to you that you may not be aware it does.

This, I just want to enumerate very briefly what happened to you in the couple of seconds, the first couple of seconds when I put this on the screen.

Second, ideas and images and memories came to mind, probably none of them very pleasant.

So that's the second thing that happened.

I mean, when people are exposed to a threatening word, they move back.

So the threat is to some extent, to some slight extent, taken to be real.

And that is getting to be interesting because those things are reciprocally reinforcing.

So if you make a disgust face you're more likely to feel disgust.

If you make a smiling face, you are more likely to think that things are funny.

So 1 of my favorite experiments along those lines is you take a pencil, you stick it in your mouth like that, and cartoons will appear funnier to you because when you stick a pencil into your mouth like that you are making a smile and just the sheer muscular change is enough to feed back into our emotions and our feelings.

This is all fairly important because what it means is you can think of, well let me add something and then I'll pull it together.

I think of system 1 very largely in terms of what happens in associative memory.

And to think of associative memory, you can think of a gigantic network of ideas and the Ideas are linked to each other in various ways associatively.

Some of them are causes of other things or categories or example instances of there are many different links.

But you have that huge representation of ideas that we have in our mind.

And at any 1 time, a stimulus occurs, it activates a subset of those nodes in that representation in memory, and then activation spreads through the associative network.

So for example, you're now, and we can know that it spreads because we become sensitized to other ideas that have been activated in this fashion.

So for example, right now, if somebody whispered words in your ears, you would be much more likely to detect and recognize words like sickness and smell and stink and nausea and hangover and a lot of associations have been activated.

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Thinking, Fast and Slow | Daniel Kahneman | Talks at Google