Thinking, Fast and Slow. Overconfidence Effect
In this article, I will continue to analyse Daniel Kahneman’s outstanding book. You can check my second chapter’s article on the following link: https://www.dhirubhai.net/pulse/thinking-fast-slow-heuristics-biases-shortcuts-your-brain-pacheco
In this third chapter, Daniel explains one of the biggest mistakes one can do: have overconfidence on our own skills.
It is relevant to mention that this chapter is the most controversial one of the book. It is common to find online reviews disagreeing with Daniel’s way of perceiving luck and its influence.
Daniel begins by discussing the Illusion of Understanding, which basically informs you about narrative fallacies. Narrative fallacies arise from our attempt to make sense of the world. They happen when you believe your skills and talents had a huge importance for the outcome of the situation but most of the times it is simply due to your own luck and randomness of the situation. Personally, I took this lesson as a guide to remain attentive and cautious of my talents.
Daniel then moves on to discuss the Illusion of Validity which I can clearly observe in business life. Essentially, we jump into conclusions out of little evidence. “Poor evidence can make a very good story”. Illusion of skills are particularly relevant for new entrepreneurs inexperienced in the market that deliberately ignore that the vast majority of start-ups fail on the first year.
Daniel’s view on intuitions vs formulas helped me to realize the importance of data. As a media buyer I try to push myself to make all my decisions data-driven. A formula does not lie, and if done properly it gives you the right amount of confidence to make your decisions. My experience also links with the next topic: when can we trust experts? There are definitely situations where you can do it. Nonetheless, you should be reminded of the uncertainness that surrounds you.
Daniel’s next topic is “The Outside View” and in my opinion this is one of the main skillsets a young talent should have. You need to develop self-awareness skills in order to analyse your situation from outside, without any consideration from being involved in it. I feel you should do it both professionally and personally. In any business meeting or important conversation, I seek to observe the situation from the other person’s point of view. I try to see my actions with their own eyes.
Daniel ends the chapter discussing the optimism that fuels the world of capitalism. Most of us believe that we are the best in something, that the world is more favourable than it really is. You should always avoid neglecting your competition and believe you are better than the ones that surround you, you should always keep humble and keep learning.
Thank you for reading, I will write an article about chapter 4 soon