Daniel Kahneman: Algorithms Make Better Decisions Than You

**Daniel Kahneman** (0:00)
Delay your intuition. Don't try to form an intuition quickly, which is what we normally do. Focus on the separate points, and then when you have the whole profile, then you can have an intuition and it's going to be better.

**Shane Parrish** (0:20)
Welcome to The Knowledge Project. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best what other people have already figured out. So you can use their insights in your life.
Before we get into the interview, I want to tell you about a moment that didn't make it into the episode. I first came across Daniel Kahneman's work in the early 2000s. His impact on me and so many people around the globe has been unbelievable. By the time I sat down with him in his New York City home in 2019, I had so many questions for him. Kahneman won a Nobel Prize in Economic Sciences in 2002, yet he never took an economics course. His central message was very simple. If we want to make better decisions, we need help. Danny died last year on March 27th, 2024 He was 90 This conversation is now one of the final opportunities to hear directly from one of the most influential thinkers of our time. I get messages about this episode every week. People come away with new insights on everything from life to decision making. I re-listened to it recently and it's timeless. That's exactly why I'm republishing it. Consider loss aversion, one of his most important discoveries. Why does losing $100 hurt twice as much as gaining $100 feels good? The asymmetry affects everything. It affects your stock portfolio, your golf game. Check your portfolio when it's down and you'll start making emotional decisions. A golfer putts better for power than for birdie. But here's what happened near the end of our interview. Danny's phone rang and it was loud. He'd forget to turn it off. We're almost done the interview at this point, but he answered and someone obviously wanted him to give a talk or review a book. He ended the call with words that have stayed with me since then. My rule is I never say yes on the phone. I'll get back to you tomorrow. I wanted to discuss that on air, but we ran out of time. As I packed up my gear, I asked him about that. This rule was a trick to avoid saying yes intuitively. It gave him time to think. He's always bombarded with requests, and he often says yes when he didn't want to. At first, he would try saying no, that date doesn't work, that timeline doesn't work, but what happened in those moments was it turned into a negotiation. What about another date, another timeline? So he hit on this rule. And to me, this is his most practical discovery. Most people don't even know about it. This rule lets you reprogram your unconscious mind. Your desired behavior becomes your default behavior, and that's incredibly powerful. It changed my life. I now exercise every day. It's actually easier than three times a week. The activity, duration and scope can change, but working out and exercising doesn't. I think I've missed five days in five years at this point. And I talk about this in my book Clear Thinking, and the concept has changed so many lives, including my great friend Brent Bishore in episode 196 We talk about this a little. Several parts of this conversation stuck out when I was re-listening to it. First, we talk about happiness versus satisfaction. Happiness is feelings. It's mostly social. Am I with the people who love me and whom I love back? Satisfaction on the other hand is how you feel about your life, your job, your career, conventional aspects. Danny argued people want satisfaction more than happiness. Second, changing behavior. Make good behavior easier and bad behavior harder. The insight, all behavior is equilibrium. Rather than pushing people to change, ask why they aren't doing it already. Third, behavior is situational. Want to understand behavior? Look at the situation. When someone acts in ways that don't make sense, ask yourself, what would the world have to look like for that behavior to make sense? Fourth, agents making decisions on your behalf beat you at certain types of decisions. They have no sunk costs. They have no emotions. Brian Johnson talks about this in episode 188 He turned his health decisions over to effectively an algorithm because that algorithm makes better decisions than he does. Fifth, our beliefs are formed by people more than facts. We agree with people we like. Despite the facts, it's easier to believe a lie from someone you like than a truth from someone you dislike. We form identity beliefs, liberal, conservative, democrat, republican. They can do no wrong. If they're wrong, we're wrong, and we can't handle that. Finally, intuition. Danny had talked about this so much, his answers sounded repetitive. So I framed my question on this to include his typical answer in the question, forcing him to think a little deeper. Whether this is your first listen or your third, you'll come away with ideas that you can use in life.