The Psychology of Thinking - with Richard Nisbett

thank you and thanks very much for inviting me oh I was quite excited to hear that I would be able to talk to the Royal Institution as you may know Americans are excited by anything royal um well it's actually a particularly appropriate place for me to speak because I just was reading the Charter for the Royal Institution and it was set up for one thing for quote teaching the application of science to the common purposes of life um and that's exactly what I want them to have no interesting findings to tell you about I just have something to tell you about using the tools of science for understanding the world that we live in the Industrial Revolution changed everything oh and by everything I mean everything oh the wealth of the average European basically did not increase for the 2,000 years before the Industrial Revolution all our life expectancies are substantially more than double what they were before the Industrial Revolution so we got healthier and wealthier did we get wiser as a result of the revolution well I actually I would be happy at a discussion to defend the proposition then we did get wiser but what I certainly have evidence about today is that we got smarter oh the Industrial Revolution required different kinds of minds then we're around at the end of the 18th century even in the most advanced countries if you were to ask of someone in the late 18th century labour off the street or the farmer oh so what's the difference between us know if you would say oh did in what way are a fish and bird to like first might say well fictional birds not at all like a fish can swim and a bird can't a bird can fly in a fish can't a bird can eat a fish but a fish can't eat a bird and that would be your answer to the similarity question because there was no clear conception of categorizing objects and making inferences about them from some higher level in the hierarchy of the category logic was a weak and basically never applied to abstractions hypothetical reasoning was difficult if you say well why do you think you think about that if you were French so I I'm not French I couldn't be French how would I you wouldn't get you would hold mode of thinking hypothetically was not there and of course there were enormous numbers of fallacies that people were not aware of so the Industrial Revolution absolutely required the three RS reading writing and arithmetic and the more of these other habits of mind that you had the further you up you would be able to go in the hierarchy of society oh now the the tools that I'm going to be talking about today have been around since the Greeks but only pizzette was asked by a very thin stratum of people I'm sure I don't know anybody as smart as Aristotle so interestingly the absolute top of reasoning ability was reached decades centuries eons ago but it didn't go down very far beyond yeah I just was told at the time this was founded there were only two universities in Britain um so this is where they had to do their research uh there wasn't no reverse attea round to do it um so there's actually a good evidence of the sort of hardest kind that psychologists can come up with and we've gotten smarter IQ tests started being given early in the 20th century and between the beginning of the 20th century and the end of World War two IQs went up by 8 or 10 points that's a very large amount since World War 2 in the rich countries Oh IQs have gone up an additional 15 points now that's a standard deviation to give you an idea of what that means someone who scored 100 in 1946 would score 85 today so instead of being average that person would be dull normal if someone who scored on today who scored 115 would would have been considered a genius why standards of 1946 well you might ask okay that's IQ tests but IQ tests aren't exactly the same thing as intelligence and I would agree that's true IQ is not the same thing as intelligence it's not but IQ test certainly tests things that we would want to call intelligence uh if you ask a child who's taking an IQ test why do doctors go back and get an education the child who can tell you the answer to that question is smarter than one who Kent's been able to figure out the world enough to be able to answer in that um a child who can answer the question how our revenge and forgiveness like oh yes smarter than a child who can't answer that question vocabulary has increased by a standard deviation equal to 15 IQ points over that period of time and the more words you have the more concepts you have the more concepts you have the smarter you are so how did this happen exactly well the basic story is pretty simple at school more school and school and at the turn even of the 20th century only a few years of grammar school was typical of the average person even in the rich countries today 40% of British and Americans have a tertiary degree so it's absolutely an enormous vastly more time spent in school ten or twelve years spent in school will be surprising if that didn't result in people getting smarter school has improved I was struck to see some preschool materials recently and kids were being forced to learn abstractions able to deal with abstractions in a logical way well it was understood at the turn of the 20th century law that oh you couldn't teach calculus oh to university students until senior year I was but first am you ready for it then today of course it's routinely taught in high school so the Industrial Revolution demanded that we have different minds and it succeeded in that to a remarkable extent it continues by the way in most countries today it started and even the least developed almost all of even the least developed countries it continues to increase in Britain in the u.s. there is one area the world where it's no longer increasing which is quite interesting um what that area is that guess what the answer to it the point there's been no continuing change its Scandinavia oh and I think it's likely that that's it this is the case because Scandinavia just does a better job than the rest of us and bringing up the bottom about giving every opportunity to people at the bottom so those those folks are they've achieved about it what we can achieve at the current level of what we're teaching in these industrial revolution skills but beginning roughly in mid 20th century got a new we got a new revolution namely the information revolution which is about data not things and there are sharp requirements of being able to live effectively in the in the revolution in the information era we have to be able to collect data have to be able to code data that means what is this data how can I give a number to it I have to be able to analyze data have to be able to manipulate the environment so as to generate reliable information you have to be able to appraise arguments based on data and you have to be able to choose between possible courses of action based on data now the tools required for that are the same tools as the Industrial Revolution required but a whole lot of other ones as well namely statistics probability theory scientific methodology sophisticated epistemology and decision theory for statistics and probability theory the concept of a sample of a population of sample bias randomness law of large numbers normal distribution standard deviation statistical significance regression to the mean base rate in correlation in many occupations today if you don't understand those things reasonably well you can't function effectively and what I want to argue today is if you understand those things you can't function effectively in your daily life for scientific methodology the bare minimums concept of the control group randomized control experiment confounded variable self selection independence of observations versus dependence of observation the concept of a natural experiment and how to discover them and artefact in decision Theory cost-benefit analysis the concepts of opportunity cost and sunk cost the notion of loss aversion and how not to mess yourself up by finding loss so aversive in roughly beginning of the 70s psychologists started showing our weaknesses with these things a condiment or skier the most famous names associated with this showing how these kinds of principles because people don't understand them or because they're unable to apply them causes them to get all kinds of problems wrong I'm sure most of you know some of these kinds of examples if you tell a University of Michigan freshman that there is a town with two hospitals one with about 50 births per day and one with about 15 earths per day and then ask which of these hospitals do you think there would be more days in the year in which 60% or more of the babies born were boys about half people will tell you doesn't make any difference of the remainder about half will say it's the larger hospital that would have more such Bay's and about half will say it's the smaller hospital it would have more such days what's missing is concept all that everyone ears and then familiar with but we just don't know how to apply across the infinite range of situations where it's necessary so that law says that the sample values resumable population values and in the case of this problem I just gave the presumed population value is 50% so sample values resemble population values as a direct function of their size and an inverse function of the expected error associated with each observation oh and you have to think of observations this is not common for us to do this but every single observation that you might make the distance from here to Pluto a person's height a person's attitude toward a political candidate can be thought of as an observation which is composed of true score which is what's really the case with Pluto as God sees it because God measures plus error associated with it and we have a good conception of error for a lot of things we know that the height estimates you would never bother to measure someone's height twice I mean once is enough that it's the error is very slight probably the same is true for the distance to Plato but all kinds of other observations that we make in everyday life we treat as if we're getting the truth score oh I mean nature wouldn't get us I've got the true score no conception of error which could be throwing us off enormous ly oh so I'm going to talk about six of these tools today you've heard of them all you probably use some of them in your work ah but you don't use them for a fraction of the relevant problems in everyday life that you encounter we're not nearly as smart as we could be or as we're going to be suppose I told you I have a friend who's a business executive and recently he interviewed someone for a manager position and this person had a great record in his previous jobs yet splendid recommendations from prior employers but my friend interviewed him and he didn't seem to have any interesting commentary to make on my friends business it just didn't seem too sharp so my friend went back to his colleagues and said I don't think we should pursue this guy just don't think he's a material for us no whistle oh that's totally commonplace ordinary event are you going to tell us there's something wrong with that professor yes I am I'll compare that to the case of a university football coach oh who is goes to visit practice by a particular player forward who's been extremely highly recommended by his coaches has a great scoring record but he observes this kid during the practice and the kids just fails to make some goals he should have made he just doesn't seem in control of all and he goes back to his fellow colleagues and he says I don't think we should pursue this guy just don't think he's material for us now that probably rings a bell wait a minute and say is that a great decision ah and of course it couldn't be a great decision and it wouldn't be a great decision because we understand the concept of observations equals true score plus error when it's applied to sports we aren't because we see it all the time we see the star who usually makes a 15 points per basketball game makes two tonight next week he makes a thirty of there's lots of error around any athletic performance that's captured in the u.s. four are what we call football ah the idea that on any given Sunday any team in the National Football League can defeat any other team you understand it there we don't understand it with interviews why don't we understand it with interviews because nobody does that many interviews not that many you just don't see that many people on interview situations and you don't and you're certainly not keeping track of how well they did it how well each of these people did in the interviews and how well they did in the in your company and then following them the people you didn't hire and seeing how they did in their companies we don't we don't do that so it's not in a sense it's not our fault but we don't understand that the interview is such a bad guide well is the interview such a bad guy yes it's astonishingly bad the correlation between interview ratings and performance in college on in any business where it's been examined performance as a physician performance as a military officer the correlations run point one one thing I want to ask really on what how many people speak correlation if I say a correlation point one how many okay not by any means everybody okay so I'll be talking mostly in terms of odds rather than correlation um okay so what do you have to do to get this right you have to frame the problem is one of observations plus error and you have to remind yourself everywhere in life that human behavior observations are subject to substantial error now we understand that as I say perfectly well with sports oh we did a study where we asked University of Michigan students to tell us what they thought the odds were that if Billy got a higher grade on a spelling task than Bobby that he would also at the next spelling test get a higher grade and we also and we also asked about basketball Joan got a higher score than Jane and it won basketball game what's the likelihood she would if the next Oh and then we asked about 20 events Billy scored higher than Bob on the average of 20 spelling tests during the year what's the likelihood that he would in another 20 odds 20 odds and 20 evens and here are the results what people thought reported in correlation terms correlations run from minus 1 to plus 1 zero means no relationship whatsoever plus one means a perfect relationship in this case it would mean if you thought that the correlation was 1 you would say well if he got a higher grade on one test he's certain a higher grade in the next test but these are reported in correlation terms ah and notice that people's guesses about that's combining basketball and spelling their guesses just happened to be right on the money they're exactly right about how much error is expected from these kinds of observations they also understand that you get much stronger association between xx scores and 20 other scores than between one score and one score they don't understand the extent to which that's true it actually goes up to near certainty of if Billy got I mean we have the data on these we know that we know what's going on here if one kid gets a higher score on 20 tests there are odds are absolutely overwhelming that that kid will get a higher score on the next batch of 20 tests no and track this with what happens when instead of looking at abilities and specifically abilities where we have some clear idea about the degree of error that exists in observations with traits we asked people about said Jane is more friendly than Joan in one situation what's the likelihood that you would be more friendly in the next situation in which you observer or on estates friendliness and honesty were the two that we asked about notice what the actual data are the correlation is 0.15 correlations between any two behaviors that can be construed as indicators of a person's value on a particular personality trait almost never correlate with one another better than 0.2 typically it's more like 0.1 if the correlation is 0.15 that means you go from if you're trying to say who's friendlier Jane or Joan ah that means you're going from what a coin flip or 50/50 I don't even know what she's done I'm just going to say it's Joan because that came up heads but if you observed her in one situation the likelihood that you'll be able to make that prediction accurately goes up to about point five six it hardly goes up at all Oh take you a very long time to notice that you're making a very serious you're making serious errors all the time um so here's what people think it is people think if Jane is friendlier than Joan in situation number one odd that the odds are 80% that she'll be friendlier in situation number two I mean that is spectacularly badly calibrated with reality oh and we make these mistakes every single day I mean we're constantly not making friends we could have made because Joe seemed kind of like a jerk when I met him at the party I mean ha so um or let's take another case where law of large numbers might matter um how much agreement would you expect between any two reviewers for a psychology article and soft psychology my kind psychology for the Journal of Personality and Social Psychology ah what would you think the odds would be if in ER if reviewer a gave Jones's paper a higher score than Johnson's paper what are the odds that reviewer B law would do the same Oh let's try some arts uh only 50/50 I mean just no reliable at all I mean there's you know psychologists just they're flipping coins when they're judging each other Oh chi-su one please tell me you're not a psychologist oh so uh how many people think it would be a 60% chance seventy eighty okay ninety okay so we got takers it's almost a flat distribution takers across all alone how about between two reviewers physicists who are reviewing solid state physics proposal for the National Science Foundation how many people think that the correlate that the Association there would be you'd only only a 60% chance that if physicists a ranks this one over that when that business is people do the same how many people would say 60% chance only one physicist by any chance okay oh um 70% chance Oh 80% chance 90% chance okay actually the correlation in both cases is that's the same its point three which means you've gone from a coin flip of 50/50 to about fifty six or seven percent oh no what what would you think it would be for evaluations of business models by potential investors so I can't entertain you with the answer I don't know but I do know that I spent some time with folks in a hedge fund who really impressed me as being extremely bright people who really were doing their business quite well in many ways but they only had two people a judge of the each business proposal if you increase the number of n the reliability that is the odds that you'll get the same answer from both go up as a function of the number of the square root of the number of cases if something is really important to you you really gotta have a good judgement about this you got to ask a lot of people for anything that's at all subjective even things that seem subjective object of like solid states physics proposals um in the u.s. basket baseball is very popular and it turns out that the the best player of a first year of the of the so-called freshmen players first year in pro ball games is very rarely the best player the next year and this phenomenon has a name it's called the sophomore slump and there's we have a similar kind of concept for second novels right the difficult second novel is a great first novel second novel it just you know hit that jinx of this or the album a great first album second one's not so terrific um no um people will give for baseball and for everything else causal explanations til the cows come home I say well the pictures make the necessary adjust but it's a well the guy gets so cocky and you know he falls off his game is he's not paying attention but let's think for a minute about how it is that that best freshman ballplayer gets to be the best freshman ballplayer well by having more talents for sure than the average player but ah he's way out there and to get way out there he not only has to have a tremendous amount of talent everything else had to go right he got particularly good coaching the first three or four games as it happened he just did great and built confidence he got engaged to the girl of his dreams the next year the great dice roller in the sky gave him an elbow injury that kept him out for the first three weeks and his fiancee uh ditched him somebody else got the dice rolls that second year oh this is just another way of saying all observations can be thought off this true score plus error and there's error around the base baseball score if you ask people this think there's no arable of course is there well look if there's error then somebody who's way the hell out there has got to be expected to come back in and this principle is called the regression to the mean which is happening all around us all the time oh and we're largely blind to nearly all the cases of it that are being presented to us every day extreme observations of events are likely to be followed by less extreme observations of the same type of event to the extent that there is variation error for observations of the type in question and when we're going from one dimension to another dimension this is especially true predictions for events of one kind based on observations of another kind have to take into account the degree of correlation between the two kinds of events so you tell them the guy scored the 95th percentile of sense since you're how do you think you scored on IQ test the average person probably scored the 95th percentile so oh I see so you think the correlation the association between sense of humor and intelligence is almost perfect literally / oh no I don't think that at all I mean I know lots of very smart people and I have no sense of humor we don't recognize when we go from one dimension to another you have to regress back for those extreme scores just as you do within the distribution in question um suppose I told you that um I have a friend so the manufacturers representative her name is Catherine um she loves her job she likes to travel and she's something of a gourmet so she enjoys eating at restaurants that have been recommended to her but she's discovered that typically um if she has a really excellent meal at a restaurant subsequent meals are typically not as exciting is that first meal now these poor University of Michigan freshmen again ah if you ask them why do you suppose this might be you'll never get anything but a deterministic answer they'll say well maybe the chef's change a lot or maybe her expectations just got too high and they couldn't be met if they've had a single statistics course they're like it is like well you know maybe it was just by chance she got such a good meal that first time which is right as far as it goes if they've had a couple of Statistics courses we've had several statistics courses they're likely to say something like well let's see there are probably more restaurants in the world where you could get an excellent meal some of the time than there are restaurants where you could get an excellent meal all of the time and if that's the case and she has an excellent meal you have to predict if the next meal is going to be less good because she's probably at that more common kind of restaurant that's another way of thinking about regression to the me my favorite example of regression to the mean is of told by Danny Kahneman who wrote Thinking Fast and Slow he spoke here while back um he was talking to pilot trainers in the military and he said you know psychologists have discovered that the best way to teach people something is to emphasize their good performance tell them why it's good and to de-emphasize the bad perform it's not as useful to tell them why performance was bad pendemonium breaks out in the room you know professor you don't know what you're talking about when it comes to pilot training we found that if guy makes a really excellent maneuver huh and we praise him for it odds are it's not as good next time made it worse if he does something really terrible we scream at the son of a gun he does better the next time think about it this way they difficult second novel or the the jinx and in albums Oh if someone's second novel was terrific and the first one had not been so good would you say gee I guess he was subject to the freshman jinx not likely it's only because we have an interesting case of extreme excellence we have no recognition that we have no right to expect that the second score is going to beat as high recently the Insurance Institute of America did a study of the safety of automobiles they reported on the deaths per model year of each of a huge number of car autos oh and they find such things as the the Ford pickup there are enormous Lemoore deaths per vehicle here associated with the driving them the Ford pickup the there are the Volvo station wagon so yes most people why do you suppose that they say well you know I've heard about these Volvo's how safe they are it's probably true but I have a quiz for you see if you can match the driver where they are we don't hand out autos at random we don't say Billy you'll be driving a lovely powder-blue station way um so uh the problem here is called self selection the subject chooses not only the subjects level on a given variable gets a a Volvo station wagon but the level on a host of other variables that are correlated with that variable safer drivers can do Bible those than by foreign pickups but actually the self selection problem makes more sense although it's of the law to say it if open applied to the auto in this case it's as if the auto selects the driver and not only selects the driver but also selects the number of miles driven per year and selects the conditions under which the auto is driven all and if you have self selection if you learn nothing else than sit because this is the thing I most the most care but please learn the concept of self selection if you measure something about a person and you now know what that you have an idea of what that person's score is on that bear in mind that that he's selected that's that score not you and any number of other things can vary as well this becomes particularly important and I guarantee you you have read many many findings like this men who take vitamin E have a lower likelihood of prostate cancer now the thing about that is that men who take vitamin E are going to differ in all kinds of other ways from men who don't take vitamin E they're going to have a higher social class on average more likely to know that they ought to take vitamins there now more likely to have the money to go out and buy vitamins they probably have a better diet because if they're bothering to take vitamins they probably care about their health enough to watch their diet and their cholesterol and their blood pressure and that probably exercise um this actually has a name now in epidemiology it's called the healthy user bias because people who do things that sound healthy do other things that sound Gulf healthy you're not going to find out whether vitamin E is good for you or bad for you until you do the randomized control experiment flip a coin see who gets the experimental treatment and who gets the control and you measure the outcome now through the miracle of random assignment you know all that on average subjects in one condition are identical to those another every guy who's very rich to somebody else in the control group was also rich everyone who has a lousy diet in the experimental group to someone in the control group who also has a lousy diet so once you do this experiment you can now find out what is the effect of vitamin E on prostate cancer in the answer is vitamin E makes prostate cancer more likely hundreds of thousands of women in the world have taken hormone replacement therapy because epidemiologists found that women who take hormone replacement therapy have less likelihood of cardiovascular disease but if you do the experiment you find out that hormone replacement therapy increases the likelihood of cardiovascular disease and the only way you're going to find that out is by doing an experiment all know people who do studies like this core purely correlational studies where they're not doing the manipulating they're just doing measuring we'll say they've got this problem handled they apply something called multiple regression analysis and what this means is that they examine the association of each of a number of independent variables with a dependent variable net of the association between every other variable and the dependent variable another way of putting this is to say the correlation of a they look at the correlation of x and y controlling for subtracting out all the correlation between all variables that are correlated with both x and y and in theory that is a way that you can get rid of this problem and I can point the cases where multiple aggression and regression analysis applied in this way will get you the right answer but often you can't identify all such variables I mean how many things might be different between people who take vitamin E and people who don't remember women who take a hormone replacement therapy and women who don't oh there are a limitless number and anybody who thinks that you tells you they can limit is just blowing through his hat you can't can't identify all variables all of those that you do identify you often can't measure them or even if you can measure them it can be very difficult or do you know how exactly you should you should you measure control they'll tell you epidemiologists will say I control for social class well you did how did you do that did you look at the money amount of money people make or did you like that you look at the prestige of their occupation or did you look at their educational level those are all ways that are correlated with anything we would want to call social class or would you use some combination of those and if so what how do you combine them it turns out that in these epidemiological studies ah it matters hugely sometimes the hormone replacement therapy studies have of although the correlational data nearly always erroneously showed that hormone replacement therapy was effective it ranged from very very slightly effective to enormous ly effective in a big part of the reason for the differences was how people bothered to measure social class I'd like to be able to tell you I'm a social psychologist like say I I know how to measure social class actually I don't I mean I don't I don't know what's the best way to measure social class um and it's meaningless to say you control for variables with missing values how many old ladies drive pickups I mean the Institute the Insurance Institute shirred us not to worry about any possible artifacts and their findings because they controlled for age and gender uh both of the guys who drew who drove Volvo station wagons had no accidents that's a way in effect the way they control for that um in 2007 when shortly after Barack Obama declared for the presidency he was invited to have a discussion with Google employees and the first question at the CEO Eric Schmidt asked him was what's the best way to sort 30 million integers oh and Obama said oh well I think the bubble sort would be the wrong way to go nerd smack his forehead and the audience Brooks out onto applause because in fact that was a correct answer and Obama then went on to say but he believed in evidence he believed in science and he would govern accordingly oh and in the audience that day there was a man named dancer Roker who decided to go to work for Obama as he put it he had me at bubble sort and there are a couple of several things that Google believes that I think we should all believe they have a derisory term for how businesses make most of their decisions which is you get the hippo the highest-paid person's opinion what there's nearly always a better way and that's a be testing you just do the experiment use a blue border use a red border which gets the most clicks and this is the kind of thing that all Soroka did for obama oh it just say well which combination of image and text gets the most clicks is it the turquoise portrait is it a black and white picture of the family or is it a five second video Obama giving a talk or is it learn more Oh join us now or sign up now I find that I'm just without intuitions about these things you may or may not but another expression they have around Google is assumptions tend to be wrong and first people to really really know this with social psychologists assumptions about human behavior especially human behavior in novel situations tend to be wrong as it turns out the most effective thing is the black and white photo in the legend learn more it's actually 40% more effective than other than the worst combination that can translate into a lot of money in a lot of votes but there's anyway a number of other ways that no businesses can make use of it ah grocery stores in the US and I imagine here to stock things by category they don't think to do that in Japan they tend to stock things by type of meal being prepared so which do you think is better impulse well probably the American Way is better for Americans in the Japanese way is better for Japanese no actually the Japanese way so far as we know is better for everybody ah it's certainly better for the for the for the grocer oh because people buy more foods oh I forgot the Romano cheese I can't make a lien food without that oh and it's better for the health of the customers they because they don't get home so my god I forgot the damn Romano cheese and pull something out of the freezer so um just try doing it suppose you wanted to sell more fruits and vegetables there's two reasons for doing this one is the profit margin is better on fruits and vegetables than on anything else a supermarket and the other is fruits and vegetables are better for your customers then most of what they're going to buy in the supermarket one it turns out that one thing you can do gaaah is simply to say the average person buys X number of dollars worth of fruits and vegetables in the store that substantially increases the vegetable sales or and this is my favorite gimmick that was tried by the people who did this to please place fruits and vegetables in front of cart that doubles the sales so now in your personal life you have numerous opportunities we all have huge numbers of opportunities that we don't take for doing experiments but are the only way to find out about something are you better off when you drink a cup of coffee in the morning of you work are you more efficient or are you sort of more growly and difficult to get along with if you just go for observations just sort of trying to paint keep the track you're not going to know because you had coffee yesterday because your husband happened to make it and you didn't have it today cuz you were in a big rush oh and you have a mess of data the only way you're going to find out is flip a coin coffee today no coffee today and his meditation good for you or not good for is yoga good for you or not good for you you need to get a base rate and keep track so a a couple of anecdotes to end with I don't have much time to talk about decision analysis many many years ago my wife and I bought a summer cottage and we were absolutely at the end of our finances we didn't have enough to buy furniture so I decided I'll build the furniture for some people that would be a good idea I was the kind of kid who always had parts left over after I built the model uh so I said well I'll go take a class I went and took a class in wood Bertie and at the end of 15 hours I had a box and dawns on me this is just not the way to do it I was not paying attention to the fact that I was paying a huge opportunity cost for trying to make my own darn furniture ah opportunity cost of any action here's the way economists think about the world it's the kind of depressing ah that everything you do has alternatives and everything you do actually has a best alternative and that best alternative is the opportunity cost of doing whatever it is you decided to do in my case there were millions of things that I would rather have done then then make my own darn furniture and the smart thing to have done would be to do what we actually did do which was live pretty low on the hog for several months but their cheap furniture and as we got richer we got better furniture do you need to frame in order to be able to recognize opportunities you need to frame actions as potential costs is this the optimal thing to be doing now what costs are being paid for it what else could I do it would cost less or benefit me more now that all sounds pretty straightforward but the problem is recognizing it if you owned an office building and you did an office yourself you'd be likely to think if you use that an office in your building it's free and in fact an accountant might say it's free but actually it's not free because you're paying an opportunity cost and if there's another office you could get that's just as good as the one you're using your own building but you can rent the one in your own building for more than you have to pay for an office in another building you're paying an opportunity cost which may be unacceptable well economists don't do anything that they could hire a small boy to do Hey they don't mow their lawn they don't do they don't pull weeds they don't do their own taxes because opportunity costs for all those things things they'd rather be doing oh my first year of graduate school I worked on a projects difficult project it was on personality and something I can't remember I've repressed what it was about because it took a lot of work ah and as I'm analyzing the data my heart's sinking it's not I'm not finding anything here so I took it to my advisor Stanley Schachter great social psychologist looked at it for an hour he says I'm sorry kid you win some you lose some there's nothing here it's unacceptable I mean this is what I've done with myself and my first year of graduate school so I'd dive back into the data Oh doing more analyses I did a couple of supplementary studies at the end of which nothing if I'd had an economist at my elbow he would have said wait a minute suppose somebody else had collected these crappy data would you be analyzing clothes it's ridiculous I wasn't analyzing then okay what you were doing is you were trying to salvage the cost of doing this by trying to get something out of it but you can't salvage it because it's gone and the Economist has in effect a motto which should be for everybody the rest of my life begins now no no and sunk costs our resources spent to attain the goal it can't be retrieved can't retrieve those resources suppose you have a you bought a ticket to a football game a month ago paid a hundred pounds for it tonight's the night but the star is not playing nothing really depends on the outcome and it looks very much like it's going to rain if you ask most people what what your do you think you do go to the game or not much like I would hate to waste that hundred pounds which the economists would say Hulk wrong you can't waste it it's gone you can pay twice you can pay once for the ticket and once for the tedium now this is not going to get you very far because you need a psychologist at the other elbow for something like this because you can frame it say yeah it's true I know I can't get it back but it hurts it produces what social psychologists call cognitive dissonance and to reduce that cognitive dissonance you say you know lots of times I've gone to games I wasn't expecting much and it turned out to be really pretty interesting I might happen now the psychologist will say here here's the thought experiment you do suppose you hadn't bought the ticket a friend calls you up and says I have tickets for the for the football game tonight oh do you want to go if the answer would be yes I went I would I'll be right over and by all means go to the game but if the answer would be you've got to be kidding the star is not playing nothing depends on the outcome it looks like it's about to rain then you don't go oh so you have to pretend the resource had not been expended would you still do this thing is a important goal well the one thing that struck me and I've been doing research on this for a very long time what struck me is how well folks did in the Industrial Revolution with getting April to cognitive skills that they needed um ah in 1760 in Britain hardly anyone could read and write by 1840 70 percent of British Madrid right oh all of the other tools that I can identify they're important of function in the Industrial Revolution are out there they're being learned and then huge changes I see almost no change in people's ability to use the very tools that they may have learned in their profession so we're going to be seen I think as ignorant and befuddled by our great-grandchildren I hope thank you do you make a distinction between smartness intelligence wisdom and cleverness

Channel: The Royal Institution

Views: 91,512

Rating: 4.7104197 out of 5

Keywords: Ri, Royal Institution, thinking, psychology, richard nisbett, IQ tests, intelligency, history, science

Id: XKm4VoExc0Q

Length: 55min 45sec (3345 seconds)

Published: Wed Jun 22 2016

Reddit Comments

[u/ntheg111]

Thanks OP! Been a while since a quality lecture was posted here

[u/testmypatience]

uh...uh...