Fascinating and thought provoking book. And also the book that explains limitation of human thinking. From another side, the author states that human being are not irrational, but rather have some biological limitations that can be compensated with a nudge carefully organized into our lives. If we, as a society, would like to see more organ donations, the form should require a check box to opt out rather than a check box to opt in…
Humans are driven by heuristics, are subject to biases, and have a very strange manner of thinking about happiness. This is who we are, even if opinions on what we should be may differ 😉
A few interesting tidbits:
CEO effort is contributing only about 30% to the company’s success – defining and applying “winning management techniques” may not be possible/practical
Regression to a mean: good performance as well as bad performance is typically regressing to the mean (pilots praised for exceptional airplane handling in training don’t do as well next time, pilots who performed badly improve).
Optimistic bias – people are generally over-optimistic about life’s possibilities. Optimism makes people happier and healthier; however, it encourages them to act irrationally and take more risks and needed.
Over-confidence in personal abilities: entrepreneurs overestimate success rate of the businesses in their field about twice and overestimate their own success even more. Statistically, selling expertise to others is more profitable and less risky than starting a new business.
Competition neglect: businesses often function in a vacuum making decision without taking into consideration competitive moves.
Interesting: failed businesses that open new markets and highlight them for more capable businesses are considered economic “martyrs.” They loose, but they serve a positive role for the economy as a whole.
Neglect to check success rate of the reference group when planning for the project success. Even the success rate of the projects of that type is known, people usually neglect to apply it to project they pursue and give over-optimistic projection. Author and a team estimated a curriculum-writing project in 2 years, while the base-rate for these type of projects was 7-10 years. Author’s project took about 8 years.
Pre-mortum project evaluation. When the project was approved with a possibly optimistic plan, every team member is required to do an independent written exercise: Today is a year [or how much is required to complete the project] later. Project failed. Describe the reasons why it happened.
Interesting: denominator blindness… Our ability to evaluate denominators (and desire to calculate) are minimal… A statement “one out of 1000….” could be more impressive than “10%. Miles per gallon is not as easy to grasp as “gallons per 100 miles,” maybe this is why it is used 🙂
Considering that our thinking ability is flawed… Could/should human society to “evolve”? Video below (produced over a decade ago) has an interesting point…