This is the essence of the focusing illusion, which can be described in a single sentence: Nothing in life is as important as you think it is when you are thinking about it.
If an event had actually occurred, people exaggerated the probability that they had assigned to it earlier.
Further experiments showed that people were driven to overstate the accuracy not only of their original predictions but also of those made by others.
Indeed, we pay people quite well to provide interesting explanations of regression effects.
When asked how much they will pay to get overnight delivery of a book they have ordered, the low scorers on the Cognitive Reflection Test are willing to pay twice as much as the high scorers.
System 1 is much better at dealing with individuals than categories.
As we noted in chapter 12, our normal way of thinking is causal. We naturally attend to the particular, following and creating causally coherent stories about individual cases, in which failures are often attributed to errors, and errors to biases. The ease with which bad judgments can be explained leaves no space for noise in our accounts of errors.
Hindsight bias has pernicious effects on the evaluations of decision makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad.
Personnel decisions are noisy. Interviewers of job candidates make widely different assessments of the same people. Performance ratings of the same employees are also highly variable and depend more on the person doing.
The decision of whether or not to protect individuals against their mistakes therefore presents a dilemma for behavioral economists. The economists of the Chicago school do not face that problem, because rational agents do not make mistakes. For adherents of this school, freedom is free of charge.
Leaders who have been lucky are never punished for having taken too much risk. Instead, they are believed to have had the flair and foresight to anticipate success, and the sensible people who doubted them are seen in hindsight as mediocre, timid, and weak.
She has a coherent story that explains all she knows, and the coherence makes her feel good.
The invisibility of noise is a direct consequence of causal thinking.
The sense-making machinery of System 1 makes us see the world as more tidy, simple, predictable, and coherent than it really is. The illusion that one has understood the past feeds the further illusion that one can predict and control the future.
She has no evidence for saying that the firm is badly managed. All she knows is that its stock has gone down. This is an outcome bias, part hindsight and part halo effect.” “Let’s not fall for the outcome bias. This was a stupid decision even though it worked out well.
Two Systems This book has described the workings of the mind as an uneasy interaction between two fictitious characters: the automatic System 1 and the effortful System 2. You are now quite familiar with the personalities of the two systems and able to anticipate how they might respond in different situations.
The attentive System 2 is who we think we are. System 2 articulates judgments and makes choices, but it often endorses or rationalizes ideas and feelings that were generated by System 1. You may not know that you are optimistic about a project because something about its leader reminds you of your beloved sister, or that you dislike a person who looks vaguely like your dentist.
People believe they capture complexity and add subtlety when they make judgments. But the complexity and the subtlety are mostly wasted – usually they do not add to the accuracy of simple models.
Causally, noise is nowhere; statistically, it is everywhere.
But System 2 is not merely an apologist for System 1; it also prevents many foolish thoughts and inappropriate impulses from overt expression.