The Riddle of Experience vs. Memory


April 15, 2016.
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Daniel Kahneman
The Riddle of Experience vs. Memory:
Why we make “wrong” decisions

Daniel Kahneman won the 2002 Nobel Prize in Economics for his pioneering work in behavioural economics—exploring why we make irrational decisions about risk.

Kahneman, Professor Emeritus at Princeton and considered one of the world’s most influential contemporary psychologists, was the first non-economist by profession to win the Nobel Economics Prize.

TED 2010 3.2M views on TED.com

In his TED talk Kahneman provides many examples from daily-life to illustrate why most of us, consistently, make decisions and choices which are not rational—in other words, the “wrong” decisions—when analyzed more closely.

The answer to this paradox is partly related to our experiencing selves, i.e. how we actually experience something—and our remembering selves, i.e how we remember what we experienced—which according to Kahneman are two very different entities. And in his talk he reveals which one of the two entities actually determines our decisions.

Kahneman has also written a fascinating and engaging book on how we think and what influences our thinking—Thinking, Fast and Slow (2011).

160415 D Kahneman Thinking, Fast and Slow

Despite being published 5 years ago, the book remains (February 2016) a No.1 Best Seller on Amazon in 3 different categories, and in the Top 100 best-selling books among all Amazon books—strong testimony to its captivating content.

The book draws on decades of research in psychology and which ultimately led to Kahneman’s Nobel Prize. As Kahneman describes in his book, we all have two types of thinking—which he simply calls System 1 and System 2 thinking.

System 1 is fast, intuitive and emotional; which we need to avoid major risks and escape danger.
System 2 is slow, deliberate, and logical; which we need to accomplish more complex tasks and make better decisions.

In theory we should use System 2 most of the time, as it is the most powerful and better thinking tool—unless faced with imminent danger. However, in practice, our thinking patterns are more complex and intertwined—with System 1 thinking often significantly influencing our decision making without us being aware of it.

By learning more about how we think, and the benefits of slow thinking—it is Kahneman’s contention that we can all significantly improve our decision making and therefore ultimately our results and performance.

Trond Varlid

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This article first appeared in the EMC Quest newsletter series.