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How cognitive illusions blind us to reason

Fun arti­cle by Daniel Kah­ne­man based on his new book,Think­ing, Fast and Slow.

How cog­ni­tive illu­sions blind us to rea­son (The Guardian):

Why do Wall Street traders have such faith in their pow­ers of pre­dic­tion, when their suc­cess is large­ly down to chance? Daniel Kah­ne­man explains.

- “Look­ing back, the most strik­ing part of the sto­ry is that our knowl­edge of the gen­er­al rule that we could not pre­dict had no effect on our con­fi­dence in indi­vid­ual cas­es. We were reluc­tant to infer the par­tic­u­lar from the gen­er­al. Sub­jec­tive con­fi­dence in a judg­ment is not a rea­soned eval­u­a­tion of the prob­a­bil­i­ty that this judg­ment is cor­rect. Con­fi­dence is a feel­ing, which reflects the coher­ence of the infor­ma­tion and the cog­ni­tive ease of pro­cess­ing it. It is wise to take admis­sions of uncer­tain­ty seri­ous­ly, but dec­la­ra­tions of high con­fi­dence main­ly tell you that an indi­vid­ual has con­struct­ed a coher­ent sto­ry in his mind, not nec­es­sar­i­ly that the sto­ry is true.” …

- “The sub­jec­tive expe­ri­ence of traders is that they are mak­ing sen­si­ble edu­cat­ed guess­es in a sit­u­a­tion of great uncer­tain­ty. In high­ly effi­cient mar­kets, how­ev­er, edu­cat­ed guess­es are no more accu­rate than blind guess­es.”

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As seen in The New York Times, The Wall Street Journal, BBC News, CNN, Reuters,  SharpBrains is an independent market research firm tracking how brain science can improve our health and our lives.

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