My most favorite YouTube video and the marvels & the flaws of intuition

Chances are high your most favorite YouTube video is very different from mine in its form and content. Mine is neither a funny clip nor a music video although I enjoy watching both kinds of clips. But here is what is perhaps common between your favorite video and mine. Like you, I have watched it a dozen times so far. But more importantly I have listened to the audio extract of the video several dozen times by now. I listened to it in the gym a couple of days back and I listened to it before going to bed last night. It is titled “Explorations of the mind” and it is an hour-long lecture given at University of California, Berkley by the father of behavioral economics and Nobel Laureate Prof. Daniel Kahneman of Princeton. Who is Kahneman? And what is this video all about? And why do I like it so much? Let me briefly describe in this article.

Kahneman was born in 1934 (same age as my dad) to Jewish parents of Lithuanian origin and spent his childhood in France where his parents had migrated in 1920s. He says in his bio at the Nobel Prize site, “I had grown up intellectually precocious and physically inept”. His school PE teacher felt to pass him means to stretch his extreme tolerance. Kahneman made up for what he lacked in his physique by writing essays in a notebook like, “What I write of what I think”. Kahneman became a psychologist and together with Emos Tversky formulated a theory known as Prospect Theory. This theory turned upside-down a long standing belief among economists that human decision making is a rational process and eventually earned him a Nobel in 2002.

This video is titled “Explorations of the mind: Intuition: the marvels and the flaws”. The video can be divided into three parts. Part 1 is where the speaker is introduced (0-4:20). In part 2 Kahneman sets the context and defines the question he is planning to address for the rest of the talk (4:20-20:10). Part 3 (20:10-55:05) is where he presents a simple and useful model that addresses the question.

What is the question Kahneman addresses in this talk? It is as follows – On the one hand we encounter marvels of intuition when we see world class chess players, basketball players, fire fighters consistently making accurate decisions in a “blink” of an eye (check out Malcolm Gladwell’s Blink for stories on this). On the other hand, we have “experts” like the Chief Economists of the International Monetary Fund (IMF) Olivier Blanchard who on September 2, 2008 said, “If the price of oil stabilizes, I believe we can weather the financial crisis at limited cost in terms of real activity”. Within two weeks some of the biggest financial companies in the world collapsed (check out Nassim Taleb’s Black Swan for stories of these kinds). Why is it that the human intuition works beautifully in certain areas like sports and doesn’t work in some other areas like long term forecasting?

Why do I find this question so interesting? I have a deep-rooted fascination for the learning process. And I believe this question is at the heart of this process. I encounter people all the time who have spent decades managing projects but have stopped learning a while ago. Surprisingly, they believe that with every passing year, they are learning more. But actually they are not. The talk sheds light on what happens when we learn or stop learning.