You may be familiar with cognitive bias from behavioral economics. But being aware of common thinking traps and how to elude them can help you in your retirement planning and in your day-to day life, including making you a wiser consumer. Dr. Woo-kyoung Ahn, a Psychology professor at Yale, is the author of the new book Thinking 101: How to Reason Better to Live Better. She joins us for an enlightening conversation about how we can be more keenly aware of our cognitive tendencies, sharpen our thinking and duck thinking errors that can have real-life implications.
- How confirmation bias works – and how it gets in our way
- Negativity bias – and why loss aversion carries more weight than gains do
- Overconfidence and the fluency effect
- Estimating better and the planning fallacy
- How marketers use cognitive bias – and how to be a wiser consumer
- Applications of the research in daily life
- How cognitive psychology can help at the individual and societal levels
Dr. Ahn joins us from New Haven.
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Mentioned in This Episode
BTS Music Video (The dance sequence Dr. Ahn uses in her class is from 1:18 to 1:24. )
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On Estimating & Planning Better
“…what I do to overcome the planning fallacy in myself is I just basically add 50% of the time that I initially estimate. And I try not to negotiate with myself on this. And sometimes 50% was not enough. My favorite story was I was planning I was preparing for a lecture on the planning fallacy, and I thought It’ll be done within four days. And I said, Okay, that means a week. No. It took two weeks, because there’s so many studies that I read and then I said, No, this one doesn’t work. No, this is not interesting. So it took two weeks. So, I think the best thing to do is just to assume the planning fallacy always happens a hundred percent – and then just double the estimate.”
On Negativity Bias
“…some researchers say that we have actually evolved to be more sensitive to loss and negative information. And it’s because throughout most of our human history, the resources have been really scarce. So in that case, any loss, even if it’s a small one, can be a direct threat to our survival. So we have evolved to protect what we possess, what our family has. We have to be very, very sensitive to that. And so this loss aversion shouldn’t be such a big deal in the current society because most of us, we can lose [a bit]. If there’s a jug of expired milk, if it expired yesterday, for instance, you should be able to let it go. It’s not a direct threat to you, but we may feel like, Oh, I can’t really let it go to waste, I might be able to use it for pancakes or something else. It might not be a big loss, but we can’t really let it go.”
On Cognitive Psychology
“The subfield of cognitive psychology that I study is a higher level reasoning processes, the thinking processes, basically. And many students take my course thinking that they want to think better because they can outsmart everybody else in the room. They want to have an edge, or a head start. But I don’t want them to want them to learn that kind of thing. To me, thinking better means being more fair to oneself as well as to other people.”
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Intro and Outro voiceovers by Ross Huguet.