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In this week’s “Masters in Business” podcast, we chat with Danny Kahneman, professor of behavioral & cognitive psychology, and winner of the 2002 Nobel Price for economics. He is also the author of the highly regarded Thinking Fast & Slow.
In a wide-ranging discussion, Kahneman discusses how he met Amos Tversky, who became his long time research partner. He notes “we” won the Nobel Prize, referring to his sharing of the prize with Tversky, who died prior to the Nobel Prize being awarded (Nobel prizes cannot awarded posthumously).
Kahneman explains how he and Tversky first discovered the heuristics of Representativeness, Availability, and Anchoring. He tells why going first in a negotiation is – contrary to common opinion – a huge negotiating advantage, as the human brain tries to make sense of the number it receives, regardless of how ridiculous it may be.
The Availability heuristic – “WYSIATI” aka What you see is all there is – reveals how people are unaware of what they do not know, and use whatever limited information may be available to create a coherent narrative, even when there is none. Hence, “Availability bias” allows people to use what looks to be salient info to fabricate narratives that seem to make sense.
You can hear the full interview, including the podcast extras, by downloading the podcast at iTunes, SoundCloud or Bloomberg. All of our earlier podcasts are at iTunes, Soundcloud and Bloomberg. (Masters in Business broadcasts all weekend on Bloomberg radio and SiriusXM, at Friday at 9pm, Saturdays at 10am, 6pm, and 11pm, and Sundays at 3am).
Next week, we sit down with Michael Mauboussin, head of Global Financial Strategies at Credit Suisse, adjunct professor at Columbia University’s school of business, and author of Untangling Luck and Skill in Sports, Business and Investing.