It’s an entertaining and profoundly insightful 20-minute talk, and worth watching even if you think you’ve heard these ideas before.
The fundamental problem Kahneman discusses is that we all experience our lives on a moment-by-moment basis, and yet we make decisions based on our memories of the past. Unfortunately, it turns out that the experiencing self and the remembering self don’t necessarily agree about what things make us happy, and so we often end up in situations where we voluntarily make choices that actually substantially reduce our experienced utility. I won’t give away the examples Kahneman talks about, other than to say that they beautifully illustrate the relevance of psychology (or at least some branches of psychology) to the real-world decisions we all make–both the trival, day-to-day variety, and the rarer, life-or-death kind.
As an aside, Kahneman gave a talk at Brain Camp (or, officially, the annual Summer Institute in Cognitive Neuroscience, which may now be defunct–or perhaps only on hiatus?) the year I attended. There were a lot of great talks that year, but Kahneman’s really stood out for me, despite the fact that he hardly talked about research at all. It was more of a meditation on the scientific method–how to go about building and testing new theories. You don’t often hear a Nobel Prize winner tell an audience that the work that won the Nobel Prize was completely wrong, but that’s essentially what Kahneman claimed. Of course, his point wasn’t that Prospect Theory was useless, but rather, that many of the holes and limitations of the theory that people have gleefully pointed out over the last three decades were already well-recognized at the time the original findings were published. Kahneman and Tversky’s goal wasn’t to produce a perfect description or explanation of the mechanisms underlying human decision-making, but rather, an approximation that made certain important facts about human decision-making clear (e.g., the fact that people simply don’t follow the theory of Expected Utility), and opened the door to entirely new avenues of research. Kahneman seemed to think that ultimately what we really want isn’t a protracted series of incremental updates to Prospect Theory, but a more radical paradigm shift, and that in that sense, clinging to Prospect Theory might now actually be impeding progress.
You might think that’s a pretty pessimistic message–”hey, you can win a Nobel Prize for being completely wrong!”–but it really wasn’t; I actually found it quite uplifting (if Daniel Kahneman feels comfortable being mostly wrong about his ideas, why should the rest of us get attached to ours?). At least, that’s the way I remember it now. But that talk was nearly three years ago, you see, so my actual experience at the time may have been quite different. Turns out you can’t really trust my remembering self; it’ll tell you anything it thinks it wants me to hear.