Two Selves - On Investment

Thinking, Fast and Slow was probably the best book I have read in the first half of 2020. Here are some of the notes I took after reading and worth sharing.This is the part III

If interested, can also check on:

Two Systems -On Investment (33)

Choices & Decision Making - On Investment (34)

Experienced utility vs Decision utility

the two concepts of utility will coincide if people want what they will enjoy, and enjoy what they chose for themselves—and this assumption of coincidence is implicit in the general idea that economic agents are rational. Rational agents are expected to know their tastes, both present and future, and they are supposed to make good decisions that will maximize these interests.

My fascination with the possible discrepancies between experienced utility and decision utility goes back a long way.

Experience and Memory

·Peak-end rule: The global retrospective rating was well predicted by the average of the level of pain reported at the worst moment of the experience and at its end.

·Duration neglect: The duration of the procedure had no effect whatsoever on the ratings of total pain.

The peak-end average was therefore 7.5 for patient A and only 4.5 for patient B. As expected, patient A retained a much worse memory of the episode than patient B. It was the bad luck of patient A that the procedure ended at a bad moment, leaving him with an unpleasant memory.

A strong majority will come down in favor of reducing the memory of pain.

I find it helpful to think of this dilemma as a conflict of interests between two selves (which do not correspond to the two familiar systems). The experiencing self is the one that answers the question: “Does it hurt now?” The remembering self is the one that answers the question: “How was it, on the whole?” Memories are all we get to keep from our experience of living, and the only perspective that we can adopt as we think about our lives is therefore that of the remembering self.

Does the actual experience count for nothing?

Confusing experience with the memory of it is a compelling cognitive illusion—and it is the substitution that makes us believe a past experience can be ruined. The experiencing self does not have a voice. The remembering self is sometimes wrong, but it is the one that keeps score and governs what we learn from living, and it is the one that makes decisions Jon thaperienci. What we learn from the past is to maximize the qualities of our future memories, not necessarily of our future experience. This is the tyranny of the remembering self.

Their decision was governed by a simple rule of intuitive choice: pick the option you like the most, or dislike the least. Rules of memory determined how much they disliked the two options, which in turn determined their choice.

System 1 represents sets by averages, norms, and prototypes, not by sums. Each cold-hand episode is a set of moments, which the remembering self stores as a prototypical moment. This leads to a conflict. For an objective observer evaluating the episode from the reports of the experiencing self, what counts is the “area under the curve” that integrates pain over time; it has the nature of a sum. The memory that the remembering self keeps, in contrast, is a representative moment, strongly influenced by the peak and the end.

Of course, evolution could have designed animals’ memory to store integrals, as it surely does in some cases. It is important for a squirrel to “know” the total amount of food it has stored, and a representation of the average size of the nuts would not be a good substitute. However, the integral of pain or pleasure over time may be less biologically significant.

Decisions that do not produce the best possible experience and erroneous forecasts of future feelings—both are bad news for believers in the rationality of choice. The cold-hand study showed that we cannot fully trust our preferences to reflect our interests, even if they are based on personal experience, and even if the memory of that experience was laid down within the last quarter of an hour! Tastes and decisions are shaped by memories, and the memories can be wrong. The evidence presents a profound challenge to the idea that humans have consistent preferences and know how to maximize them, a cornerstone of the rational-agent model. An inconsistency is built into the design of our minds. We have strong preferences about the duration of our experiences of pain and pleasure. We want pain to be brief and pleasure to last. But our memory, a function of System 1, has evolved to represent the most intense moment of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end. A memory that neglects duration will not serve our preference for long pleasure and short pains.

Life as a story

A story is about significant events and memorable moments, not about time passing. Duration neglect is normal in a story, and the ending often defines its character. The same core features appear in the rules of narratives and in the memories of colonoscopies, vacations, and films. This is how the remembering self works: it composes stories and keeps them for future reference.

Caring for people often takes the form of concern for the quality of their stories, not for their feelings.

her “total happiness” was the happiness of a typical period in her lifetime, not the sum (or integral) of happiness over the duration of her life.

As expected from this idea, Diener and his students also found a less- is-more effect, a strong indication that an average (prototype) has been substituted for a sum. Adding 5 “slightly happy” years to a very happy life caused a substantial drop in evaluations of the total happiness of that life.

Amnesic vacations

The frenetic picture taking of many tourists suggests that storing memories is often an important goal, which shapes both the plans for the vacation and the experience of it. The photographer does not view the scene as a moment to be savored but as a future memory to be designed. Pictures may be useful to the remembering self—though we rarely look at them for very long, or as often as we expected, or even at all—but picture taking is not necessarily the best way for the tourist’s experiencing self to enjoy a view.

In many cases we evaluate touristic vacations by the story and the memories that we expect to store. The word memorable is often used to describe vacation highlights, explicitly revealing the goal of the experience.

Statistical analysis established that the intentions for future vacations were entirely determined by the final evaluation—even when that score did not accurately represent the quality of the experience that was described in the diaries. As in the cold-hand experiment, right or wrong, people choose by memory when they decide whether or not to repeat an experience.

Odd as it may seem, I am my remembering self, and the experiencing self, who does my living, is like a stranger to me.

Thinking about life

People who decide to get married do so either because they expect it will make them happier or because they hope that making a tie permanent will maintain the present state of bliss. A massive error of affective forecasting.

The steep decline of life satisfaction. The graph is commonly interpreted as tracing a process of adaptation, in which the early joys of marriage quickly disappear as the experiences become routine. However, another approach is possible, which focuses on heuristics of judgment.

Because marriage is almost always voluntary in the United States, almost everyone who is reminded of his or her recent or forthcoming marriage will be happy with the idea. Attention is the key to the puzzle. Figure can be read as a graph of the likelihood that people will think of their recent or forthcoming marriage when asked about their life. The salience of this thought is bound to diminish with the passage of time, as its novelty wanes.

The focusing illusion

We can infer from the speed with which people respond to questions about their life, and from the effects of current mood on their responses, that they do not engage in a careful examination when they evaluate their life. They must be using heuristics, which are examples of both substitution and WYSIATI.

The concept of happiness is not suddenly changed by finding a dime, but System 1 readily substitutes a small part of it for the whole of it. Any aspect of life to which attention is directed will loom JghtA5 aoom Jght large in a global evaluation. This is the essence of the focusing illusion, which can be described in a single sentence:

Nothing in life is as important as you think it is when you are thinking about it.

The essence of the focusing illusion is WYSIATI, giving too much weight to the climate, too little to all the other determinants of well-being.

Adaptations

attention is withdrawn from a new situation as it becomes more familiar. The main exceptions are chronic pain, constant exposure to loud noise, and severe depression. Pain and noise are biologically set to be signals that attract attention, and depression involves a self-reinforcing cycle of miserable thoughts. There is therefore no adaptation to these conditions.

Adaptation to a new situation, whether good or bad, consists in large part of thinking less and less about it. In that sense, most long-term circumstances of life, including paraplegia and marriage, are part-time states that one inhabits only when one attends to them.

In storytelling mode, an episode is represented by a few critical moments, especially the beginning, the peak, and the end. Duration is neglected. We saw this focus on singular moments both in the cold-hand situation and in Violetta’s story.

The mind is good with stories, but it does not appear to be well designed for the processing of time.

To be continued...