Daniel Kahneman, winner of the 2002 Nobel Prize in Economics, died on March 27, 2024, at the age of 90, according to The New York Times.
Photo from the Nobel Foundation archive.
I am deeply saddened to learn that Mr. Daniel Kahneman, the greatest master of cognitive psychology and Nobel laureate in economics, has passed away. I first met Mr. Kahneman because of his magnum opus, "Thinking Fast and Slow", which not only made me feel familiar at first sight, but also brought more inspiration and thought. Similarly, when Raul, Reese's Spanish partner, read the book, he wrote to Mr. Reese as soon as he could, saying that he had our soulmate here. This feeling of "being at home at first sight" comes from the common exploration of the cognitive world. Since the positioning theory pioneered by Al Rees and Jack Trout in the 60s and 70s of the last century, it was pointed out for the first time that "the mind is the ultimate battlefield of business competition".
At the same time, there are no real facts in the business world, "cognition is facts". This series of ideas opens the prelude to the field of business practice, where people understand, understand, and use cognition. In the following half century, a large number of masters of cognitive psychology were born in the academic field, revealing the truth and laws of the cognitive world from different perspectives, including Herbert Alexander Simon, Daniel Kahneman, and Richard Thaler, three Nobel laureates, among which Mr. Kahneman is the most prominent.
Mr. Kahneman argues that cognition determines behavior, and his research mainly reveals multiple cognitive biases in human decision-making processes. At the same time, the human brain has two systems of fast thinking and slow thinking in decision-making, and in the case of information explosion and sufficient choice, people often rely on the "fast thinking" system for decision-making. "Fast thinking" is characterized by relying on intuition and experience rather than logic. He pointed out that in a noisy business environment, people are often disturbed by various external factors, which leads to decisions that deviate from the facts and essence, and the business is also in a state of chaos. This chaos not only makes companies lose their adherence to their core values, but can also lead to wrong business decisions, which can affect the sustainable development of the company. Mr. Kahneman's academic work has provided great help for many government, military and corporate decision-makers around the world to avoid cognitive biases and make rational and scientific decisions.
Because of this, Mr. Kahneman has become the cognitive psychologist I admire and follow the most, and we have established a constant connection and exchange. In the last two years, we have had two direct communications and discussions. One was a video conversation in November 2022, and the other was at the Reese Category Innovation Global Summit in October last year, where the 90-year-old readily agreed to share insights on business decisions and judgments with 500 Chinese entrepreneurs. During the conversation, he told me that although he was not in business, he knew the importance of Al Reese. He believes that there is a solid foundation in cognitive psychology behind the theory of positioning. I also joked with him that in fact we are peers, but your job is to tell decision-makers how to avoid cognitive biases in order to make the right decisions. And my job is to show decision-makers how to use cognitive biases to win over customers' minds......
In my communication with him, I learned a lot from his research and thoughts, and strengthened my insight into the new mental model. At the same time, it also allows more entrepreneurs to further understand the importance of understanding the world and mastering the laws of cognition. These dialogues and exchanges are still fresh in our minds, and Mr. Kahneman is gone......
A special excerpt from Mr. Kahneman's dialogues and speeches is a special excerpt to commemorate Mr. Kahneman, the master is gone, but the thought lives on.
Fast thinking has to do with affluence
Fast systems and slow systems are part of our human nature. The human brain was formed over many years of evolution. We slowly evolved from animals to humans, and the changes in the brain are very slow, and it is only possible to change a little bit over millions of years. Of course, with new technology, there may be some phenomena such as the synthesis of AI and the human brain, but this is a completely different development path. But back to human nature itself, our nature is difficult to change, it is very difficult to change, you can add it slowly, but the most basic and basic aspects of it remain the same. Because we humans are some kind of animal, we have brains, we have evolved over hundreds of millions of years, and it's hard to change.
I think fast thinking has to do with affluence. In many cases, consumers rely on quick thinking, which means that this consumer has sufficient financial means. As consumers become more affluent, they will have more choices, which is why we can now use Quick Thinking more. When consumers are more affluent, they will have more choices and will use Quick Thinking more.
The brain classifies memories, and the same kind of memories are competitive
When humans process too much and too complex information, the brain uses the way of categorization. I think that's the only way we understand the world, you go into a room and you see chairs, tables, flowers. Before you search your brain for details about related items, you categorize them and come up with them. So one of the mechanics that inspired us was that when we look closely at an item, we quickly put it in a category that we already know so well. That's the psychological explanation behind this phenomenon.
The ability of our human brains to create concepts is actually limitless. But in the existing category, the first impression of the category is very important, maybe the initial message will be simple, but after that, we will gradually develop more details and ideas based on that. When a particular category of information appears in the brain, such as a tree or a country, there are not many examples that immediately come to mind in that category. The number of brain storage categories is unlimited, and the list of information in a single category will be limited, because memory will compete for the same type of information storage. When you think of a category, a certain concept will come to mind as soon as it comes to mind, and the rest of the information will be difficult to come up with. Therefore, there is no competition between categories and memories, but there is competition for information in categories. I think this principle also applies to the field of marketing.
Actual innovation does not maintain an advantage
We live in a world of our own creation, and we live in our own cognitive world. Eventually, when a dominant brand emerges, the previous brand loses in the competition and is forgotten. So it doesn't matter who is the de facto number one. Of course, being the first inventor certainly has an advantage, but the fact that innovation does not maintain this advantage. If you can't win the competition, you're bound to be forgotten. So in that sense, memory is unjust, and in fact innovation is not always rewarded.
What can be commended? You mentioned Apple, the genius of Steve Jobs, who could create a demand that didn't exist before, but he created a need. I still remember when the iPad came out, we didn't know why we needed it. But it became the dominant product in the tablet, which was a surprise. In fact, there are already a lot of tablets on the market. Of course, Apple is an innovative company, and the iPad is also a successful product in the category, but its success is not because of its innovation, but because it dominates the market and perception.
Cognitive formation vs. initial popularity
Some interesting research tells us that people influence each other. For example, if you think the movie is terrible, but your friend first says that the movie is great, then you start to wonder if the movie is good or not. You'll suspect that this movie might not be that bad because you heard your friends' opinions. Especially when your own ideas are not very firm, it is easier to be influenced by others. The influence is transmitted, the first person makes a comment, the second person supports the first person's idea, the third person supports the second person's idea, and soon most people form the same idea in one direction. This phenomenon is very common, and it is a process of cognitive formation.
On the other hand, if you don't want to see one person have too much influence and want to hear different opinions and voices, be careful not to let the first person to speak influence the minds of all the participants. It is very useful to recognize this pattern, some scenarios can take advantage of it, while others need to be careful to avoid chain effects and effects.
Be wary of "assumption consistency"
This is a fairly common cognitive bias in the field of cognitive psychology and is related to an individual's subjective feelings and opinions. Everyone's different views on the same thing lead to a completely different world as we see the world, and choosing how to understand the world will produce different results.
For example, if we consult with an insurance company and the insurer has different opinions on some complex issues, including insurance risks and charges, the company may need to cover a huge risk. I asked the company's executives what would be the difference if two underwriters were randomly selected to answer some of the same questions, and the executives' answers would be 10 to 20 percent. However, the reality is that the difference between the two underwriters is 50%, which shows that most people misunderstand cognitive biases.
Once people think their understanding and decisions are correct, they take it for granted that others will make the same choices as themselves. However, in reality there is a lot of difference between them, which is an extremely common situation.
This phenomenon is widespread in the way people treat things and see the world. We tend to think that the world seen by others is the same as what we see, and if we use our own experience and opinions to evaluate other people's opinions and choices, it can lead to errors in decision-making and judgment. This is a hallucination caused by a cognitive bias and is incorrect.
The simpler, the better
We need to understand how consumers make decisions in different problem scenarios. More often than not, consumers don't answer complex questions and are more inclined to answer simple ones. Therefore, the simpler it is, the more powerful it is, and the easier it is to occupy the minds of consumers.
People often unconsciously fall into the illusion of such cognitive biases. For example, when an investor looks at a company, it is likely to be influenced by the surrounding environment. Whether the office is tidy, whether the staff behaves in a civilized manner, whether the dress is neat, whether the conversation is appropriate, etc., these superficial factors may affect the impression of investors. However, these superficial impressions only assess the company's external performance, not the actual value of the company.
Because simple ideas are very powerful and easier to get into our brains. Simple ideas are more coherent. If you have a simple idea and build a series of brand images around it, it will slowly form a halo effect. So on an economic level, it's very difficult to put a big, complicated idea in your head all at once.
The most economical way to discuss this from the field of marketing is to come up with a simple idea. Your goal is to create an image of your brand and a series of associations around it, so that consumers can immediately pick up that impression in their minds and buy the product.
Don't blindly follow
There is a common denominator in business books in almost all countries, which includes a large number of successful cases and experience sharing of enterprises or individuals, such as Elon Musk and so on. In the process of reading these materials, the reader often has the feeling that these successful people always seem to be right, and that I can also succeed as long as I follow him. This kind of thinking is one-sided, and once you take a closer look at the material and dig into the story behind the success, it is not difficult to see that they took a big risk before they succeeded.
The book's ideas seem to convey a recipe for success when you're faced with similar situations, such as being bold when you're taking risks, being more confident when you're confident, even if you're not very kind to your employees. But in reality, this is a logical error, it is misleading, and the truth of success is not. The book is all about "hindsight", and if a person or company has achieved great success, their behavior patterns are often difficult to replicate.
We should focus on the root causes behind the behavior of these successful people, so as to find out what lessons to learn from. For example, when they take risks, what is the probability of success, when they are overconfident, what is the probability of success, and when they are not kind enough to employees, what is the probability of success? Because the probability of success behind these behaviors is very low, don't be fooled by the illusion caused by this cognitive bias.
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