1. Thinking & Decision-Making

2. Kahneman & Tversky
The following examples are from the works of Danny Kahneman & Amos Tversky as related in The Undoing Project by Michael Lewis

3. Exercise 1
Read the scenario and answer the question silently to yourself
Which of the following is a more likely birth order for a family with 6 kids?
Boy-Boy-Boy-Girl-Girl-Girl
Girl-Boy-Boy-Girl-Boy-Girl

4. Answer
They are the same

5. Our minds are easily mislead by randomness
Ex. WWII London bombings
What about other, vaguer concepts?

6. Exercise 2
A certain town is served by 2 hospitals. In the larger hospital about 45 babies are born each day, and in the smaller hospital about 15 babies are born each day. As you know, about 50% of all babies are boys. The exact percentage of baby boys, however, varies from day to day. Sometimes, it may be higher than 50%, sometimes, lower.
For a period of 1 year each hospital recorded the days on which more than 60% of the babies born were boys. Which hospital do you think recorded more such days? Choose one silently:
The larger hospital
The smaller hospital
About the same (w/in 5% of each other)

7. Answer
The smaller hospital – smaller sample size leads to likely greater variability

8. Heuristics
You will be given three different letters of the alphabet, and you will be asked to judge whether these letters appear more often in the first or in the third position of the word.
For example, T is in the first position of the word turbulent, and the third position in the word catch.
You will also be asked to estimate the ratio of the frequency with which they appear in these positions

9. Consider the letter G Take 30 seconds and decide silently to yourself…
In English words greater than 3 letter in length,
is the letter G more likely to appear in
___ the first position of a word?
___ the third position of a word?
Your estimate for the ratio of these two values is ___:1

10. Consider the letter R Take 30 seconds and decide silently to yourself…
In English words greater than 3 letter in length,
is the letter R more likely to appear in
___ the first position of a word?
___ the third position of a word?
Your estimate for the ratio of these two values is ___:1

11. Consider the letter K Take 30 seconds and decide silently to yourself…
In English words greater than 3 letter in length,
is the letter K more likely to appear in
___ the first position of a word?
___ the third position of a word?
Your estimate for the ratio of these two values is ___:1

12. Listen to this list of names as I read them aloud
Burak reads the names
Estimate how many male names and how many female names I read

13. Availability Heuristic
Our judgement can be distorted by the memorable
People aren’t stupid. We tend to use information that’s most readily available to make judgements
That does still expose us to error
It’s probably easier to think of words that start with G, R, and K but only G has more words that have G in the 1st position than the 3rd position
There were two more female names than male names but because the male names were more famous we can recall those more easily

14. Activity A
Everyone use your phone or laptop to Google “random number generator”
Change the max value to 200
Generate a random number and write it down

15. Now, you will have 5 seconds to estimate the number of African countries in the United Nations. GO!
STOP!

16. 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 Activity B
Divide class into two groups
Group 2 close your eyes, Group 1 – I will give you 5 seconds to write down an estimate to the following…
8 x 7 x 6 x 5 x 4 x 3 x 2 x 1
Now switch, Group 1 close your eyes, Group 2 – I will give you 5 seconds to write down an estimate to the following…
1 x 2 x 3 x 4 x 5 x 6 x 7 x 8

17. Activity C
Write down the last two digits of your address e.g. if your address is , then write down 12.
Now, write that number as dollars and cents – so $1.20
I am now going to show you a series of items – I want you to write down the items and write your version of $1.20 next to each item
Now write down next to each item – yes or no – would you be willing to pay exactly that amount for each item
Finally, I want you to write down the maximum amount of money you would actually be willing to spend on each item

18. Anchoring
These last 3 activities are designed to test the concept of anchoring
Lacking obvious information for how to assess the items in the math problem or the items you’d be willing to buy, you likely use a frame of reference based on the most recent or obvious piece of information available, even if that is somewhat arbitrary.
There are 54 African countries in the UN. Let’s crunch the numbers based on the random number generator to see if that affected the estimates.
Let’s crunch the numbers from Activity B – rationally these should be about the same, right?
I will crunch the numbers for Activity C and tell you the results on Tuesday

19. Summation Reliability of judgements is subject to our experiences
To put another way, stories we concoct, rooted in our memories, replace probability judgements
“Images of the future are shaped by experience of the past”
“We often decide that an outcome is extremely unlikely or impossible, because we are unable to imagine any chain of events that could cause it to occur. The defect, often, is our imagination.”