Informed Bets

Informed Bets

My last post was about limitations of the human mind and why we should be willing to doubt our conclusions and beliefs. This post contrasts my last post to argue that we can trust the informed bets that our brains make. Our brains and bodies do not have the capabilities to fully capture all of the information necessary to perfectly replicate reality in our minds, but they can do a good job putting information together in a way that helps us successfully navigate the world and our lives. Informed guesses, that is assumptions and intuitions based on experience and expertise rather than random and amateurish judgements, are actually very useful and often good approximations.


“Intelligence…” Gerd Gigerenzer writes in his book Risk Savvy, “is the art of making informed guesses.” Our brains make a lot of predictions and rely on heuristics, assumptions, and guesses to get by. It turns out that our brains do this well, as Gigerenzer argues in his book. We don’t need to pull out graph paper and a scientific calculator to catch a football. We don’t need to record every thought and action we have had over the last month to know if we are happy with our New Year’s resolutions and can keep them going. When we see someone standing in a long customer service line at the grocery store we don’t need to approach them with a 100 point questionnaire to know whether they are bored or upset.  Informed bets and reasonable guesses are sufficient for us to have decent and functional understanding of the world.


Gigerenzer continues, “Intelligence means going beyond the information given and making informed bets on what’s outside.” This quote is introduced after an optical illusion, where a grayscale checkerboard is shown with a figure casting a shadow across the board. Two squares on the board are the same shade of gray, yet our minds see the squares as different colors. Our minds are going beyond the information given, the literal wavelength of light reaching the back of our eyes, and making informed bets on the relative colors of the squares on the board if there was not a figure to cast a shadow. In the case of the visual illusion, our brain’s guess about reality is actually more helpful for us than the literal reality of the same colors of the squares in the image.


Bounded rationality is a serious concern. We cannot absorb all the information that exists in the world which may help us make better decisions. However, humans are intelligent. We can use the information we receive and make informed bets about the best choices and decisions available. We might not be perfect, but by making informed bets and educated guesses we can successfully come to understand the world and create systems and structures that help us improve our understanding over time.
intelligence - Joe Abittan


“Intelligence is not an abstract number such as an IQ, but similar to a carpenter’s tacit knowledge about using appropriate tools,” writes Gerd Gigerenzer in his book Risk Savvy. “This is why the modern science of intelligence studies the adaptive toolbox that individuals, organizations, and cultures have at their disposal; that is, the evolved and learned rules that guide our deliberate and intuitive decisions.”


I like Gigerenzer’s way of explaining intelligence. It is not simply a number or a ratio, but it is our knowledge and ability to understand our world. There are complex relationships between living creatures, physical matter, and information. Intelligence is an understanding of those relationships and an ability to navigate the complexity, uncertainty, and connections between everything in the world. Explicit rules, like mathematical formulas, help us understand some relationships while statistical percentages help us understand others. Recognizing and being aware of commonalities between different categories of things and items and identifying patterns help us understand these relationships and serves as the basis for our intelligence.


What is important to note, is that our intelligence is built with concrete tools for some situations, like 2+2=4, and less concrete rules of thumb for other situations, like the golden rule – do to others what you would like others to do to you. Gigerenzer shows that our intelligence requires that we know more than one mathematical formula, and that we have more than one rule of thumb to help us approach and address complex relationships in the world. “Granted, one rule of thumb cannot possibly solve all problems; for that reason, our minds have learned a toolbox of rules. … these rules of thumb need to be used in an adaptive way.”


Whether it is interpreting statistical chance, judging the emotions of others, of making plans now that delay gratification until a later time, our rules of thumb don’t have to be precise, but they do need to be flexible and adaptive given our current circumstances. 2+2 will always equal 4, but a smile from a family member might be a display of happiness or a nervous impulse and a silent plead for help in an awkward situation. It is our adaptive toolbox and our intelligence that allows us to figure out what a smile means. Similarly, adaptive rules of thumb and intelligence help us reduce complex interactions and questions to more manageable choices, reducing uncertainty about how much we need to save for retirement to a rule of thumb that tells us to save a small but significant amount of each pay check. Intelligence is not just about facts and complex math. It is about adaptable rules of thumb that help us make sense of complexity and uncertainty, and the more adaptive these rules of thumb are, the more our intelligence an help us in the complex world of today and into the uncertain future.
Rich Representations of Things

Making Connections From Rich Representations of Things

On August 12th, Tyler Cowen released a podcast interview with Stanford Economics Professor Nicholas Bloom on his podcast Conversations with Tyler. In response to a question from Cowen about making adjustments in his life, Bloom said the following:


“For me, I really like to read broadly rather than deeply — sounds an odd thing to say. Every Monday, for example, or Sunday night, the National Bureau of Economic Research has this vast email of all the recent papers. I tend to try and scan every title and abstract. I read the papers. I like the Economist magazine. It’s good. It’s often been a source of ideas, actually.
We were talking before the call — I listen to your podcast. I actually listen to a lot of podcasts because I try and go out for a walk or a run for about an hour every day. I mostly listen to podcasts. [laughs] If I’m getting too tired, I have to switch to music. For me, that’s been helpful for coming up with new research ideas.” 


The quote from Bloom came back to mind this morning as I looked over a quote I highlighted in Daniel Kahneman’s book Thinking Fast and Slow. Kahneman’s quote is about connections in the mind, and how having a rich set of connections can help us have better representations of the world. When people are asked questions about Michigan, research in Kahneman’s book shows, they have different responses depending on whether they remember that Detroit is in Michigan. People with more knowledge of the state think differently of it compared to people with minimal knowledge of Michigan. Kahneman writes,


“More intelligent individuals are more likely than others to have rich representations of most things. Intelligence is not only the ability to reason; it is also the ability to find relevant material in memory and to deploy attention when needed.” 


This idea relates to what Bloom said in the interview with Cowen. Bloom was asked about his productivity, and how he is able to keep up a high level of publications with co-authors across a wide range of academic institutions, geographic locations, and subjects. Bloom responded that he is developing rich representations of most things through broad, but not necessarily deep, investigations of a wide range of topics.


By taking in a wide range of information, Bloom is able to pick out the important connections between disparate topics. This gives him an ability to deploy attention where there is a lack of study on certain topics. By reading across many fields, he is able to look at current developments in economics, news, and society to find relevant material that can generate useful knowledge for the world of economics.


Not all of us are ever going to be economists, and not all of us will be in a place where we can publish academic articles on lots of topics. But all of us are asked by social media every day to offer our opinion on something. If we have a narrow and limited knowledge base, then our opinions and ideas are going to also be narrow and limited. If, however, we can work to broaden our horizons and work to focus our memory and attention on relevant material, then we can start to offer better opinions about the world, and we can start to move discussions forward in a better direction.

How Our Poorly Evolved Brains Contribute to Political Dysfunction

One of my beliefs about human beings is that we are currently operating in a world that has far outpaced the realities that our brains were evolved to live within. We are social creatures that operate in political tribes, and the social and political situations of our ancestors lives have pushed our brains to be bigger and pushed us to be smarter, but have not necessarily pushed us to be more adapt at understanding reality or seeing the world in a clear and honest way. This has happened in our brain, however, while we have maintained the basic hardware and default mechanisms which were originally developed for the purpose of survival on a savanna or in a jungle. Our brains are still built for making quick decisions between safe and threatening, but we have layered on great intelligence through social and political games that require smarter and more deceptively cunning intelligence. The result is that our brains are powerful, but deeply flawed and inadequately evolved for current circumstances.


This is important because we live in a world that is incredibly complex and requires that we make decisions among noise and competing values with varying levels of social and political consequences. Our world is filled with decisions that must balance multiple variables, but at their base, our brains really just want to make a quick decision between two variables: safety or threat.


I see so many situations in my own thinking where I reduce the world to one or the other. Someone is either a great person because they gave me plenty of space in their car while I was riding my bike, or they are an evil human being who couldn’t move over for me. Someone is either lazy and dumb, or hard working and brilliant. Considerations of the middle ground are complex, and as a result I default to an either-or mindset when looking at the world. For most of my daily interactions and situations this doesn’t matter much, but when we layer these tendencies up throughout society, it becomes dangerous and is a contributing factor to the political dysfunction and social unrest we see around us today.


In their book The New Localism, authors Bruce Katz and Jeremy Nowak hit on this point. About our political disagreements between Democrats and Republicans (the authors use Left versus Right which I disagree with for other more complicated reasons) they write,


“The battle between these two choices in public asset management [public ownership and provision as favored by Democrats versus the undeterred use of market forces as favored by Republicans] has contributed to political partisanship by posing a false choice between management mediocrity and the loss of ownership rights. These choices, driven by fallacies that are supported by old ideologies, contribute to political dysfunction.”


Katz and Nowak argue that we make huge political decisions in our country based on outdated models that feel comfortable for our brains (as our brains scan for safety versus threat) but that don’t really reflect reality. Good public management, the authors argue, in today’s age requires a merger of public and private asset management strategies. Public ownership cannot be absolute because it can lead to politically biased decisions with elected officials acting as arbitrary gatekeepers. Open markets, however, can leave people out and be leave us with greater inequality rather than provide us solutions to pressing problems.


One solution the challenge above might look like public ownership a of a private corporation, adding a layer to reduce political influence and bias, and using experts to maximize public benefit as opposed to using business insiders to maximize shareholder value. This is just one example of a third approach to a problem that our brains would rather see as a choice between two variables. We want to see the world as good versus evil, because that is how our brains have evolved. It didn’t matter if there was some nuance to our early ancestors about eating mushrooms, running from animals, or traversing down a steep cliff. What mattered was survival and having an innate sense of safety versus threat was advantageous. Today however, that same innate sense is at play (even though we don’t recognize it) and is holding us back and creating chaos rather than helping us successfully reproduce.

A Science Fiction Message

Larry Niven wrote a letter to James Harmon for Harmon to publish in his book, Take My Advice, and in his letter Niven offers his 19 “Niven Laws” which are his observations of how the world works. I highlighted law number 14 because it brings to life the idea that other people do not think the same way that we do, and it does so in a fun way. “14. The only universal message in science fiction: There exist minds that think as well as you do, but differently.”  I think that once we have graduated from high school or college our 12 to 16 years of the academic world can leave us in a place where we look for right answers and assume that there is one correct way to look at everything in the world.  Standardized tests, teachers who push a single viewpoint, and competitions to see who can have the highest grades and GPA create a world where we constantly rank our intelligence and compete to see who can have the answers that are the most in tune with the ideas of the person grading our tests.  Niven uses science fiction to show that there are incredible thinkers in this world who can use their mind as well as anyone, but who can apply it in innovative ways. The diversity of science fiction is simply a reflection of the diversity of thought in the human mind, and in todays Age of Superheroes that diversity is being celebrated despite the fact that 24 hour news networks chariot single viewpoints and commercials direct materialistic views of happiness into our homes.


Perhaps we can look at Niven’s understanding of what science fiction is, a collection of thoughts that differ from the every day, to explain why superhero movies and shows have come to dominate lately.  We want to see the world in new ways and imagine what the world could be if we adopted new view points.  This whole notion could be a counter reaction to the media surrounding what happens in the “real world”.


What first drew me in to Niven’s quote was the idea that we compare the way that we think to others.  Academics puts a mark on who thinks well, an who does not think well, and it teaches us to identify ourselves based on the quality of our thought as graded by a professor or as outlined by a series of multiple choice questions.  Years of schooling can force an individual into pre-set manners of thinking and can encourage the assimilation towards a single viewpoint.  Niven’s quote uses science fiction to show that  we do not have to judge the way other thing or the quality of their thoughts based on how aligned they are with what we consider to be normal or standard.  The idea in the quote above shows that we can celebrate other ways of thinking without judgment.


It may be argued that those who study creative subjects such as literature or art throughout school will be more open to the idea of looking at multiple perspectives while those who study science, math, or engineering are more shut out to the possibility of multiple answers.  For me this is too simple of an explanation for differences in thought and education.  My first venture into the world of quantum physics was by reading the book, The Dancing Wu Li Masters, by Gary Zukav.  Zukav explains that the science of quantum mechanics, what happens at the sub-atomic level inside the atom of every element, is a shifting science with our interactions in the experiments we perform providing us with mixed results.  The most famous example of this is how we study light. Depending on the test we run and how we measure our tests, we can show light particles to behave as a wave or as an individual particle.  There is no right answer with identifying exactly what light is, and the problem can only be solved with creative people who do not accept a single right answer but can look for answers in new directions.  Another example of people abandoning the idea of a single right answer in science comes from the book I am currently reading, Stuff Matters, by Mark Miodownik.  In his book Miodownik dives into the world of material science and shows us how new thinking and applications of materials has changed our world in ways that are often hidden to most of us.  He explains how complex concrete is and how modern day concrete was created in part through the innovations of a gardener who simply wanted to build stronger pots.  It took the unique viewpoint of someone outside the world of material science to find an answer to concrete’s tendency to crack and crumble. Luck provided that concrete and steel have very similar coefficients of expansion, which allows for concrete to be poured around steel to give it extra tension and strength when poured in unique shapes.


If we stick to the idea that there is only one correct answer for everything, and if we assume that others think like us, then we are left in a world where we cease to innovate.  We must remember, and science fiction helps us to do so, that we do not think “better” than anyone else.  We simply all think in different ways, and combining our different ways of thinking is what builds a better world.  Science fiction today has come to celebrate unique thoughts and ideas, and there is plenty of room to expand our celebration of unique thought to areas of the world where the dominate ideas is that there is “one right answer”.