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When to be an expert is a matter of luck

The bulk of the article of Kahneman is a reflection on a study on the behavior of some consultants from an investment firm. Kahneman was invited by the firm to give a lecture, and the psychologist was proposed to know if the success in the work of the traders is based on a difference of ability (what is referred to as expertise).

To do this, Kahneman had the data on earnings reported by 25 traders anonymous for eight consecutive years. The analysis statistical of these data showed something surprising: the success of the traders was due to chance, to luck, and not to their ability as consultants.

More surprising, however, was the reaction of the managers and the traders to know about the results; it simply did not seem to take into consideration the conclusions of the study. And that is, as it says Kahneman, the illusion of skill is deeply rooted in the culture of the industry, that the facts that might threaten that assumption are simply not digested. In the words of Kahneman:

This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience.

But, why are we blind to those facts that show the weakness of our abilities? According to Kahneman, the explanation includes two factors:

In the first place, we tend to believe that the phenomena of the world are much more regular and predictable than they really are, and that’s because our memory builds constantly with explanations about what happens.

In the second place, the confidence in our judgments is not the product of a reasoned assessment about the reality, but of a feeling that has to do with the coherence of our stories and how easily available they are in our memory. And is that, as I already wrote in a previous post, our ideas about what the world is, and how it works, they tend to blind us to how actually the world works.

In this way, our future trials on the world can not be affected by a possible evidence against, even though we may believe that it is a good evidence.

Then, can we trust the claims of someone who was present as an expert in a subject? Kahneman concludes his article with two good recommendations, which I think are also applicable to examine the validity of our own judgments when we adopt the role of expert in an area:

1. How is the environment over which is made the trial sufficiently regular to enable predictions from the available evidence?: the answer will depend on what are the factors that influence the environment, and how they relate to each other.

2. Do you have the expert the opportunity to learn the regularities of the environment?: the answer will depend on the experience of the expert and how and at what speed can the expert to discover their errors of judgment.

I just the post with the final recommendation of Kahneman, a reminder of the need for critical thinking:

In general, however, you should not take assertive and confident people at their own evaluation unless you have independent reason to believe that they know what they are talking about. Unfortunately, this advice is difficult to follow: overconfident professionals sincerely believe they have expertise, act as experts and look like experts. You will have to struggle to remind yourself that they may be in the grip of an illusion.


Image of killthebird