The Invisible Gorilla: And Other Ways Our Intuitions Deceive Us (44 page)

26.
R. Lowenstein, “Triple-A Failure,”
The New York Times Magazine
, April 27, 2008 (
www.nytimes.com/2008/04/27/magazine/27Credit-t.html
). Similar problems beset so-called “quant” funds, which were hedge funds that made trading decisions entirely or mostly based on the predictions of computer models that were calibrated with historical data that didn’t include market conditions like the increasingly risky environment of 2007. See H. Sender and K. Kelly, “Blind to Trend, ‘Quant’ Funds Pay Heavy Price,”
The Wall Street Journal
, August 9, 2007.

27.
R. H. Thaler, A. Tversky, D. Kahneman, and A. Schwartz, “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test,”
Quarterly Journal of Economics
112 (1997): 647–661.

28.
Interestingly, the most active traders also tended to have smaller portfolios at the beginning of the study than did the least active ones; obviously this difference would tend to magnify over time since their net returns would be lower as well. See B. Barber and T. Odean, “Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors,”
Journal of Finance
55 (2000): 773–806. Men, especially single men, also trade much more frequently than women, and earn correspondingly lower returns on their investments. See also B. Barber and T. Odean, “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment,”
Quarterly Journal of Economics
116 (2001): 261–292.

29.
Unless you are a coin collector, you don’t know enough to distinguish a counterfeit penny from a real one. Even coin collectors might fail to recognize subtle changes unless they’re actively looking for them. As a child, Dan collected coins, and he did spot one obvious fake. He was at a coin show, and a vendor was selling a really old coin that he claimed was from ancient Greece. The coin was well worn, with few details still visible. It certainly looked like it could be more than two thousand years old, and the figure on the front looked like a Greek hero. Dan didn’t buy it, though—it had a date of “300BC” partially visible below the figure! (Some counterfeiters apparently are not terribly bright.)

30.
The idea that the mind works like a Web browser comes from R. A. Rensink, “The Dynamic Representation of Scenes,”
Visual Cognition
7 (2000): 17–42. In philosophy and psychology, metaphors for the workings of the mind often draw on the latest and greatest in technology. Early models of the mind appealed to the notions of hydraulics, with the flows of fluids causing different thoughts and actions. Such models were gradually replaced by the notion of the mind as a mechanical device, with metaphorical gears. In the 1960s, the dominant model of the mind was as an information-processing device. Essentially, the mind was treated as a powerful computer. The computer metaphor continues to hold sway in psychology, with some adjustments corresponding to further changes in technology: an emphasis on the parallel nature of processing, off-loading of some types of processing to specialized modules (just as computer graphics are often handled by a special chip set), and so on. For an interesting discussion of the effects of technological developments on the nature of scientific theories, see G. Gigerenzer, “From Tools to Theories: A Heuristic of Discovery in Cognitive Psychology,”
Psychological Review
98 (1991): 254–267.

31.
B. Popken, “Do Coat Hangers Sound as Good as Monster Cables?”
The Consumerist
blog, March 3, 2008,
consumerist.com/362926/do-coat-hangers-sound-as-good-monster-cables
(accessed June 29, 2009).

32.
If you want some snarky entertainment, read the user reviews of the Denon cable at Amazon.com. Just search the site for “Denon Ethernet cable.” As of August 2009, one Amazon user was even offering one of these cables “used” for sale at $2,500!

33.
D. S. Weisberg, F. C. Keil, J. Goodstein, E. Rawson, and J. R. Gray, “The Seductive Allure of Neuroscience Explanations,”
Journal of Cognitive Neuroscience
20 (2008): 470–477. The “curse of knowledge” described in the example we gave from this experiment has implications for the illusion of knowledge. If we assume that other people know what we know, and we think we know more than we do, then we must think other people know more than they do as well!

34.
These results are from Experiment 1 of D. P. McCabe and A. D. Castel, “Seeing Is Believing: The Effect of Brain Images on Judgments of Scientific Reasoning,”
Cognition
107 (2008): 343–352.

35.
The Allstate ad is on the company’s website,
www.allstate.com/content/refresh-attachments/Brain-Ad.pdf
(accessed November 15, 2009).

36.
Agricultural facts taken from Wikipedia,
en.wikipedia.org/wiki/Illinois
(accessed February 27, 2009).

37.
Details about Illinois weather forecasting and WILL are from an interview with Ed Kieser conducted by Dan on February 27, 2009.

38.
P. Hughes, “The Great Leap Forward: On the 125th Anniversary of the Weather Service, A Look at the Invention That Got It Started,”
Weatherwise
47, no. 5 (1994): 22–27.

39.
J. P. Charba and W. H. Klein, “Skill in Precipitation Forecasting in the National Weather Service,”
Bulletin of the American Meteorological Society
61 (1980): 1546–1555. There has been much discussion of “chaos” in physical systems like the earth’s climate, and the now-clichéd idea that a butterfly can flap its wings on one side of the world and influence the weather weeks later on the opposite side of the world. None of this makes it impossible to predict whether it will rain tomorrow.

40.
This demonstration was suggested by one of Dan’s teaching assistants, Richard Yao, who experienced it in a class as an undergraduate at Northwestern University.

41.
R. A. Price and S. G. Vandenberg, “Matching for Physical Attractiveness in Married Couples,”
Personality and Social Psychology Bulletin
5 (1979): 398–400.

42.
The meteorologist preference question was asked of the 72 chess players in Philadelphia who participated in the study of overconfidence in chess ability that we discussed in Chapter 3. The question was first used in G. Keren, “On the Calibration of Probability Judgments: Some Critical Comments and Alternative Perspectives,”
Journal of Behavioral Decision Making
10 (1997): 269–278. See also G. Keren and K. H. Teigen, “Why Is
p
= .90 Better Than
p
= .70? Preference for Definitive Predictions by Lay Consumers of Probability Judgments,”
Psychonomic Bulletin and Review
8 (2001): 191–202. The popular preference for certainty in weather reports was noted anecdotally over a century ago. When William Ernest Cooke introduced estimates of uncertainty to weather forecasting in 1906, he predicted that the public would prefer his new method, but immediately below his first article, a note by one Professor E. B. Garriott appeared, giving no fewer
than five specific arguments why Cooke’s “scheme” was impractical, concluding with “because our public insist upon having our forecasts expressed concisely and in unequivocal terms.” W. E. Cooke, “Forecasts and Verifications in Western Australia,”
Monthly Weather Review
34 (1906): 23–24.

43.
P. E. Tetlock,
Expert Political Judgment: How Good Is It? How Can We Know?
(Princeton, NJ: Princeton University Press, 2005). In weather forecasting, meteorologists understand the need to show that over time their methods outperform a simple model that assumes that tomorrow’s weather will be the same as today’s weather. And they are easily able to make enough verifiable predictions to show that they can beat such models. People in many other disciplines lack that ready source of feedback and they often do not check whether their models can outperform such simple heuristics. Even when they do have access to such data (e.g., public financial data can be used to determine whether a money manager’s method of actively picking stocks outperforms the returns of a passive index fund), they often do not bother to check. If they did, perhaps they would not express quite as much confidence as they do.

44.
We thank our editor, Rick Horgan, for suggesting these two examples.

45.
Citation for Herbert Simon from Nobel Prize website (
nobelprize.org/nobel_prizes/economics/laureates/1978/index.html
).

46.
In August 2009, Amaranth agreed to a settlement with the U.S. government over the charges, but Brian Hunter did not. As of earlier that year, he was an adviser to Peak Ridge Capital Group, where his “Commodity Volatility Fund” was up 138 percent in its first six months. “To have lost that amount of money and get back into the market with a similar-type trade takes a lot of confidence, if not arrogance,” said one industry analyst. See S. Kishan, “Ex-Amaranth Trader Hunter Helps Deliver 17% Gain for Peak Ridge,” Bloomberg.com, May 19, 2009 (
www.bloomberg.com/apps/news?pid=20601087&sid=aUlBVaEHAk04&refer=home
); “Ex-Amaranth Trader Makes Good, Possibly,” the
New York Times
DealBook blog, April 11, 2008 (
dealbook.blogs.nytimes.com/2008/04/11/ex-amaranth-trader-makes-good-possibly/
); A. Davis, “Amaranth Case Shows Trading’s Dark Side,”
The Wall Street Journal
, July 26, 2007, p. C3; C. Kahn, “Federal Judge Orders Amaranth Advisors to Pay $7.5M for Price Manipulation,” Associated Press, August 12, 2009 (ca.news.finance.yahoo.com/s/12082009/2/biz-finance-federal-judge-orders-amaranth-advisors-pay-7–5m.html); J. Strasburg, “A De cade Later, Meriwether Must Scramble Again,”
The Wall Street Journal
, March 27, 2008, p. C1 (online. wsj.com/article/SB120658664128767911.html); and G. Zuckerman and C. Karmin, “Rebounds by Hedge-Fund Stars Prove ‘It’s a Mulligan Industry,’”
The Wall Street Journal
, May 12, 2008, p. C1 (online.wsj.com/article/SB121055428158584071.html).

1.
Details from this case and the subsequent outbreak of measles in Indiana were taken from the CDC report “Import-Associated Measles Outbreak—Indiana, May–June 2005,”
Morbidity and Mortality Weekly Report
(MMWR) 54 (October 27, 2005): 10731075. Other details came from A. A. Parker, W. Staggs, G. H. Dayan, I. R. Ortega-Sánchez, P. A. Rota, L. Lowe, P. Boardman, R. Teclaw, C. Graves, and C. W. LeBaron, “Implications of a 2005 Measles Outbreak in Indiana for Sustained Elimination of Measles
in the United States,”
New England Journal of Medicine
355 (2006): 447–455. Other information about measles discussed in this section comes from the preceding sources as well as the following additional sources: World Health Organization Measles Fact Sheet,
www.who.int/mediacentre/factsheets/fs286/en/
(accessed March 24, 2009); CDC report “Outbreak of Measles—San Diego, California, January–February 2008,”
Morbidity and Mortality Weekly Report
(MMWR) 57 (February 22, 2008): 203–206; “Confirmed Measles Cases in England and Wales: An Update to End–May 2008,” 2008, Health Protection Report 2, no. 25 (2008); S. B. Omar, W. K. Y. Pan, N. A. Halsey, L. H. Moulton, A. M. Navar, M. Pierce, and D. A. Salmon, “Nonmedical Exemptions to School Immunization Requirements: Secular Trends and Association of State Policies with Pertussis Incidence,”
Journal of the American Medical Association
296 (2006): 1757–1763; CDC report “Measles—United States, January 1–April 25, 2008,”
Morbidity and Mortality Weekly Report
(MMWR) 57 (May 1, 2008): 494–498; CDC report “Update: Measles—United States, January–July 2008,”
Morbidity and Mortality Weekly Report
(MMWR) 57 (May 1, 2008): 893–896. Information about the measles outbreak in Romania from: Associated Press, “Measles Outbreak Sickens 4000 in Romania,” December 5, 2005. After we wrote this chapter, an excellent article reporting on this case and its implications was published in
Wired:
A. Wallace, “An Epidemic of Fear: How Panicked Parents Skipping Shots Endangers Us All,”
Wired
, November 2009,
www.wired.com/magazine/2009/10/ff_waronscience/
.

2.
In Romania, more than four thousand people contracted measles and ten people died during the outbreak that was the source of the missionary girl’s infection.

3.
Evidence that people can recognize their friends by their gait alone comes from J. E. Cutting and L. T. Kozlowski, “Recognizing Friends by Their Walk: Gait Perception Without Familiarity Cues,”
Bulletin of the Psychonomic Society
9 (1977): 353–356. Evidence that people can judge teachers from a brief glimpse comes from N. Ambady and R. Rosenthal, “Half a Minute: Predicting Teacher Evaluations from Thin Slices of Nonverbal Behavior and Physical Attractiveness,”
Journal of Personality and Social Psychology
64 (1993): 431–441.

4.
Examples of pareidolia discussed in this section come from the following sources: Associated Press, “‘Virgin Mary Grilled Cheese’ Sells for $28,000,” November 23, 2004 (
www.msnbc.msn.com/id/6511148/
); “Jesus Seen in Cheese Snack,” CNN.com, May 18, 2009 (
www.cnn.com/video/#/video/living/2009/05/18/pkg.tx.cheese.snack.jesus.KTXA
); “Message from Allah ‘in Tomato,’” BBC News, September 9, 1999 (
news.bbc.co.uk/2/hi/uk_news/443173.stm
). Other religious pareidolia examples are summarized by Wikipedia,
en.wikipedia.org/wiki/Perceptions_of_religious_imagery_in_natural_phenomena
(accessed May 28, 2009).

5.
This experiment is reported in N. Hadjikhani, K. Kveraga, P. Naik, and S. Ahlfors, “Early (M170) Activation of Face-Specific Cortex by Face-like Objects,”
Neuroreport
20 (2009): 403–407. The researchers showed their subjects pictures from an entertaining book that contains nothing but “found” images of faces in other common objects: F. Robert and J. Robert,
Faces
(San Francisco: Chronicle Books, 2000).