The Art of Thinking Clearly: Better Thinking, Better Decisions

See also Expectations (ch. 62); Planning Fallacy (ch. 91); Authority Bias (ch. 9);
Hindsight Bias (ch. 14); Overconfidence Effect (ch. 15); Illusion of Control (ch. 17);
Hedonic Treadmill (ch. 46); Black Swan (ch. 75)

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41
THE DECEPTION OF SPECIFIC CASES
Conjunction Fallacy
Chris is 35. He studied social philosophy and has had an interest in developing
countries since he was a teenager. After graduation, he worked for two years with
the Red Cross in West Africa and then for three years in its Geneva headquarters,
where he rose to head of the African aid department. He then completed an MBA,
writing his thesis on corporate social responsibility. What is more likely? A) Chris
works for a major bank or B) Chris works for a major bank, where he runs its Third
World foundation. A or B?
Most people will opt for B. Unfortunately, it’s the wrong answer. Option B does
not only say that Chris works for a major bank, but also that an additional
condition has been met. Employees who work specifically within a bank’s Third
World foundation comprise a tiny subset of bankers. Therefore, option A is much
more likely. The 
conjunction fallacy
is at play when such a subset seems larger
than the entire set – which by definition cannot be the case. Nobel laureate
Daniel Kahneman and Amos Tversky have studied this extensively.
We are easy prey for the 
conjunction fallacy
because we have an innate
attraction to ‘harmonious’ or ‘plausible’ stories. The more convincingly,
impressively or vividly Chris the aid worker is portrayed, the greater the risk of
false reasoning. If I had put it a different way, you would have recognised the
extra details as overly specific: for example ‘Chris is 35. What is more likely? A)
Chris works for a bank or B) Chris works for a bank in New York, where his office
is on the twenty-fourth floor, overlooking Central Park.’
Here’s another example: What is more likely? A) ‘Seattle airport is closed.
Flights are cancelled.’ B) ‘Seattle airport is closed due to bad weather. Flights are
cancelled.’ A or B? This time, you have it: A is more likely since B implies that an
additional condition has been met, namely bad weather. It could be that a bomb
threat, accident or strike closed the airport; however, when faced with a
‘plausible’ story, we don’t stop to consider such things. Now that you are aware of
this, try it out with friends. You will see that most pick B.

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Even experts are not immune to the 
conjunction fallacy
. In 1982, at an
international conference for future research, experts – all of them academics –
were divided into two groups. To group A, Daniel Kahneman presented the
following forecast for 1983: ‘Oil consumption will decrease by 30%.’ Group B
heard that: ‘A dramatic rise in oil prices will lead to a 30% reduction in oil
consumption.’ Both groups had to indicate how likely they considered the
scenarios. The result was clear: group B felt much more strongly about its
forecast than group A did.
Kahneman believes that two types of thinking exist. The first kind is intuitive,
automatic and direct. The second is conscious, rational, slow, laborious and
logical. Unfortunately, intuitive thinking draws conclusions long before the
conscious mind does. For example, I experienced this after the 9/11 attacks on
the World Trade Center. I wanted to take out travel insurance and came across a
firm that offered special ‘terrorism cover’. Although other policies protected
against all possible incidents (including terrorism), I automatically fell for the offer.
The high point of the whole farce was that I was willing to pay even more for this
enticing yet redundant add-on.
In conclusion: forget about left brains and right brains. The difference between
intuitive and conscious thinking is much more significant. With important
decisions, remember that, at the intuitive level, we have a soft spot for plausible
stories. Therefore, be on the lookout for convenient details and happy endings.
Remember: if an additional condition has to be met, no matter how plausible it
sounds, it will become less, not more, likely.