Limit of Rationality

The other day, I wrote about the importance of thinking.

I like thinking. And I like discussing with people about what I think.

But then, some people say, "You think too much. Stop thinking and just do it."

I partly disagree with it because of the reason I explained the other day.

But partly I agree.

Why?

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When I say "I like thinking" or "It is important to think", it tacitly implies "I like thinking ratiolally and logically" or "It is important to think rationally and logically"

It seems like we live in a world where rationality and logic play important roles.

At homes, in schools and in offices, we are expected to act rationally and logically.

When we write essays in schools, we are supposed to write it logically and coherently. (I try to write this blog logically and coherently....hahaha )

In our work places, we are supposed to think logically and act accordingly.

It seems like the expression of "smart people" is a synonym of "rational and logical people".

So, why do we appreciate rationality and logic so much?

Maybe, it's because we believe that if we are rational and logical enough, we can understand the world.

Science is a representative of this thought.

However, can we really understand the world if we are rational and logical enough?

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Kahneman (2011) casted doubt on this notion from the viewpoint of psychology.

By studying the CFOs' decision making on stock investment, he revealed that the CFOs' forecast about the future price of stock market have nothing to do with the actual volatility of the stock market. He explained the cause of this as following:

when we estimate a quantity, we rely on information that comes to mind and construct a coherent story in which the estimate makes sense. Allowing for the information that does not come to mind – perhaps because one never knew it – is impossible.

(p.262)

In other words, those CFOs thought that they understood the market, analyzing only available information and making up a convenient story that they feel comfortable with. Since the amount of information is infinite and it is impossible to analyze all of it, one can never totally understand the market.

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What can we learn from this?

Kahneman's theory explains how we think.

When we think rationally and logically, first we collect information (input), then analyze it thinking rationally and logically (process) and finally come to the conclusion (output). We think that the more input we have and more correctly we process it, the more correct and perfect the output becomes.

However, as he explained, we can never collect all the information that exists in this world. We are naturally biased to only collect the information that is convenient for what we believe or what we want to believe.

Suppose that I like a girl. I want to believe that she likes me too.

When I think about wether she really likes me or not, I tend to come up with good signs (ex. She smiled me today, She said she wanted to hang out with me, etc etc...) and try to believe that she likes me. We tend to ignore bad signs.

(Dont you have similar experience guys?? Is that only me???? hahaha!!!)

Kahneman called this "What You See Is All There Is" (WYSIATI) effect.

No matter how hard we try to collect all the information and analyze it logically, we cannot get rid of this WYSIATI effect.

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Believing that we understood the world is arrogant.

Believing that we can understand the world if we become rational and logical enough is an illusion.

The world is more complex.

This is the reason why I partly agree with those who say "you think too much".

Sometimes, we should doubt our rationality and try to follow our intuition.

It is not to say that we do not have to think. Thinking is important.

It is important to keep thinking, knowing that we can never completely understand the world.