¶ … Slow The Illusion of Validity.

In this chapter, Kahneman pursues the further implications of two principles described earlier in the book. One is WYSIATI, or What You See Is All There Is: this is the tendency to tell a coherent story based on the immediate visible evidence, without consideration that there might be significant additional evidence. The second is Confidence by Coherence: in Kahneman's account, a story that feels coherent gives a person an unwarranted sense of confidence. Confidence in a judgment usually means that an individual has constructed a coherent story about available evidence, not that the story is true. And feeling confident about one's judgments creates the illusion of validity and the illusion of skill in making those judgments, even when it is contradicted by the evidence. The average stock-trader on Wall Street actually performs a worse job than if the stocks were traded randomly -- what happens is that the illusion of skill and the illusion of validity cause the trader to feel confident, even though the numerical evidence shows that the trader is not showing consistency in achievement (the mark of actual skill) rather than luck.

Chapter 21: Intuitions vs. Formulas

Studies have shown that, in various fields of prediction, experts are inferior to simple mathematical algorithms. Why? For the same reason that...

But also experts are inclined to take a nuanced view of the subject, and to allow for extraordinary possibilities which, statistically speaking, will never happen. Subjective judgments do not work as well as a simple mathematical formula in most cases.
Chapter 22: Expert Intuition: When Can We Trust It?

If the previous chapter showed that the predictive judgments of experts usually have worse results than a mathematical formula trying to make the same prediction, in this chapter Kahneman describes when experts can be trusted. In circumstances where both "Systems" ("Fast" and "Slow") of thinking get used -- the "intuition" of experts is no more than recognizing patterns that the expert has seen before. Memory of previous experience is triggered without us knowing how, especially if that previous experience had an emotional component. Intuitions are only trustworthy if they are formed in an environment that is (a) regular enough to be predictable, and (b) offers the opportunity to learn these regularities through prolonged practice. In other words, the expert has to have had an environment that is conducive to learning, and has to have actually learned. Nurses…