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Heuristics and Biases: The Psychology of Intuitive Judgment.
Article in Academy of Management Review · October 2004
DOI: 10.5465/AMR.2004.14497675
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Reviewed Work(s): Heuristics and Biases: The Psychology of Intuitive Judgment by
Thomas Gilovich, Dale Griffin and Daniel Kahneman
Review by: William P. Bottom
Source: The Academy of Management Review, Vol. 29, No. 4 (Oct., 2004), pp. 695-698
Published by: Academy of Management
Stable URL: https://www.jstor.org/stable/20159081
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2004 ?ooJc Reviews 695
dangers. But the topic, particularly in light of the
consensus that the full impact of the internet
will depend on political choices yet to be made,
could have had a greater presence than it does.
sions. The papers that ultimately made it
through the screening process are grouped into
three major sections. Eleven papers reflecting
New Theoretical Directions are sandwiched be
tween twenty-one papers devoted to Theoretical
and Empirical Extensions and ten devoted to
Real World Applications.
Heuristics and Biases: The Psychology o?
Intuitive Judgment edited by Thomas
Gilovich, Dale Griffin, and Daniel Kahne
man. Cambridge: Cambridge University
Press, 2002.
Reviewed by William P. Bottom, Washington Univer
sity, St. Louis, Missouri.
Individuals cope with the uncertainty and
complexity of their personal and professional
lives by using a small number of general
purpose heuristics for simplifying judgments
and making decisions. These tools work reason
ably well and save time and effort, but they also
lead to predictable errors. In Judgment Under
Uncertainty: Heuristics and Biases, published
back in 1982, Daniel Kahneman, Paul Slovic, and
Amos Tversky collected a set of papers that re
flected the growing body of research exploring
That distribution of papers is indicative of the
major emphasis and strength of the book?
basic psychological theory. Early chapters are
devoted to revisiting each of the three major
general-purpose heuristics from Judgment Un
der Uncertainty. These chapters reinforce the
relevance and importance of availability, an
choring, and representativeness but also pro
vide a very different perspective on their opera
tion and interplay. Two broad themes emerge.
The first is the recognition that judgment is ul
timately the product of the interplay between
two distinctive cognitive systems.
The "two-systems" concept elaborates on the
distinction that Tversky and Kahneman (origi
nally 1984, Chapter 1 here) drew between exten
sional reasoning based on the logic of probabil
ity and intuitive reasoning based on heuristics.
Gilovich and Griffin ("Heuristics and Biases:
Then and Now"), Kahneman and Frederick
("Representativeness Revisited"), Sloman ("Two
this simple yet powerful idea. The papers in
Systems of Reasoning"), and Stanovich and
extending, and challenging the logic of the
tuition and deliberation will be essential to
West ("Individual Differences in Reasoning") di
rectly address the evidence for this interpreta
ability, representativeness, and anchoring and tion. They also show that dual-process theories
adjustment. The book proved instrumental in of cognition that treat the individual as a cogni
tive miser are not adequate. System One output
spreading the application of behavioral deci
sion theory to diverse fields such as law, medi
is not simply switched off by raising the incen
cine, economics, and management. It also gen
tives high enough to activate System Two. Un
derstanding the dynamic interplay between in
erated an outpouring of new research probing,
Judgment Under Uncertainty address the opera
tion of three general-purpose heuristics: avail
"heuristics and biases program." In Heuristics
and Biases, Thomas Gilovich, Dale Griffin, and
Daniel Kahneman have pulled together a new
collection of papers reflecting those develop
ments.
The Nobel Prize in Economic Science awarded
better explaining and predicting judgment.
In "Representativeness Revisited," Kahneman
and Frederick reinterpret heuristics as a general
to Kahneman in 2002 is certainly one indicator of
the tremendous impact of heuristics and biases
research. The high quality of the papers in this
book is another. The still larger number of sig
judgment. This attribute substitution is the prod
uct of the associative, rapid, and parallel infor
mation processing in the intuitive System One.
Similarity judgment based on prototype match
ing?the process at work in the representative
ness heuristic?is but one such attribute substi
tution process. Like other System One output, it
nificant papers that could have been included
may actually be the best measure of all. The
editors' task must have been a challenging one,
and readers will undoubtedly have varying
opinions about particular choices and omis
process of "attribute substitution" in which a
target judgment is effortlessly and automati
cally made by substituting a simpler, natural
can sometimes be partially overridden by the
controlled, deductive, serial, self-aware, and
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696 Academy of Management Review October
rule-based System Two. Kahneman and Freder
accurate. These authors show that a simple rule,
operation.
Gilbert ("Inferential Correction") elaborates
most valid of many available cues, is a form of
problem simplification that exceeds the predic
tive performance of simple linear rules and even
ick reinterpret anchoring not as an intuitive heu
ristic but as a much more foundational cognitive
on this conclusion, tying anchoring back into the
two-systems framework. Rather than serving as
an alternative to availability or representative
ness, Gilbert sees anchoring as "the process by
which the human mind does virtually all its
inferential work" (p. 167). That is, the noncon
scious System One output forms the anchor,
which System Two may or may not subse
quently correct. The attribute substitution pro
cess generating that anchor could be availabil
ity or similarity. This new interpretation is
consistent with the review of empirical evidence
that Chapman and Johnson report on the impact
of experimentally manipulated anchors ("An
chors in Judgments of Belief and Value"), which
"points to anchors as a type of memory prompt
or prime to activate target information similar to
the anchor" (p. 133). Mental laziness is not what
creates bias from anchoring and adjustment?a
commonly held view in the past. It is the biased
search (either of memory or external sources) the
anchor directs that skews judgment.
The second major theme of the selections in
this volume is the belated recognition that intu
ition can be neither explained nor predicted
without considering the role of affect, mood, and
emotion. The papers in Judgment Under Uncer
tainty are primarily experiments on affect
neutral cognition. In "The Affect Heuristic,"
Slovic, Finucane, Peters, and MacGregor begin
to redress this oversight. They review both pre
viously neglected and new evidence indicating
that a general feeling of goodness or badness
associated with a given stimulus automatically
substitutes for such target attributes of judg
ment as attractiveness, risk, and willingness to
pay. Like availability or prototype matching,
this automatic response from the intuitive sys
tem can generate judgments that may or may
not be overridden by rule-based deliberation.
The two-systems concept also reconciles the
heuristics and biases program with other con
ceptions of rationality that appeared as cri
tiques of Judgment Under Uncertainty. As Gig
erenzer, Czerlinski, and Martignon demonstrate
("How Good Are Fast and Frugal Heuristics?"),
many rules-of-thumb for decision making are
not only simple and fast but also remarkably
such as "take the best," which uses only the
some multiple regression models. But these
rules-of-thumb and Simon's notion of satisficing
constitute System Two heuristics. These are con
scious strategies that are deliberately chosen
because of self-awareness of one's own mental
capabilities. They are not the product of auto
matic intuition, although they frequently entail
the decision maker's conscious and very clever
recruitment and manipulation of intuitive Sys
tem One output.
Two important parts of the book are less com
plete and therefore less satisfactory. In their in
troduction to the book, Gilovich and Griffin pro
vide a selected history of this field of research.
They trace the antecedents of Kahneman and
Tversky's work back as far as Meehl's empirical
studies of clinical judgment, Edward's labora
tory tests of Bayesian updating, and Simon's
theoretical work on bounded rationality. This is
certainly accurate as to recent influences. But an
accurate history of the representativeness and
availability heuristics would acknowledge the
contribution of Walter Lippmann (1922, 1927) in
redefining a term that originally referred to a
process in which "a solid plate.. .is used for
printing from instead of the forme [sic] itself"
(Oxford English Dictionary [2nd ed.]) to mean
"the pictures in our heads." The ingenious dem
onstrations of the representativeness heuristic,
such as "the Linda problem" (is Linda more
likely to be "a bank teller" or "a bank teller who
is also a feminist"?), amply confirm Lippmann's
proposition that we make judgments by noticing
"a trait which marks a well known type, and fill
in the rest of the picture by means of the stereo
types we carry about in our heads" (1922: 59).
Lippmann's work, in which he notes that "the
opportunities for manipulation open to anyone
who understands the process are plain enough"
(1922: 158), was based neither on armchair theo
rizing nor on laboratory experimentation. This
was an inductive theory-building exercise in
which the former Army information officer,
former foreign policy adviser to Woodrow Wil
son, and future adviser to Presidents Hoover,
Roosevelt, Truman, Eisenhower, Kennedy, and
Johnson described the way in which bounded
rationality, representativeness, availability,
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2004 Book Reviews 697
and egocentric bias had distorted peace negoti work demonstrated, this was never truly an is
ations with Germany and the former Ottoman sue. Practice in the field by those who "under
Empire (Bottom, 2003a). This process ultimately
stood the process well enough" was consider
generated a vindictive but unenforceable treaty,
ably ahead of theory in 1922 and arguably still
which was "not wise, which was partly impos well ahead of it today. Collecting together pa
sible, and which threatened the life of Europe"
pers on important applied problems that have
(Keynes; cited in Bottom, 2003b: 4). Lippmann's
drawn on the insights of cognitive heuristics
theory was also based on personal practice?his would have shed much needed light on the gen
earlier contribution to the propaganda cam eral social, organizational, and policy implica
paign that manufactured consent for an Ameri
tions of basic theory.
can crusade against "the Hun" in Europe.
Just before the recent scandal among profes
Were the history of these concepts better
sional accounting firms broke, Bazerman and
known, the authors might have constructed a Loewenstein (2001) used heuristics and biases to
more complete section on Real World Applica note the impossibility of truly independent au
tions. My initial interpretation of this section led dits. Roll (1986) highlighted the way in which
me to believe that the editors had compiled systematic miscalibration of probability has
some of the many important social problems
fueled the explosive growth of the market in
that have been illuminated by research on heu
mergers and acquisitions, in spite of the disap
ristics. Some of the papers in this section do fit
pointing track record of such corporate transac
that interpretation. De Bondt and Thaler use tions. Pogarsky and Babcock (2001) showed how
heuristics to predict and explain systematic
anchoring undermines the intended rationale
bias among professional security analysts. The
for policies that would cap the size of legal
scandals plaguing the industry in recent years
claims. And Kuran and Sunnstein (1999) pre
mark this paper, originally published in 1990 in
sented a series of case studies, including the
the American Economic Review, as both pre
Alar controversy, on what they call "availability
scient and of continuing relevance to policy
makers and investors. Koehler, Brenner, and entrepreneurs"?those who capitalize on the
workings of the availability heuristic to manip
Griffin provide a new and comprehensive re
ulate public discourse so they can further a
view of studies of the judgmental calibration of
given
social agenda. Lippmann, a very able
professional experts. This study should be es
availability
entrepreneur, would have recog
sential reading for those interested in under
nized
these
as
further evidence of the opportu
standing when and under what circumstances
nities
for
manipulation
open to those who un
overconfidence is likely to arise among experi
derstand how to manufacture consent.
enced professionals.
The limitations of historical context and real
However, several of the papers might have
world application aside, this new collection of
been better placed in other sections of the book.
Gilovich, Vallone, and Tversky's study of the papers should rapidly become a staple for doc
toral courses in cognitive psychology, social
misperception of streaks of consecutive made
psychology,
economics, and various profes
shots in basketball is an essential study of rep
resentativeness, which the editors could have sional fields, including management. Research
ers in those fields who are looking for an ad
included in the section Theoretical and Empiri
cal Extensions. Medvec, Madey, and Gilovich's vanced reference work on the subject will
study of regret among Olympic medallists certainly want to add this to their library. Even
would have made an excellent addition to the those who already have a number of the previ
section New Theoretical Directions. The under ously published papers will welcome having
them in one compact source. They will also wel
lying interest in grouping together these papers
come the many new and important contributions
in the concluding section appears to be in dem
to our understanding of the psychology of intu
onstrating empirically that heuristics generate
itive judgment crafted just for this volume. The
bias in a nonlaboratory context.
theory building begun by Lippmann, the work
The justification would seem to be a perceived
need to demonstrate that these biases exist in collected in Judgment Under Uncertainty, and
"the real world"?that they are not simply a lab
the contributions in this new book have begun to
oratory curiosity. As Lippmann's very grounded permit social science to catch up to practice.
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698 Academy of Management Review October
REFERENCES
Bazerman, M. H., & Loewenstein, G. 2001. Taking the bias out
of bean counting. Harvard Business Review, 79(1): 28.
Bottom, W. P. 2003a. Keynes' attack on the Versailles Treaty:
An early investigation of the consequences of bounded
rationality, framing, and cognitive illusions. Interna
tional Negotiation, 8: 367-402.
Bottom, W. P. 2003b. Smoke and mirrors: Cognitive illusions
and the origins of appeasement at the Paris Peace Con
ference. Paper presented at the International Biennale
on Negotiation, Paris.
De Bondt, W. F. M., & Thaler, R. H. 1990. Do security analysts
overreact? American Economic Review, 80(2): 52-57.
Kahneman, D., Slovic, P., & Tversky, A. 1982. Judgment under
uncertainty: Heuristics and biases. Cambridge: Cam
bridge University Press.
Kuran, T., & Sunnstein, C. R. 1999. Availability cascades and
risk regulation. Stanford Law Review, 51: 683-768.
Lippmann, W. 1922. Public opinion. New York: Macmillan.
Lippmann, W. 1927. The phantom public. New York: Mac
millan.
Pogarsky, G.# & Babcock, L. 2001. Damage caps, motivated
anchoring, and bargaining impasse. Journal of Legal
Studies, 30: 143-159.
Roll, R. 1986. The hubris hypothesis of corporate takeovers.
Journal of Business, 59: 197-216.
Tversky, A., & Kahneman, D. 1984. Extensional versus intui
tive reasoning: The conjunction fallacy in probability
judgment. Psychological Review, 91: 293-315.
Mind Your Own Business, by Sidney
Harman. New York: Random House,
2003.
Reviewed by Mustafa ?zbilgin, University of Surrey,
Guildford, United Kingdom.1
There has been a proliferation of biographies
recounting "leadership and management suc
cess" from prescriptive and "best practice" per
spectives, promising the replication of such suc
cess to their readers. Sidney Harman's Mind
Your Own Business is an autobiographical work,
which does not fit in this genre. In this text
Harman takes us through his journey of key
learning events and episodes of epiphany in
business, leadership, and life, recounting sto
ries from his multifaceted life as an entrepre
11 thank Fin?la Kerrigan for her valuable suggestions on
earlier drafts of this review.
View publication stats
neur, businessman, leader, public servant, so
cial agent, citizen, and sportsman. Harman, the
founder of a very successful international busi
ness, Harman International, which specializes
in high-fidelity audio systems, is a self
proclaimed business maverick of over sixty
years. Playing the devil's advocate, one may ask
whether this old maverick has passed his time
for learning new tricks. Harman belies the vul
gar phrase "You can't teach an old dog new
tricks," advocating just the opposite?a way of
doing business informed by both academic and
practitioner knowledge and sensemaking with
entrepreneurial spirit supported by a strong eth
ical stance. The book is a tribute to his experi
ences of venturing with values, advocating a
"new old" (p. 4) business perspective that con
siders values an essential ingredient of busi
ness conduct.
Sidney Harman narrates his experiences in an
unpretentious and accessible manner, free from
management jargon. The book will appeal to an
audience of entrepreneurs, business practitio
ners, management biographers, and business
studies academics with an interest in biograph
ical works and discourse analysis of autobio
graphical narratives. Through the successful
use of storytelling techniques, the book demon
strates that it is possible to envisage a princi
pled business life informed by human values.
The storytelling technique by which the book is
written generates vignettes providing deep un
derstanding of many issues. The vignettes in the
text are suitable for use as a point of discussion
in teaching a wide range of business manage
ment subjects. These narratives provide time
less insights into some very pertinent issues,
including the significance of enterprising and
human aspects of employment relations, mar
keting, finance, negotiation, and linkages with
social life. Reconciling entrepreneurial enthusi
asm with a genuine concern for stakeholder
welfare appears to be the main stance Sidney
Harman takes in this book, and this is, at the
same time, the main distinguishing attribute of
the book. In the age of corporate greed and scan
dals, this book, with its timely call for business
with values, is as rare as rain in a desert.
The book is based on self-reporting of lived
experience. The subjective nature of the ac
counts offered and the possibility of post hoc
rationalization in presentation of life histories
may appear, at first sight, to be the weakness of
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