The Best Business Book Ever

The best business book I’ve ever read isn’t a business book at all. But it’s helped me in countless situations. It’s made me a smarter…

The best business book I’ve ever read isn’t a business book at all. But it’s helped me in countless situations. It’s made me a smarter product person, a better recruiter, a more informed parent, and a higher quality human being.

That book is Thinking Fast and Slow by Daniel Kahneman. I read it years ago and was reminded of it recently by Teresa Torres’s Continuous Discovery Habits.

If you don’t want to read the book, you can get a good primer from the Wikipedia page. There’s a note there regarding some of the science underpinning Kahneman’s research. So let’s be careful about making life-or-death decisions without a second opinion.

My summary: Cognitive biases and other psychological phenomenon undermine our efforts to intuitively understand the world and to make decisions based on how it appears.

The book is constructed of case studies that remind us of the dozens of ways that our brains are wired for survival, not success. Here’s an example:

“We want pain to be brief and pleasure to last. But our memory… has evolved to represent the most intense moment of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end. A memory that neglects duration will not serve our preference for long pleasure and short pains.”

For leaders: People tend to remember the best or worst part of a project, or (in my experience) the last part — how it ended. So a long, tough project that ends with a feeling of triumph may be remembered positively. But the experience of working on a high-profile project that started with an optimistic tone could be undermined by a botched launch announcement.

For Product Managers, Kahneman writes extensively about “[O]ptimism bias…which may be the most pervasive of the cognitive biases.” Wikipedia describes Optimism Bias as “a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event.”

What kind of negative event? All kinds, but Kahneman devotes a bit of ink to those of us struggling to accurately estimate and plan projects. Turns out it’s not just me! In fact, Kahneman and another researcher created the term Planning Fallacy to describe this, summary again from Wikipedia:

[A] phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed. This phenomenon sometimes occurs regardless of the individual’s knowledge that past tasks of a similar nature have taken longistr to complete than generally planned.

Does that sound familiar to anybody? The author goes on to suggest several tactics for combatting the Planning Fallacy and Optimism Bias. I won’t go into this here, except to say that I think it would be really interesting to try to get a team really disciplined about Reference Class Forecasting (both for forecast estimating and for back-testing estimates) and see where it gets us.

This book is not for everybody! I was surprised to see how mixed the Amazon reviews were. I remember reading this review and telling my wife “I have never read a book that made me feel this stupid and smart at the same time!”

I hope it’s your cup of tea.