Nobel-prize winning economist and author Daniel Kahnemen speaks at Penn

By ray pomponio 04/11/16 1:43am

A select group of Penn students had the chance to attend a major industry conference this past week.

On Thursday and Friday, the Wharton School held its third annual People Analytics Conference at the Ritz-Carlton in Philadelphia. The first keynote guest was Nobel laureate Daniel Kahneman, who spoke on Thursday afternoon in front of a crowd of 400 including MBA students, faculty and industry practitioners.

In conversation with Dan Pink, author of “To Sell is Human,” Kahneman spoke about his experience in psychology, economics and consulting and how it relates to people analytics. According to the conference’s website, people analytics is “a data-driven approach to managing people at work.” Those using people analytics tend to bring sophisticated models to decision-making, especially as it relates to hiring, performance evaluation, compensation and leadership.

In his talk, Kahneman emphasized that data-driven models should not replace human decisions, but instead should augment them to help better inform decision makers in organizations.

The conference sought to understand why organizations make erroneous decisions, among other questions.

Those familiar with Kahneman’s work, which includes his bestselling book “Thinking, Fast and Slow,” know that much of the error in human judgment is due to cognitive biases. These biases include mistakes like anchoring, or the tendency to rely heavily on one piece of information when making decisions, such as giving too much importance to the odometer reading when buying a used car and failing to take other factors into consideration.

Kahneman said the variability of outcomes — sometimes called noise — is an additional source of error because it distracts people during the decision process.

Some companies have already made strides in reducing noise, Kahnemen noted. For example, Google uses many employees to judge a particular job candidate, a process that minimizes differences in opinions and leads to more rational decision-making.

“We’re worst at making very big decisions because we have few opportunities to practice them,” he said.

As another example, he pointed out that first-time homebuyers tend to overspend on their house and leave themselves very little to spend on furniture. This kind of flawed judgment, and discovering the proper methods to correct it, is what Kahneman’s research is all about.

Ultimately, the attendees walked away from Kahneman’s talk with a warning to avoid overconfidence and to be systematic when making decisions in the workplace.

The conference has seen success since its inception in 2014. Organized by a team of MBA students and Wharton professors Adam Grant and Cade Massey, the conference aims to provide a dialogue about incorporating people analytics into the work environment.

“We definitely want people to be talking about their experience with people analytics,” Massey said.

Aside from hosting over 20 speakers including Olympic soccer gold medalist Abby Wambach and Zappos CEO Tony Hsieh, this year’s conference provided opportunities for attendees to network outside of speaker events. The first day of the conference featured a startup exposition and an evening cocktail reception.

Conference chair and Wharton MBA student Aakash Gupta said the planning process is much longer than that of a typical event at Wharton. The student-led planning team begins contacting sponsors and keynote speakers in the summer before the school year begins.

“There’s always been a focus on getting diverse points of view,” Gupta said.

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