Because we tend to reward others when they do well and punish them when they do badly, and because there is regression to the mean, it is part of the human condition that we are statistically punished for rewarding others and rewarded for punishing them.
Read the post for the IDF pilot training story that inspired this. The quotation is from Kahneman´s autobiography on the Nobel site. For a heavier-duty synthesis of his life´s work on cognitive bias, see his 2002 Nobel lecture .
Kahneman and his colleague Amos Tversky (who died before he could be Nobelized with him) have put Francis Bacon´s insight about the inbuilt biases in human understanding – ¨idols of the mind¨ in Bacon´s language – on a rigorous scientific basis. A pity that it took 350 years for anyone to follow up Bacon´s warnings and not just his scientific triumphalism. We would have been spared a lot of persuasive nonsense based on perfect rationality – an idol of the tribe (a misleading short cut) that became an idol of the theatre (a scholastic dogma).
The only rationality we can ever have is bounded.