Book summary Thinking fast and slow by Daniel kahneman

 

Thinking fast and slow is a best-selling book on behavioral science and economics by Nobel laureate, Daniel Kahneman, whose work on the economy led to the Nobel memorial prize in Economic sciences. Kahneman also worked with Israel defense forces and several departments and collaborators, which have contributed to his research. The book summarizes research that Kahneman conducted over decades, often in collaboration with Amos Tversky.

 

The main thesis of the book is a dichotomy between two models of thoughts i.e "system 1" which is fast, automatic, unconscious, instinctive and emotional, "System 2" which is slower, deliberative, conscious, calculating and logical. System 1 continuously generates suggestions for a system 2: impressions, intuitions, intentions, and feelings. If endorsed by System 2, impressions and intuitions turn into beliefs, and impulses turn into voluntary actions. Usually, system 2 adopts system 1's suggestion with little or no modification, and you generally believe your impressions and act on your desires. System 2 does the continuous monitoring of your own behavior. The control that keeps you polite when you are angry or alert when driving at night. System 2's task is to overcome the impulses of System 1 and it is in charge of self-control.

 

Kahneman introduced the concept "What You See Is All There Is"(WYSIATI). This theory states that when the mind makes decisions, it deals primarily with Known Known’s, phenomena it has observed already. It rarely considers Known Unknowns, phenomena that it knows to be relevant but about which it does not have information.

 

System 1 is generally very good at what it does; it's model of familiar situation are accurate, it's short-term predictions are usually also accurate and its initial challenges are swift and generally appropriate. System 1 has biases, however, systematic errors that it is prone to make in specified circumstances. It answers easier questions than the one is asked, and it has little understanding of logic and statistics.

 For examples:

     Complete the phrase "war and ..."

     Solve 2+2=?

     Display disgust when seeing a gruesome image

     Understand simple sentences

 

Whereas, system two is better at:

     Prepare yourself for the start of a sprint

     Direct your attention towards someone at a loud party

     Park into a tight parking space

     Solve 17 × 24

 

kahneman explains different cognitive biases and heuristics with number of experiments.

Basic introductions to some of my favorites from all chapters are anchoring effect, availability heuristic, optimistic bias, and regress to the mean.

 

Anchoring effect

if provided with greater/lesser numbers, participants gave greater/lesser responses. when asked whether Gandhi was more than 114 years old when he died, most participant provided a much greater estimate of his age at death than others who were asked whether Gandhi was more or less than 35 years old. Experiments show that people's behaviour is influenced, much more than they are aware, by irrelevant information.

 

Availability heuristic

The availability heuristic is based on the notion that, "if you can remember it, it must be important." Because of the coincidence of two planes crashing last month, she now prefers to take the train. That’s silly. The risk hasn't really changed; it is an availability bias. The easier it is to recall the consequences of something, the greater we perceive these consequences to be. Sometimes, this heuristic is beneficial, but the frequencies at which events come to mind are usually not accurate representations of the probabilities of such events in real life.

 

Optimistic bias

Optimism is sometimes beneficial, and sometimes be damaging, Kahneman writes it as, "the most significant of the cognitive biases." it generates the illusion of control: the illusion that we have substantial control of our lives. The planning fallacy is one of the optimistic biases to overestimate benefits and underestimate costs, impelling people to begin risky projects.

 

Regression to the mean

Regression to the mean is a common statistical phenomenon that can mislead us when we observe the world. If a golfer did extraordinarily, he will do average the next day. if a company is extraordinarily successful, it might do average next year. Kahneman advises to regress to the mean and look for base rates

 

I encourage you to read the book and his works which I didn't include here such as prospect theory, the notable work of Kahneman and Tversky, on which he landed Nobel prize.

 

Kahneman shows how we always try to make sense of the world around us. The coherent world is much simpler, and a lot less messy than it really is. 

The book is full of fun experiments and questions such as A bat and a ball cost $1.10. The bat costs 1 dollar more than the balls, how much does the ball costs? making the readers giggle and engage their system 2.

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