I just finished “Thinking, fast and slow” by Daniel Kahneman and this is one amazing book. Kahneman is famous for his work in behavioral economics, decision making, biases and heuristics.
Summary: A definite recommendation. Explore our mind, how we make choices and how we make faults. How common sense is not really common and how our mind fails us in the process.
A rather tome-like book, I was introduced to Kahneman when I started reading a blog by David McRaney called you are not so smart. He explores biases and heuristics such as anchoring, availability bias, sunk cost fallacy, and the like. These of course are bulk of Kahneman’s work thus his name appears frequently in his blog. Another common name in the blog is Richard Thaler who has an awesome book as well called Nudge who Kahneman has worked with.
Kahneman’s goal with the book, as stated in the introduction, is to open a lay man’s mind in others decisions in situations, changes in policy and other topics that are usually discussed around the water cooler. A very simple goal if you ask me, but very relevant and timely as we “know” more about our friends from social media more than anytime in the world. He aims to give us tools to discuss situations in an informed way and to know why certain decisions seem very irrational and yet people still make the mistake of doing it.
Thinking, fast and slow (TFS) is divided into five parts starting with our “two systems”. A part of the book which will be referenced several times as it is the basis on how a lot of us think and process situations. Aptly named System One and System Two, this is a simplification of our thought process. System One is our “gut”, the part of our brain that decides fast and assesses the situation with lightning speed. System Two is our “thinking self” the one that we use when we take time to process situations. When we stop and think, when we multiply 12 by 46. These two systems guide us everyday and make us do what we do. The use of these two systems for me defines a person. Impulsive versus reflective, an analyzer versus a quick doer.
The first section of the book already introduces priming. Where decisions and situations are influenced by the outside environments by priming our System One. Priming is setting up the environment or situation to influence the decision of another to our favor. Whenever you walk into a shop, observe the environment. Everything is there for a reason, which is for you to purchase something. Making it easy for you to make a decision so that you don’t need to engage your lazy System Two and letting System One take care of the rest. Several examples are in the book of which most of us can definitely relate to.
Section two of TFS talks about heuristics and biases and for me was the most interesting section. These are common misconceptions that us lazy humans make sense of in our attempt to understand the world we are living in. Sadly, these pitfalls in our human minds are so hard to detect and figure out for ourselves as we are in the middle of the situation, compared to when we are observing a third party that is falling to the “trap”. Common examples such as anchoring, having a base number over a purchase influences us that there is a discount. Availability bias that limits our decisions to what is only available to our feeble minds. One of my favorites is regression to the mean where we think that there is no where to go but up or a hot streak in basketball is really a “streak”. I really hate our dumb minds.
Section three introduces more biases as it’s named Overconfidence. Hindsight bias the act of looking back and saying “I told you so” and outcome bias are both common in the working world and I was glad to have learned it in this book. Another interesting chapter is our reliance on experts and how, if we should, evaluate experts. Feedback and experience are the two key words here.
The fourth section talks about choices. This is where bulk of Kahneman’s work really shines where he also discuss about his work that earned him the Nobel Prize for Economics. My hatred for understanding math concepts came out but I appreciated the whole section as it again shows our poor understanding of ourselves especially in making decisions. What situations make a person more risk or loss averse. When do we get more value out of our money and how we view gains and losses. How much we value our things through the “endowment effect”. Loss aversion, possibility effects and others make this section another must read (which I will actually re-read soon) as it shows how much we value things either monetary or otherwise. Another chapter of this section talks about rare events, such as getting struck by lightning and the like. How we overweigh and overestimate things. How vivid stories and images add weight to situations and “rare events”. My dabbling with statistics already gave me the tools not to overweigh things but it’s great to see it from another angle. How come we’re more afraid of shark attacks than driving even though our chances of dying to the latter is much more?
The fourth section for me had the most meat and shows how much research has Kahneman put on the topics in the section. My mind was opened with several situations presented in each of the chapters in the section. I have to admit that I fall for most of the situations in this section as my System Two for mathematical situation and analysis is very lazy. Risk and loss aversion, framing losses, disposition effect and other situations where gains and loss has to be calculated is definitely something that I have to improve on. A re-read and a better understanding will definitely allow me to take a step back and see the bigger picture of gains and losses.
The book ends with Two Selves. Our mind is very strange especially on how we see experiences and memories. How we focus on the wrong things and want others. How happiness is perceived and how we strive to achieve it. This chapter is a great end to the book as it analyzes our situation as a whole. How we humans look at ourselves and how we experience, remember and reflect on our own existence and happiness. A great end to a great book.
Thinking, fast and slow gets all praises for me as I enjoy reading books that look into the mind. The best thing about Kahneman’s book is it’s really based on research and not just chewed up and regurgitated paper like a Malcolm Gladwell book. I was a fan of him until I read Blink and realized how much that book wasted my time with his premise going round and round. I realized that he is a great writer and nothing more.
Thinking, fast and slow is an easy read and a great introduction to the world of our mind. A world full of contradictions and biases. A mind full of assumptions and what ifs. If you want to understand others and ourselves, do pick this up. Thank you Mr. Kahneman and Mr. Tversky.
PS. Wikipedia has a good collection of cognitive biases that is worth a look after reading the book. List of cognitive biases