Thinking Fast and Slow by Daniel Kahneman, a book that summarizes decades of research that won him the Nobel Prize, explaining his contributions to our modern thinking about psychology and behavioral economics . Over the years, Kahneman and his colleagues have made major contributions to a new understanding of the human mind. We now have a deeper understanding of how people make decisions, why certain judgment mistakes are so common, and how to better ourselves.
Who is the author of this book?
Dr. Daniel Kahneman won the Nobel Prize in Economics in 2002. He is a veteran Woodrow Wilson School Scholar of Public Affairs and International Affairs, Emeritus Professor of Psychology and Public Affairs at the Woodrow Wilson School, Professor Emeritus Eugene Higgins in Psychology at Princeton University, and scholar of the Center for Reason at the Hebrew University of Jerusalem.
Who should read this book?
- Anyone interested in how the mind works, how people solve problems, make judgments, and the weak points that our minds are prone to.
- Anyone interested in the contributions of Nobel laureate Daniel Kahneman to psychology and behavioral economics, and their application to society.
1: About two minds: our behavior is controlled by two different systems – one automatic and the other deliberate
There's a fascinating play going on in our minds, a movie-like story between two characters with lots of twists, drama, and contradictions. Two characters include System 1 – instinctive, automatic and emotional; and System 2 – mature, slow, and calculated. When confronted, their interactions determine how we think, make judgments, decide, and act.
System 1 is the part of the brain that acts intuitively and suddenly, often without conscious control. You can experience this system in action when you hear a very loud and sudden sound. What you will do? You can immediately and automatically redirect your attention to it. It's System 1.
This system is the legacy of millions of years of evolution: the vital advantages lie in the ability to make quick decisions and judgments.
System 2 is what we mean when we imagine the part of the brain responsible for an individual's decision-making, reasoning, and beliefs. It controls conscious activities of the mind such as self-control, choice, and intentional focus.
For example, imagine you are looking for a girl in the crowd. Your mind will deliberately focus on the task: it remembers the person's features or whatever helps determine her coordinates. This ability eliminates distractions, helping you to ignore irrelevant subjects. If you maintain this deliberate focus, you can spot her in a few minutes, whereas if you are distracted you will have a hard time finding her. As you will see in the next section, the relationship between these two systems determines how we behave.
2: The system is lazy: inertia can lead to mistakes and affect intelligence
To see how the two systems work, try solving the following famous stick-and-ball problem:
A bat and ball costs $1.10. The bat is $1 more expensive than the ball. So how much does the ball cost?
The price that comes to mind, $0.10 is the result of 1 emotional and automated system, and it's working! Take a few seconds and try to solve this problem.
Do you see your error? The correct answer is $0.05.
What just happened is your impulsive System 1 takes over and automatically responds by relying on gut feelings. But it responds too fast.
Normally, when faced with an unclear situation, System 1 would call System 2 to solve the problem, but in the bat and ball problem, System 1 was fooled. It looks at the problem too simple, and mistakenly believes it can be mastered.
The stick-and-ball problem exposes our instinct for lazy mental labor. When the brain is active, we usually use only the minimum amount of energy that is sufficient for that task. This is also known as the law of least effort. Because reviewing answers with System 2 uses more energy, the mind won't do so when it thinks just using System 1 is enough.
Laziness is harmful because the practice of System 2 is such an important part of human intelligence. Research shows that doing System 2 work requires focus and self-control, making us smarter. The stick-and-ball problem illustrates this, because our minds could have double-checked our answers using System 2 and thus avoid the common error.
If we are lazy and lazy to use System 2, our mind will limit its intelligent power.
3: Autopilot: why we don't always consciously control our thoughts and actions.
What comes to mind when you see the letters “SO_P” ? Maybe nothing. But what if you see the word “EAT” first? Now, when you look at the word “SO_P” again, you should be able to complete it as “SOUP.” This process is also known as priming .
We are baited when we come across a word, concept, or event that reminds us of related words and concepts. If you looked at the word “SHOWER” instead of the word “EAT” above, you would probably picture the word “SOAP”.
This dropping phenomenon affects not only the way we think but also the way we act. Just as your mind is affected when it hears certain words and concepts, so can your body. A prime example of this phenomenon can be found in a study in which participants were baited by words associated with old age, such as “Florida” and “wrinkles”, whose responses slowed down. than usual.
Surprisingly, we are completely unaware that our thoughts and actions are affected by the release of bait.
So baiting shows that, contrary to popular belief, we can't always consciously control our actions, judgments and choices. Instead we are always guided by certain social and cultural conditions.
For example, research done by Kathleen Vohs proves that just thinking about money makes people live more personally. People who are preyed on by the concept of money – for example, by looking at pictures of money – act independently and are less willing to get involved, depend on, or accept requests from others. One implication from Vohns' research is that living in a society filled with monetary stimuli might make people more selfish.
Baiting, like other social factors, can influence an individual's thoughts and therefore choices, judgments, and behaviors – and they are reflected back into culture and influence social patterns. that we live in.
4: Quick judgment: How quickly the mind makes choices, even when it doesn't yet have enough information to make a rational decision.
Imagine you meet someone named Ben at a party and find him very approachable. Then when someone asks if you know anyone who wants to donate to charity. You think of Ben, even though the only thing you know about him is how friendly he is.
In other words, you like one part of Ben's personality, and so you think you like everything else about him. We often love or hate a person even though we know very little about them.
The mind's tendency to simplify things without enough information often leads to judgmental errors. This phenomenon is called exaggerated emotional consistency, also known as the halo effect : a positive feeling about Ben's closeness causes you to place an aura on Ben, including when you don't understand what he is.
But this is not the only way our minds take shortcuts when making judgments.
People also have confirmation bias , the tendency to agree with information that supports their previous beliefs, as well as to accept whatever fits it.
We can observe this phenomenon when we ask, "Is James friendly?". Studies show that, when faced with this kind of question with no other information, it's easy to see James as a friendly person - because the mind automatically agrees with the suggested idea.
The halo effect and confirmation bias happen at the same time because our minds rush to make quick judgments. But this often leads to mistakes, because we don't always have enough data to make an accurate judgment. Our minds rely on fallible suggestions and over-simplify things to fill gaps in the data, leading us to potentially erroneous conclusions.
Like dropping bait, these cognitive phenomena can occur completely unconsciously and influence our choices, judgments, and actions.
5: Reflection: How quickly the mind uses shortcuts to make decisions
We often find ourselves in situations where we have to make quick judgments. To do this, our minds have developed little shortcuts to help us instantly make sense of our surroundings. These are called heuristics .
For the most part, these processes are very useful, but the problem is that our minds often overuse them. Applying these rules in inappropriate situations can lead to mistakes. To better understand what heuristics are and the errors that follow, we can consider two types: the substitution heuristic and the availability heuristic .
Alternative heuristics occurs when we answer an easier question than the one actually asked.
For example, try this question: “A woman is running for sheriff. How successful will she be in that ministry?” We automatically replace the question we should have answered with an easier one, like, “Does she look like someone who would make a good sheriff?” This experimentation means that instead of researching a candidate's profile and policies, we are simply asking ourselves the much easier question of whether this woman fits our mental image of a candidate. good sheriff or not.
Unfortunately, if she doesn't fit that mental image, we'll throw her out – even though she has years of crime fighting experience, which makes her a good candidate.
Next comes the built-in heuristics , which is when you think something is more likely to happen just because you hear about it more often, or find it easier to remember. For example, strokes cause more deaths than traffic accidents, but one study found that 80% of respondents thought more people died from traffic accidents.
That's because we hear more about these deaths in the media, and because they leave a deeper impression; We remember deaths from a horrible accident more easily than from a stroke, and so we are more likely to react inappropriately to these dangers.
6: Hate numbers: Why we struggle to understand statistics and make avoidable mistakes just because of it.
How can you predict this will happen or not?
One effective way is to remember the base rate . It refers to the base rate in the statistic, on which the other statistics depend. For example, imagine a large taxi company has 20% yellow cars and 80% red cars. That is, the base rate for yellow taxis is 20% and for red cars is 80%. If you call a car and want to guess its color, remember the base scale and you will make a relatively accurate prediction.
So one should always keep the base rate in mind when predicting an event, but unfortunately this is not usually the case. In fact, forgetting about the base rate is extremely common.
One of the reasons we forget about our base rate is that we focus on what we expect rather than what is most likely to happen. For example, imagine the taxis above: If you see five red cars passing by, you may begin to feel the high probability that the next one will be red. But no matter how many cars of any color pass, the probability that the next car is red is still about 80% – and if we remember the base rate, we will realize this. But instead, we often focus on what we expect to see, a yellow car, and so it's easy to make mistakes.
Neglecting the base rate is a common error related to human problems when dealing with data. We often forget that everything will regress to the average . It means admitting that all situations have a mean, and that fluctuations from the mean will eventually return to equilibrium.
For example, if a football striker who scores 5 goals a month on average, scores 10 goals in September, her coach will be delighted, but if the rest of the year she only scores 5 goals 1 month, the coach would criticize her for not keeping her form. However, she does not deserve to be criticized because she is just regressing to the mean!
7: Past Evil: Why we remember events from hindsight and not from experience.
Our minds don't record experiences in a straight line. We have two machines that record different situations.
The first is the experiential self , recording how you feel in the present. It asks, “How am I feeling right now?”
Second, is the flashback being , which records the entire event that happened. It asks, “How do I feel in general?”
The experiencing self is a more accurate description of what happened, because how we feel at that moment is the most accurate. But the flashback ontology is not as accurate because it records only some of the salient memories after the event is over.
There are two reasons why memory dominates experience. The first cause is called duration neglect , where we forget the whole course of an event to remember a small part of it. That's because of the peak-end rule , where we often overemphasize what happens at the end of an event.
For visualization, consider an experiment that recorded people's memories of a painful colonoscopy. Before the endoscopy, people were divided into two groups: one group had a very long colonoscopy, while the other group had a faster endoscopy, but the pain gradually increased at the end.
You would think the most uncomfortable patients were those who had a longer colonoscopy, because they had to endure the pain longer. That's exactly how they felt at the time. During an endoscopy, when asked about pain, the experience self will give the correct answer: whoever has to have the colonoscopy longer will feel worse. However, in the end, when the flashback self took over, those who had a quick colonoscopy with a more painful ending felt the worst. This survey provides a clear example of the effects of ignoring time and the law of peaks and troughs , and our inaccurate memories.
8: Willpower: how regulating the focus of the mind can have a dramatic effect on our thoughts and behavior
Our minds use different levels of energy depending on the type of work. When there is no need to call for attention and little energy, we are in a state of cognitive ease .
However, when attention is needed, the mind uses more energy and enters a cognitive strain.
These changes in the brain's energy levels have a dramatic effect on the way we act. When the mind is at ease, the emotional System 1 dominates the mind, and the logical and energy-intensive System 2 weakens. This means we'll be more intuitive, creative, and happy to make decisions, but we're also more likely to make mistakes.
When our minds are tense, our awareness is heightened, and System 2 takes over. System 2 tends to double-check our judgments than System 1, so even though we may be less creative, we will make fewer mistakes. You can deliberately influence the amount of energy the mind uses to choose which system to master for each task. For example, if you want your message to be more persuasive, try switching to a relaxed state of mind.
One way to do this is to be exposed to repetitive information over and over again. If information is repeated to us, or easier to remember, it becomes more persuasive. That's because the mind has changed to respond more positively when exposed to the same message over and over again. When we see something that is familiar to us, we enter a relaxed state of mind.
On the other hand, a stressed mind will help us succeed in jobs involving numbers. We can move into this state by being exposed to information that is presented in a confusing way, for example in a difficult-to-read font. Then the mind will have to pay more attention and increase energy levels to understand the problem, and so we are less likely to give up.
9: Take a risk: how probabilities are presented affects how we assess risk
The way we evaluate ideas and approach problems is heavily influenced by how they are presented. Changing just one small detail or emphasizing a statement or question can dramatically change our response.
A good example can be found in the way we assess risk:
You might think that once we could determine the probability of a risk, everyone would approach it the same way. However, that is not the case. Even with carefully calculated possibilities, simply changing the wording of a number can change the way we approach it.
For example, people will find a rare event more likely to happen than it is expressed in terms of relative frequency rather than statistical probability.
In an example also known as the Mr. Experiment. Jones, two groups of psychiatrists were consulted about whether it was safe to release Mr. Jones from a psychiatric hospital at this time. One group was told that patients like Mr Jones had a “10% chance of assaulting others,” and a second group was told that “out of 100 patients like Mr Jones, 10 are likely to commit violence.” As a result, group 2 had twice as many people refusing to release people as group 1.
Our focus is also distracted from statistically relevant information, known as denominator neglect . This happens when we ignore obvious statistics in favor of vivid mental images that can influence our decisions.
For example the following two sentences: “This drug will protect children from disease X but has 0.001% permanent disfigurement” with “1 in 100,000 children taking this medicine will be permanently disfigured.” Even though the meaning of the two sentences is the same, the latter conjures up the image of a deformed baby and has a greater impact, and that is why it makes us hesitate to take this drug.
10: Not Robots: Why Humans Don't Make Decisions Based on Reasoning
How do individuals make choices?
A group of influential economists have long argued that people make decisions based on rational reasoning. They argue that everyone chooses according to utility theory, asserting that when individuals make decisions, they only look at rational data and choose the option with the greatest total utility.
For example, utility theory would make the following sentence: if you prefer oranges to kiwis, you would choose a 10% chance of getting oranges over a 10% chance of getting kiwis.
Obviously isn't it?
The most influential group of economists in the field is concentrated at the Chicago School of Economics, and their most famous scholar is Milton Friedman. Using utility theory, the Chicago School held that individuals in the market were super-rational decision makers, what the economist Richard Thaler and lawyer Cass Sunstein would later call Econs. . With the Merchant, each individual behaves exactly the same, valuing goods and services based on their rational needs. Moreover, economic people also evaluate their assets rationally, only interested in the benefit it brings them.
So imagine two people, John and Jenny, both have a combined net worth of $5 million. According to utility theory, since they have the same amount of money, they will be equally happy.
But what if we complicate matters a little more? Let's say the $5 million fortune is the result of a day of gambling, and the two have different starting points: John initially has only $1 million and ends up getting 5 times as much, whereas Jenny starts with 9 million dollars and the loss is only 5 million dollars.
Do you still think John and Jenny are equally happy with $5 million? Obviously, we judge things by more than mere utility .
As we will see in the next section, because people do not view utility as rationally as utility theory asserts, we can make strange and irrational decisions.
11: Intuition: why instead of making decisions based on rational considerations, we are often swayed by emotional factors.
If utility theory is false, which theory is correct?
Another alternative is prospect theory , developed by the author himself
Kahneman's prospect theory challenges utility theory by showing that when we make choices, we don't always act in the most rational way.
Imagine two scenarios: In case 1, you are given $1000 and have to choose between: 100% get $500 or bet 50/50 to win another $1000. In case 2 you are given $2000 and have to choose between : 100% lose $500 or bet 50/50 lose $1000.
If we were to decide only rationally, you would make the same choice in both cases. But that's not the case. In the first example, most people would take the safe bet of $500, but in case 2, most people risk it.
Prospect theory helps to explain why there is a difference. It highlights at least two reasons why we don't act rationally. Both refer to our fear of loss – in fact, we are more afraid of losing than of receiving a profit.
The first reason is that we value things based on reference points . Starting at $1000 or $2000 in either scenario changes our ability to gamble, because the starting point affects how we value our positions. The reference point in case 1 is $1000 and $2000 in case 2, meaning if there is $1500 left, it is a profit on TH1 but a loss in TH2. Even with obvious illogical reasoning (because you have $1500 anyway), we understand value through the starting point as well as the objective value at that point.
Second, we are influenced by the diminishing sensitivity principle : our perceived value may differ from what it is. For example, losing money from $1000 to $900 doesn't feel as bad as losing money from $200 to $100, regardless of the amount lost. Similarly in our example, the value of the perceived loss when losing money from $1500 to $1000 will be greater than the loss from $2000 to $1500.
12: False images: why psychology builds a complete picture to explain the world, but they often lead to overconfidence and falsehoods.
To understand situations, our minds use cognitive coherence ; We construct complete mental images to explain ideas and concepts. For example, we have a lot of images in the brain about the weather. If we have a picture of summer weather, maybe a picture of a bright, hot sun makes us sweat profusely.
In addition to helping us understand things, we also rely on these images to make decisions.
When making decisions, we refer to these images and build assumptions and conclusions based on them. For example, if we want to know what to wear in the summer, we base our decisions on the image in our mind of summer.
The problem is that we trust these images too much. Even if the statistics and available data disprove these mental pictures, we will still let it guide us. The weatherman might think it's going to be cold today, but you're still in shorts and a t-shirt, as your mind-blowing summer picture tells you. So you can huddle outdoors.
We are overconfident in false mental images. But there are ways to overcome this problem and make better predictions.
One way to avoid errors is to make use of reference class forecasting. Instead of making judgments based on general mental images, use historical data for more accurate predictions. For example, think about times when you've been out in the summer and it's cold. What did you wear then?
In addition, you can create a long-term risk policy , to plan for specific measures in case of both standard and false forecasts. Through preparation and defense, you can rely on evidence instead of mental images and make more accurate forecasts. In the case of our weather, this means bringing a sweater just to be sure.
13: Key message
Thinking fast and slow shows us that our mind is composed of two systems. System 1 works instinctively and requires very little effort; System 2 works more meticulously and requires more concentration. Our thoughts and actions change depending on which system is controlling the brain at the time.