Thinking Fast & Slow - Book Summary & Review

Thinking Fast & Slow

Daniel Kahneman

Book Description

International Bestseller 'Thinking, Fast and Slow’ is authored by the eminent economist and psychologist Daniel Kahneman. In this book, Kahneman by dissecting the mind in detail goes on to explain different systems that affects our way of thinking and making choices. He exposes certain extraordinary capabilities of fast thinking along with its flaws and biases and explains how it shapes a person’s behaviour and thoughts.

The author also explains how proper understanding of the different systems helps us to make proper and correct decisions concerning carious aspects of life.

About the author:

Daniel Kahneman is the Senior Scholar at Princeton University and Professor Emeritus of Public Affairs, Woodrow Wilson School Of Public and International Affairs. Daniel Kahneman is also an eminent new-age economist and on 2002 was bestowed with the prestigious Nobel Prize in Economics.

Book Summary – Main Ideas of the Book

Daniel Kahneman’s Thinking, Fast and Slow is a retelling of the decades of research that led to his winning the Nobel Prize. It explains his contributions to our current understanding of psychology and behavioral economics.

Of two minds: how our behavior is determined by two different systems – one automatic and the other considered.

There is a compelling drama going on in our minds, with two main characters. These two characters are, first the impulsive, automatic, intuitive System, and second, the thoughtful, deliberate, calculating System. As they play off against each other, their interactions determine how we think, make judgments and act on them.

First system is the part of our brain that operates intuitively, often without our conscious control.

Second system deals with conscious activities of the mind such as self-control, choices and more deliberate focus of attention.

The relationship between these two systems determines how we behave. By being lazy and avoiding using Second System, our mind is limiting the potency of our intelligence.

Autopilot: why we are not always in conscious control of our thoughts and actions.  We’re primed when exposure to a word, concept or event causes us to beckon related words and concepts. Such priming affects the way we think and act.

The priming of actions and thoughts is completely unconscious. It therefore shows that we are not always in conscious control of our actions, judgments and choices. We in reality are being constantly primed by social and cultural conditions. 

Snap judgments: how the mind makes quick choices, even when it lacks enough information to make a rational decision.

Our mind has tendency to oversimplify things without sufficient information which often leads to judgment errors. This is called exaggerated emotional coherence, also known as the halo effect.

But here is also confirmation bias, which is the tendency for people to agree with information that supports their previously held beliefs, as well as to accept whatever information is suggested to them.

The halo effect and confirmation bias both occur due to the fact that our minds are eager to make quick judgments. Our minds rely on false ideas and oversimplifications to fill in the gaps in data, leading us to potentially wrong conclusions.

Like priming, these cognitive phenomena happen without our conscious awareness and affect our choices, judgments and actions.

Heuristics: how the mind uses shortcuts to make quick decisions.

We often find ourselves in situations where we need to make a quick judgment. To help us, our minds have developed little shortcuts to help us immediately understand our surroundings. These are called heuristics.

Most of the time, this process is very helpful, but the trouble is that our minds tend to overuse them, which can cause us to make mistakes. There are two types of heuristics: the substitution heuristic and the availability heuristic.

The substitution heuristic is where we answer an easier question than the one that was actually posed.

The next type is the availability heuristic, which is where we overestimate the probability of something we hear often or find easy to remember.

No head for numbers: why we struggle to understand statistics and make avoidable mistakes because of it.

How can you make predictions on whether certain things will happen? We should always remember the base rate when predicting an event, but unfortunately the base-rate neglect is extremely common. One of the reasons we ignore the base rate is because we focus on what we expect rather than what is most likely.

Base-rate neglect is a very common mistake. We also struggle to remember that everything comes back to the mean.

Past imperfect: why we remember events from hindsight rather than from experience.

Our minds remember experiences in a complicated way. We have two different apparatuses, called memory selves, both of which remember situations differently.

First, there is the experiencing self, it asks the question: “How does it feel now?”

Then there is the remembering self, which asks, “How was it on the whole?”

The experiencing self is more accurate, because our feelings during an experience are always the most accurate. But the remembering self, is less accurate because it registers memories after the situation is finished.

There are two reasons why the remembering self dominates the experiencing self. The first of these is called duration neglect, where we ignore the duration of the event in favor of a particular memory from it. Second is the peak-end rule, where we exaggerate what occurs at the end of an event.

Mind over matter: how adjusting the focus of our minds can dramatically affect our thoughts and behaviors.

Our minds use different amounts of energy depending on the task. When there’s need for only little energy, we are in a state of cognitive ease. Yet, when our minds must mobilize attention, they use more energy and enter a state of cognitive strain. These changes affect how we behave.

In a state of cognitive ease, the intuitive System 1 is in charge of our minds. In a state of cognitive strain, our awareness is more heightened, and so System 2 is in charge.

We can influence the amount of energy the mind uses.

One way to do this is to expose ourselves to repetitive information. If information is made more memorable, it becomes more convincing. When we see something familiar, we enter a state of cognitive ease. Cognitive strain, on the other hand, helps us succeed at things like statistical problems.

Taking chances: the way probabilities are presented to us affects our judgment of risk.
The way we judge ideas and approach problems is determined by the way they are expressed to us.
Even for carefully calculated probabilities, just changing the way the figure is expressed can change how we approach it.

Another way our attention is distracted from what is statistically relevant is called denominator neglect. This occurs when we ignore plain statistics in favour of vivid mental images.

Not robots: why we don't make choices based purely on rational thinking.

For a long time, a group of economists suggested that we made decisions based purely on rational argument. They argued that we all make choices according to utility theory, which states that when individuals make decisions, they look only at the rational facts and choose the option with the most utility.

But we all don’t see utility as rationally as utility theory thinks, we can make strange and seemingly irrational decisions.

Gut feeling: why rather than making decisions based solely on rational considerations, we are often swayed by emotional factors. Kahneman’s prospect theory challenges utility theory by showing that when we make choices, we don’t always act in the rational way.

Prospect theory highlights at two reasons why we don’t always act rationally. Both of them feature our loss aversion — the fact that we fear losses affects us more than the value gains.

Second, we’re influenced by the diminishing sensitivity principle: that the value we perceive may be different from its actual worth. 

False images: why the mind builds complete pictures to explain the world, but they lead to overconfidence and mistakes.

In order to understand situations, our minds naturally use mental pictures to explain ideas and concepts. When we make decisions, we refer to these pictures and base our assumptions and conclusions based on them.

The problem is that we place too much confidence in these images. Even when available statistics and data disagree with our mental pictures, we still let them rule over.

One way to avoid it is to utilize reference class forecasting. Instead of making judgments based on general mental images, we should use specific historical examples to make more accurate predictions.

In addition, we can devise a long-term risk policy that takes specific measures in the case of both success and failure in forecasting.

Ruchika Verma

Review

In this engaging book Kahneman enlightens us how we think and how we can think better. Where we can and cannot trust our intuitions and how we can tap into the benefits of slow thinking. He offers practical and enlightening insights into how choices are made in both our business and our personal lives. How we can use different techniques to guard against the mental glitches that often get us into trouble. Thinking, Fast and Slow is a lengthy and challenging read. However if you persist it will definitely transform the way you think about thinking.

Dhriti Shandilya

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