I have to admit that I wasn't really aware of Kahneman's work before I bought this book. Back in 2002, I was shocked to hear that there was a Nobel prize in Economics given out for someone showing that humans aren't rational investors. "Duh" I thought. Psychologists have known that for decades. Well, it turns out the guy who won that Nobel prize was a psychologist- Kahneman.
This book, written at the end (or just about) of his career, is a reflection back on a life's worth of research. Part biography (including his research partner Amos Tversky), part lecture, part research book, it makes for a good read. The chapters are all short, focused, and aimed at a broad audience yet contain some data for researchers. They also end with two or three quotes that illustrate the point of the chapter. Time and again, we're hit over the head with the difference between System 1 of the mind (unconscious, intuitive, biased, fast) versus System 2 (conscious, logical, lazy, slow). In a nutshell, most people believe that System 2 dominates our thoughts and behaviors. Kahneman goes to great lengths to show that this is often not the case.
Taking a broadly evolutionary perspective, he views System 1 as a background integrator of data that's concerned with survival-level issues. It often steers the thinking of System 2, which is costly and thus lazy. System 1 works well enough often enough for System 2 to only really kick in under consciously important circumstances. Certainly, psychology has revealed dozens of ways in which our unconscious mind can exert shockingly large influences on our behavior in contrast to our conscious perceptions and ideas. That's hardly surprising, and in that regard, I found the book a little stale and repetitive. Which isn't surprising given that it documents research starting in the 70s.
One of the reasons it gets five stars is that it is packed with enough amusing examples and anecdotes that only the most jaded psychologist would not enjoy reading through the chapters. Even though I was aware that many of the examples were tests of my System 1 vs. 2, I still fell into some of the common System 1 traps. Which is an intentional move by the author. To his credit, he follows some of the research he preaches by making the story personal to the reader, using their own surprised thoughts at their performance and the dominance of their System 1 to cause the reader to change the way they think about their mind. It's a great illustration of using science to teach science, something that I can't help but enjoy.
And that's ultimately what's so satisfying about this book. Because it's big, and often belabors similar points, I was tempted to give it four stars. But given its writing/teaching style, the theories it presents, and the evidence for them, this book deserves five stars. Because it is pretty hard to read it and not come away with a different perspective on one's mind and how one thinks. And that's a pretty cool thing for any book to accomplish!
on February 4, 2012
Investors are often criticized for making irrational decisions, as if it were possible through hard work and discipline to reach some kind of idealized rational state. According to psychologist and Nobel laureate Daniel Kahneman, author of Thinking, Fast and Slow, it doesn't quite work that way. People can be trained to make more thoughtful decisions but, ultimately, the anatomical structure and evolutionary history of the human brain calls the shots. And that brain tells us to make quick, intuitive judgments with identifiable biases. Our more reflective processes, more often than not, line up to support these judgments.
If this sounds familiar, it should. In 2005, Malcolm Gladwell published the bestseller Blink: The Power of Thinking Without Thinking. Gladwell wrote detailed case studies about intuitive judgments. On rare occasions, such as the case of a chess master with several thousand hours of training, intuitions can be remarkably accurate. At other times, when we use physical traits like a square jaw to judge a politician's leadership capabilities, they are just plain dumb.
But, Thinking, Fast and Slow is a much richer book than Blink. Kahneman has written the organized, referenced big brother of Blink and other books like Freakonomics by Steven Levitt and Stephen Dubner and Moneyball by Michael Lewis. All of these titles owe their existence to the intellectual framework developed by Kahneman and others.
The author, who has spent five decades studying the way we make decisions, is seen as a pioneer in the field of behavioural finance. He was the first psychologist to be awarded the Nobel Memorial Prize in Economics for his co-authorship, with Amos Tversky, of Prospect Theory. Among the insights derived from Prospect Theory is loss aversion, where people overweight losses in their decision-making.
To help readers better understand the complex interplay between our slower, reflective processes and our quick, intuitive processes, Kahneman writes about two systems: System 1 and System 2. System 1 is described as uncontrolled, effortless, associative, unconscious and skilled. When you see a photo of an angry person's face, System 1 generates an automatic response ' something like, 'Yikes!' System 2 is controlled, effortful, deductive and slow. It goes to work when you are presented with a problem like, 'What is 34 times 13?'
Through MRIs and measurements of pupil dilation during mental tasks, researchers have physical evidence of fundamentally different processes at work. And, over the years, a sizeable body of research has developed about biases, heuristics and decision errors. One of the most common patterns is that we substitute an easy question for a hard one. When asked what we think of a politician, we substitute the question, 'Does she look like a leader?' System 1 comes up with a quick answer: 'Of course she does!' System 2 would have to perform a difficult analysis to provide the real answer: 'What are her policies on various issues and how do they compare with those of her rivals?' Since System 2 tries to conserve energy, the System 1 substitution takes place, and then System 2's supporting points are brought in after the fact. It is completely lame and we all do it.
If the value of a book were measured in 'Aha!' moments, Thinking, Fast and Slow would represent a tremendous bargain. At $34 retail (and you will almost certainly pay less than that), each 'Aha!' costs about 17 cents. Examples: 'Aha! So that's why mega-projects routinely come in wildly over-budget.' Or, 'Aha! That's why it's harder to putt for birdie than for par.' Or, 'Aha! That's why CEOs of businesses facing losses often take high-risk, capital-destroying gambles.' Or, 'Aha!, that's why caps on civil liabilities favour large companies over small ones.'
One note of caution about Thinking, Fast and Slow: it is dense and it requires you to think. The author has gone to heroic lengths to make it readable, but each chapter requires thoughtful participation, often beginning with a word problem or exercise. The effort, however, is worthwhile. Unless you are a researcher in experimental psychology and know the content already, it will probably change the way you think. But it won't make you rational.
on April 6, 2012
This is a good book, with a lot of insight for sure. The author offers great examples to illustrate his points and these are relevant, and on the whole, useful. My issue with this book is that, after a while, it becomes a bit of a tedious read. Questions like "would you rather have 5$ today if your mood was mediocre because you just had a stellar glass of chardonay or 15$ if your dog had previously had an epileptic seizure and you had a mild cold." Ok, this is an exaggeration, but there are so many of these types of scenarios that I found myself losing interest in the topic. It's not that the material is bad, or even that it is poorly written. Only that for the layman who just wants a good read it can be, well, a bit boring.
The book is at its best when Kahneman describes real world circumstances and explains our mind rational (or irrationality) for their outcomes. These certainly provide real insights into how the simple mechanisms of our brains (he refers to this as system 1) operate. He contrasts this with our system 2, which is the more rational, though lazy system of thinking. Yet as the book unfolds, he uses these systems to examine very minute operations of these systems that eventually wore me down until I just wanted to activate my system 1 and flip on mindless cable TV.
on April 24, 2012
This book is important reading for anyone who considers themselves to be entirely rational. If you think that you make decisions based on careful and reasoned thinking, you need to think again. Kahneman has alerted us to the entirely human sport of jumping to conclusions and then hanging onto them in the face of the evidence. Apart from being a compendium of his extensive research it is well written for the lay reader. Great reading!
This book is a rare opportunity. You can sit under the teaching and knowledge of a great thinker, and that thinker has the communication skills to make his insight intelligible to the lay reader. This is a very challenging book, but it is an accessible book, although your pace may vary.
This book is also disturbing, as it clearly lays bare the inadequacies in how our minds work. Our brains have 2 systems, the "fast" and "slow" of the title. The fast system does most of the work, and does so unconsciously. We are not even aware of what is happening. The slow system, our conscious mind, is called on for more difficult tasks. Most of the time, this is great. But occasionally this leads to disastrous results.
This book is about how that happens, and also what can be done about it. And it is also about much else. This book is to be thought about, and to be returned to time and again. There is much that can be improved in how we use our minds, and being aware of our shortcomings is a fine first step.
Dr. Daniel Kahneman is one of the world's greatest living psychologists, Professor Emeritus at Princeton University, and a winner of the Nobel prize for Economics.
Thinking Fast and Slow is the summary of a lifetime of his groundbreaking research on the nature of the human mind. It is destined to become a timeless classic alongside Dr. Robert Cialdini's Influence: The Psychology of Persuasion.
Dr. Kahneman labels the approximately 95% of the mind that is unconscious `System 1'; and the approximately 5% of the mind that is conscious `System 2'.
« System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2 allocates attention in the effortful mental activities that demand it. The operations of System 2 are often associated with the subjective experience of agency, choice, and concentration.
When we think of ourselves, we identify with System 2, the conscious, reasoning self that has beliefs, makes choices, and decides what to think about and what to do. Although System 2 believes itself to be where the action is, System 1 effortlessly originates impressions and feelings that are the main sources of the beliefs and deliberate choices of System 2. "
"In the unlikely event of this book being made into a film, System 2 would be a supporting character who believes herself to be the hero. The defining feature of System 2, in this story, is that its operations are effortful, and one of its main characteristics is laziness, a reluctance to invest more effort than is strictly necessary. As a consequence, the thoughts and actions that System 2 believes it has chosen are often guided by the figure at the center of the story, System 1."
Or as Dr. David Eagleman summarizes in `Incognito: The Secret Lives of the Brain': "The first thing we learn from studying our own circuitry is a simple lesson: most of what we do and think and feel is not under our conscious control. The conscious you is the smallest part of what's transpiring in your brain. Your consciousness is like a tiny stowaway on a transatlantic steamship, taking credit for the journey without acknowledging the massive engineering underfoot."
Dr. Kahneman explains that "System 1 continuously monitors what is going on outside and inside the mind, and continuously generates assessments of various aspects of the situation without specific intention and with little or no effort. These `basic assessments' play an important role in intuitive judgement." Most of our beliefs and choices originate here.
System 1 is active and always on. System 2 is too weak to be always on, so it is selectively re-active:
"The often-used phrase `pay attention' is apt: you dispose of a limited budget of attention that you (System 2) can allocate to activities, and if you try to go beyond your budget, you will fail. Intense focusing on a task can make people effectively blind even to stimuli that normally attract attention. The most dramatic demonstration was offered by Christopher Chabris and Daniel Simons in their book The Invisible Gorilla. They constructed a short film of two teams passing basketballs, one team wearing white shirts, the other wearing black. The viewers of the film are instructed to count the number of passes made by the white team, ignoring the black players. This task is difficult and completely absorbing. Halfway through the video, a woman wearing a gorilla suit appears, crosses the court, thumps her chest, and moves on. The gorilla is in view for 9 seconds. About half the people who see the video do not notice anything unusual. It is the counting task and the instruction to ignore one of the teams that causes the blindness. The gorilla study illustrates two important facts about our minds: we can be blind to the obvious, and we are also blind to our blindness."
"Both self-control and cognitive effort are forms of mental work (by System 2). People who are simultaneously challenged by a demanding cognitive task and by a temptation are more likely to yield to the temptation (e.g. eating junk food).
People who are cognitively busy are also more likely to make selfish choices, use sexist language, and make superficial judgments in social situations. A few drinks have the same effect, as does a sleepless night. An effort of will or self-control is tiring; if you have to force yourself to do something, you (System 2) are less willing or less able to exert self-control when the next challenge comes around. The phenomenon has been named `ego depletion.'"
Dr. Kahneman goes on to offer explanations of numerous limitations and vulnerabilities of our minds, including `cognitive ease', `confirmatory bias', `narrative fallacy', the `halo effect', the `anchoring effect', the `mere exposure effect', the `affect heuristic', stereotyping and `priming':
"A sentence that is printed in a clear font, or has been repeated, or has been primed, will be fluently processed with `cognitive ease'. Hearing a speaker when you are in a good mood also induces cognitive ease. Conversely, you experience cognitive strain when you read instructions in a poor font, or in faint colors, or worded in complicated language, or when you are in a bad mood, or even when you frown.
REPEATED EXPERIENCE or CLEAR DISPLAY or PRIMED IDEA or GOOD MOOD = EASE = FEELS FAMILIAR or FEELS TRUE or FEELS GOOD or FEELS EFFORTLESS
When you feel strained you are more likely to be vigilant and suspicious, invest more effort in what you are doing, feel less comfortable and make fewer errors, but you also are less intuitive and less creative than usual." You are more creative when you are relaxed, when your conscious mind (System 2) is not exerting itself (cf. Carl Honore's `In Praise of Slow').
"Good mood, intuition, creativity, gullibility and increased reliance on System 1 form a cluster. At the other pole, sadness, vigilance, suspicion, an analytical approach and increased effort go together."
Whereas Malcolm Gladwell focused on the strength and successes of System 1 in his bestseller `Blink: The Power of Thinking without Thinking', Kahneman also points out the ways in which our intuition can lead us astray:
"Finding `causal' connections is part of understanding a story and is an automatic operation of System 1. All the (news) headlines do is satisfy our need for coherence: a large event is supposed to have consequences, and consequences needs `causes' to explain them. We have limited information about what happened on a day, and System 1 is adept at finding a coherent `causal' story that links the fragments of knowledge at its disposal." All we ever experience are effects, but we automatically project `causes' behind them, usually inaccurately.
"The psychologist Daniel Gilbert wrote an essay `How Mental Systems Believe,' in which he developed a theory of believing and unbelieving that he traced to the 17th century philosopher Spinoza. Gilbert proposed that understanding must begin with an attempt to believe it: you must first know what the idea would mean if it were true. Only then can you decide whether or not to `unbelieve' it. Belief is an automatic operation of System 1, which involves the construction of the best possible interpretation of the situation. `Unbelieving' is an operation of System 2.
System 1 is gullible and biased to believe, System 2 is in charge of doubting and unbelieving, but System 2 is sometimes busy, and often lazy. Indeed there is evidence that people are more likely to be influenced by empty persuasive messages, such as commercials, when they are tired and depleted.
The confirmatory bias of System 1 favours uncritical acceptance of suggestions and exaggerations of the likelihood of extreme and improbable events." (e.g. religious beliefs or the likelihood of violent crime).
"In `The Black Swan' Nassim Taleb introduced the notion of a `narrative fallacy' to describe how flawed stories of the past shape our views of the world and our expectations for the future. The explanatory stories that people find compelling are simple; are concrete rather than abstract; assign a larger role to talent, stupidity and intentions than to luck; and focus on a few striking events that happened rather than on the countless events that failed to happen."
And "the sequence in which we observe characteristics of a person is often determined by chance. Sequence matters, however, because the `halo effect' increases the weight of first impressions."
"In his penetrating book The Halo Effect, Philip Rosenzweig shows how the demand for illusory certainly is met in popular genres of business writing, consistently exaggerating the impact of leadership style. Imagine that business experts are asked to comment on the reputation of the CEO of a company. The CEO of a successful company is likely to be called flexible, methodical and decisive. Imagine that a year has passed and things have gone sour. The same executive is now described as confused, rigid, and authoritarian. Because of the halo effect, we get the causal relationship backward: we are prone to believe that the firm fails because its CEO is rigid, when the truth is that the CEO appears to be rigid because the firm is failing. This is how illusions of understanding are born."
And "an `anchoring effect' occurs when people consider a particular value for an unknown quantity before estimating that quantity: the estimates stay close to the number that people considered. If you are asked whether Gandhi was more than 114 years old when he died, you will come up with a much higher estimate of his age at death than you would if the anchoring question referred to death at 35. If you consider how much you should pay for a house, you will be influenced by the asking price. The same house will appear more valuable if its listing price is high than if it is low, even if you are determined to resist the influence of this number."
"The famed psychologist Robert Zajonc dedicated much of his career to the study of the link between the repetition of an arbitrary stimulus and the mild affection that people eventually have for it. This `mere exposure effect' does not depend on the conscious experience of familiarity. In fact, the effect does not depend on consciousness at all: it occurs even when repeated words or pictures are shown so quickly that the observers never become aware of having seen them. They still end up liking the words or pictures that are presented more frequently. System 1 responds to impressions of events of which System 2 is unaware. Indeed, the mere exposure effect is actually stronger for stimuli that the individual never consciously sees."
"The dominance of conclusions over `arguments' is most pronounced where emotions are involved. The psychologist Paul Slovic has proposed an `affect heuristic' in which people let their likes and dislikes determine their beliefs about the world. In the context of attitudes, System 2 is more of an apologist for the emotions of System 1 than a critic of those emotions - an endorser rather than an enforcer. Its search for information and arguments is mostly constrained to information that is consistent with existing beliefs, not with an intention to examine them." (cf. Dr. Daniel Dennett's Breaking the Spell).
"One of the basic characteristics of System 1 is that it re-presents categories as norms and prototypical exemplars. This is how we think of horses, refrigerators, and New York police officers; we hold in memory a re-presentation of one or more `normal' members of each of these categories. When the categories are social, these re-presentations are called stereotypes. Some stereotypes are perniciously wrong, but the psychological facts cannot be avoided: stereotypes, both correct and false, are how we think of categories."
"Studies of priming effects have yielded discoveries that threaten our self-image as conscious and autonomous authors of our judgments and our choices (cf. Dr. Gerald Zaltman's How Customers Think). Our vote should not be affected by the location of the polling station, for example, but it is. We now know that the effects of priming can reach into every corner of our lives.
The idea of money primes individualism: a reluctance to be involved with others, to depend on others, or to accept demands from others. Living in a culture that surrounds us with reminders of money may shape our behaviour and our attitudes in ways that we do not know about and of which we may not be proud. Some cultures provide frequent reminders of respect, others constantly remind their members of God, and some societies prime obedience by large images of Dear Leader. The feeling that `Big Brother is Watching' leads to a reduction in spontaneous thought and independent action. Reminding people of their mortality increases the appeal of authoritarian ideas." What Dr. George Lakoff calls the `Strict Father' model.
Thinking Fast and Slow is a brilliant treatise that goes far beyond Malcolm Gladwell's `Blink'. It will change the way you see human nature. Five stars!
on May 30, 2013
Having no formal background, but a strong interest in psychology, I eagerly ordered this book, and subsequently took 3 months to finish it. That said, it is the most dogeared & annotated book I own, and one that I will be re-reading many times.
The book is divided into numerous chapters that are each roughly 10 pages. I soon learned that this was about the amount of information I could take in before I needed to just sit back, say "Huh.", and digest everything I'd read.
Kahneman is brilliant, and provides well-researched points in a very convincing way. If you're at all interested in understanding how you arrive at the conclusions you do, I highly recommend it.
on July 1, 2015
Why are people not the perfectly rational decision makers (called “Econs”) that standard economics assumes them to be? This book gives us some insight into how the brain works to help answer this question. Unfortunately the goal seems to be limited to helping us become better Econs rather than a deeper understanding of why we think the way we do.
His world seems rather insular, as he interacts mainly with academics like himself, his students, or stockbrokers. He loves to show how trained professionals make irrational choices in their field of expertise. It would be nice to get more insight about the irrational choices the rest of us make. Although he is careful to use gender inclusive language, one gets the impression he has never met an actual woman. For whatever reason, women seem to use their intuitive faculties differently, and one might think that difference would be worth exploring.
Lets Answer an Easier Question Instead
One interesting fallacy he identifies is the tendency to answer a question by substituting an easier question. While we think of politicians doing this deliberately, we do it all the time unconsciously. A typical question (in this book) would be “Should I buy stock in Mercedes Benz?” which gets replaced with “Do I like their cars?” Of course, the quality of the cars is already taken into account in the stock price, which may be overvalued because too many people like the name.
Substituting an easier question seems to be the theme of the psychological experiments the book is largely based on. It is so much easier to ask questions about money than investigate how beliefs form and how they affect the thinking process.
Practicing What He Preaches
The writing style is explicitly based on the findings presented in the book. He chooses to describe the parts of our mind as active agents because we can process that better than abstract properties. He tells us the name “System 1” was chosen because it takes less space in working memory than something like “automatic system”. He does not tell us why the more usual term “unconscious” was not chosen, but I assume he is avoiding any association with Freud. Fine, but why not use the even simpler terms “Fast” and “Slow”, as in the title?
Dissecting Our Lazy Two-Part Brain
The author presents a two part model for our thinking. The automatic “System 1” (I will use his terms in this review) receives information from our senses, quickly processes them according to its own rules, then passes the results to the rational “System 2” for evaluation. But reasoning is hard work, so if we are lazy, or our minds are overloaded, we simply accept the conclusions of the automatic system without questioning them. System 1 performs many essential functions (such as reading this) and does them very well. But its limitations can lead us into irrational decisions.
System 1 makes its decisions using that the author calls “activated memory”, which is loaded mainly from recent experiences. There are plenty of experiments that show how priming, essentially putting ideas into your head just before the decision, can strongly affect the outcome in surprising ways.
But this concept is not fully developed. For example, his chapter on how experts successfully use intuition shows that System 1 has access to all of our memory, not just the activated part. One of his favorite phrases is “What You See is All There Is”, but it seems you can see everything. This idea is a little too simple.
The set of ideas we work with must also determined by our fundamental beliefs, such as emotional and religious beliefs, our concepts of morality, and our sense of belonging to a group. These all act to filter what will get into our activated memory. While the book touches on these issues in various places, it does not connect them to the concept of activated memory.
A Glimpse into the Potential of Neurobiology
Neurobiology is mentioned a few times in the last part of the book. The idea is that certain modes of brain activity “light up” certain parts of the brain, so one can gain insight into how a problem is being solved. As System 1 operates unconsciously, this technique can help identify which parts of the brain are making the decision. For example, the brain region associated with emotions (the amygdala) was shown to be active when making what looked like simple financial decisions.
Then why is this technique not used more often in the book? Is there even any physical way to detect the difference between System 1 and System 2? This would seem to be a good way to test theories of activated memory, and help develop it into a coherent concept.
The Experiencing and Remembering Self
The book ends with a dramatic switch from money to philosophical questions of wellbeing and who is the self. Are we the one who experiences in the present moment, or the one who remembers what happened in the past? While this gets reduced to a simple experiment, it is instructive. A group of people experienced two events: 60 seconds of pain, and 60 seconds of the same pain followed by 30 seconds of less pain. People chose to repeat the second experience. Are they crazy? It seems so reading it in plain text. But their memory of experiencing the event is dominated by the relief of the last 30 seconds, so they interpret that as the better experience. We tend to remember peak events, and what came last. Duration is harder to recall.
It works the same way on the positive side. A single exciting event is remembered more than a few weeks of pleasant vacation. So what does it mean to experience a pleasant day on the beach that will later be forgotten? While observational data will not solve a philosophical problem, it can lead us to think about it differently.
Is Teaching Psychology a Waste of Time?
Not only is this question actually asked in the book, the answer appears to be no. What he means is that the students who learned about fallacies of judgment did not apply the lessons to themselves. One of those lessons should have been that we often fail to realize that the characteristics of a group we belong to might also apply to ourselves.
He should not expect to change behavior by teaching the usual abstract academic course. Maybe he needs to reread his own book. He tells us that the intuition in System 1 can be trained for new tasks. If the goal is to change behavior, then a training course designed to reprogram that intuition is required.
I don’t think the book is a waste of time. One of its many insights is that our System 1 must believe any information it receives in order to parse it, before sending it to System 2 for evaluation. It works that way when I read a book such as this one. I first believe what I read, then later all the problems and limitations become evident. Writing a review helps reveal those problems, which makes it overly critical of this worthwhile book.
Although the scope is mainly limited to how our elites make financial decisions, the lessons in this book can be extended to understand how ordinary people think and behave the way they do. It is worth remembering that the many logical errors the people commonly make occur before the reasoning process is invoked. It is also worth remembering that this applies to me as well. The many insights make this book worth four stars, even if I need to do a lot more work on my own to make the concepts useful.
on January 10, 2015
Thinking Fast and Slow is Nobel laureate Daniel Kahneman's "tour of the mind" in terms of two so-called "systems"—one fast, one slow—and the extensions of this model into behavioural economics and psychology.
Kahneman starts by introducing his two systems as shorthand for two categories of neural response. System 1 is "fast"—it makes snap judgements on incomplete information based on heuristics, while System 2 is "slow"—it gets engaged when we pause to consider what information is available, and what our appropriate response should be. Kahneman then cites numerous studies (some of which he conducted) to show that many of our cognitive biases arise when we (knowingly or not) rely too strongly on our System 1 heuristics.
Next, the two systems model is extended to a two "species" model. The species of "Econs" is that which is studied by economists—Econs are perfectly rational human beings that make textbook System 2 economic decisions and thus drive the market in a regular fashion. However, very few Econs are actually known to exist, and instead the world is populated mainly by Humans, who let emotion influence choices and sometimes behave very irrationally. Notable examples discussed in the book include prospect theory vs utility theory and the matrix of gain/loss aversion/seeking.
Finally, Kahneman introduces the two "selves"—the experiencing self and the remembering self. The former comprises an individual's mental state in the moment of experience, while the latter comprises the mental state during memory recall. While at first glance the distinction does not seem very profound, Kahneman cites more experiments showing that in the context of suffering, the experiencing self is sensitive to the instantaneous pain, while the remembering self is sensitive only to the maximum pain and the pain felt at the end of the experiment; similar results were found on the opposite side of the spectrum when people were asked about the pleasure they derived from a vacation. Beyond our understanding of human memory, this also has consequences for the design of medical procedures such as colonoscopies (as was also mentioned in a Freakonomics podcast).
Thinking Fast and Slow is, overall, a great read for its nearly 40 chapters explaining just how, for better or for worse, our minds are not perfect reasoning machines. I particularly enjoyed the third of the book focusing on behavioural economics, since it stood in such stark contrast to the unwavering faith in rational actors espoused by the title figures in The Quants by Scott Patterson, which I also finished recently. Moreover, the chapter on regression towards the mean was one of the rare times the lightbulb suddenly turns on and leaves you wondering how you couldn't have recognized such an effect earlier. Four stars.
on August 17, 2014
Daniel Kahneman, along with his colleague Amos Tversky and the American economist Richard Thaler, is a founder of what has come to be called behavioral economics. He is also the senior member of this trio, who have given some of the main lines of traditional economic thinking a savage whipping by exposing the irrationalities that contrary to received belief underlie many forms of economic decision-making. Thinking, Fast and Slow is Kahneman's magnum opus -- the recapitulation of a lifetime spent exposing the weaknesses in received economic thinking simply by accurately observing the psychology of how people actually behave. The favorite question of Kahneman and his colleagues -- "What do people actually do?" -- is the most destructive thing to hit some of the knee-jerk notions of traditional economic theory since the 1920s.
The book is an extended excursion into the widely accepted "two systems of the mind" -- "System 1, [which] operates automatically and quickly, with little or no effort and no sense of voluntary control;" and "System 2, [which] allocates attention to the effortful mental activities that demand it, including complex computations." To give a total reduction to the antithesis, the book is about reflex vs. reflection, and it elaborates the antithesis for a stunning 450 pages plus notes and index. The antithesis is continually enriched by example and by reference to other scholarship. The writing is both lucid and engaging.
Kahneman's analysis has wide and diverse applicability -- from public policy (in which bad wars like Vietnam and Iraq are sold by administrations that force members of Congress to think strictly in System 1), to auctions (whose social arrangements foster almost universal reliance by attendees on System 1 by those present), to many other one-on-one transactions involving an appellant and a potential grantor. Risk, and behavior in the presence of risk, is a dominant theme in the book.
No review or summary could possibly do justice to this extraordinary work: get the book and read it.