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Thinking, Fast and Slow by Daniel Kahneman [ Book Review and Summary, PDF and Audiobook ]


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The book is a tour of our minds. On this summary of Thinking, Fast and Slow, we learn about the systems in use as we think, make decisions and act.

About the author

Daniel Kahneman is Eugene Higgins Professor of Psychology Emeritus at Princeton University and a professor of public affairs at the Woodrow Wilson School of Public and International Affairs.

He received the 2002 Nobel Prize in Economic Sciences for his pioneering work with Amos Tversky on decision-making.

Thinking, Fast and Slow summary

Summary of Thinking Fast and Slow

The book has five parts that all revolve around the two systems of the mind and how they interplay influences our decisions and focused attention.

Part 1: The Two Systems

The first part introduces the two systems of our minds involved in our decision making processes and our choices.

System 1: Handles Associative Memory

The filter by which we interpret our experiences. This is the system in use when you are making intuitive decisions. Having developed from our innate survival instincts, the first system is old, unconscious and impulse-driven.

This system is more influential than your experience tells you, it influences many of the choices and judgments you make. It continually constructs a coherent interpretation of what is going on in our world. System 1 is the reason you can:

  • Answer 2+2=
  • Understand simple sentences.
  • Complete the phrase “bread and…”

“Intelligence is not only the ability to reason; it is also the ability to find relevant material in memory and to deploy attention when needed.” 

Daniel Kahneman

System 2: Considerate, Present-Oriented and Intensely Aware

Because of its present awareness and consciousness, system 2 is the system moved in use when you are paying focused attention. System 2 is younger, having developed in the last several thousand years as we adapt to modernization and shifting priorities.

Most of the operations handled by the second system require conscious attention, such as giving someone your phone number.

The operations of the system 2 are often associated with the subjective experience of agency, choice, and concentration. Slow thinking. 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. System 2 is the reason you can:

  • Maintain a faster walking speed than is natural for you
  • Monitor the appropriateness of your behavior
  • Fill out a tax form

How do the two systems work and interact?

A major part of the book focuses on illustrating how the two systems interact and work with each other. Both systems are active while you are in an awakened state with system 1 being automatic, while the second system is lazy; it expends the least effort possible. When they are not jostling for focused attention the two systems play well together.

“A general “law of least effort” applies to cognitive as well as physical exertion. The law asserts that if there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action. In the economy of action, effort is a cost, and the acquisition of skill is driven by the balance of benefits and costs. Laziness is built deep into our nature.” 

Daniel Kahneman

System 1 generates suggestions such as feelings, impressions, intentions, and intuitions. It then transfers these to system 2, which on its part looks for patterns from which in its bid to be automatic and save mental energy. It creates intuitions and beliefs or voluntary actions that eventually turn habitual.

Although System 2 believes itself to be where the action is, the automatic System 1 is the hero.

When System 1 runs into difficulty, it calls on System 2 to support more detailed and specific processing that may solve the problem of the moment. System 2 is mobilized when a question arises for which System 1 does not offer an answer.

When do the two systems conflict?

Although the two systems have a cordial working relationship, they constantly conflict, especially when you enter into situations that are outside your normal routine.

Part 2: Heuristics and Biases

The second part of the book introduces the concept of heuristics, mental shortcuts we create as we make decisions. Always we try to solve our problems without the most efficiency.

Although highly beneficial when negatively applied, heuristics can cause the formation of cognitive biases, systemic errors in thinking, that often lead to judgments, bad decisions or misinterpretation of events.

The author introduces several concepts among them.

#1: The law of small numbers that shows our strongly biased belief of smaller numbers or samples as resembling the population from which they come.

#2: Anchors: Anchoring happens when we consider a specific unknown value before estimating its quantity with the estimates, staying close to the number in consideration.

#3: Biases: Because being consciously aware all the time is a futile effort, and because system one is always active, avoiding biases, errors in judgment and decisions is very difficult, but when done is highly beneficial because it limits the occurrence of judgment mistakes.

#4: Risk and failures: Daniel Kahneman notes that risk is a human invention, whose initial intent was to help us face and survive uncertainties and dangerous terrains or circumstances.

“This is the essence of intuitive heuristics: when faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.” 

Daniel Kahneman

Part 3: Overconfidence

The third part of the book explores how we continuously miss-construct our experiences, and because of our choice to believe in flimsy accounts, it wrongly predisposes us to believe we understand our past, and out of this understanding believe we can predict the future.

Hindsight

Using various elements, Daniel Kahneman shows how little of our past we actually understand. He mentions hindsight, a bias that has an especially malicious and seeming effect on the decision making process. Because it shifts the measure used to access the soundness of decisions from the process itself to the nature of the outcome, Good or bad.

He notes that actions that seemed prudent in foresight. can look irresponsibly negligent in hindsight.

“The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.” 

Daniel Kahneman

A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge, or beliefs that have changed.

Hindsight bias has pernicious effects on the evaluations of decision-makers. It leads observers to assess the quality of a decision not by whether the process was sound but by whether its outcome was good or bad.

Hindsight is especially unkind to decision-makers who act as agents for others—physicians, financial advisers, third-base coaches, CEOs, social workers, diplomats, politicians. We are prone to blame decision makers for good decisions that worked out badly and to give them too little credit for successful movesecaр that appear obvious only after the fact. There is a clear outcome bias.

Although hindsight and the outcome bias generally foster risk aversion, they also bring undeserved rewards to irresponsible risk seekers, such as a general or an entrepreneur who took a crazy gamble and won. Leaders who have been lucky are never punished for having taken too much risk.

Part 4: Choices

Risk-Aversion

In choices, Kahneman notes that humans tend to be risk-averse, which is why we tend to avoid risk whenever we can.

Most people dislike risk (the chance of receiving the lowest possible outcome), and if they are offered a choice between a gamble and an amount equal to its expected value they will pick the sure thing.

In fact, a risk-averse decision-maker will choose a sure thing that is less than expected value, in effect paying a premium to avoid the uncertainty.

In one instance, he notes people who face very bad options take desperate gambles, accepting a high probability of making things worse in exchange for the small hope of avoiding a large loss. Risk-taking of this kind often turns manageable failures into disasters.

“People who are poor think like traders, but the dynamics are quite different. Unlike traders, the poor are not indifferent to the differences between gaining and giving up. Their problem is that all their choices are between losses. Money that is spent on one good is the loss of another good that could have been purchased instead. For the poor, costs are losses.”

Daniel Kahneman

Loss Aversion

He also introduces the concept of loss aversion. of which notes that many of the options we face in life are mixed. There is a risk of loss and an opportunity for gain, and we must decide whether to accept the gamble or reject it.

Loss aversion refers to the relative strength of two motives: we are driven more strongly to avoid losses than to achieve gains. A reference point is sometimes the status quo, but it can also be a goal in the future: not achieving a goal is a loss, exceeding the goal is a gain.

The two motives are not equally powerful. The aversion to the failure of not reaching the goal is much stronger than the desire to exceed it. People often adopt short-term goals that they strive to achieve but not necessarily to exceed. They are likely to reduce their efforts when they have reached an immediate goal, with results that sometimes violate economic logic.

People attach values to gains and losses rather than to wealth, and the decision weights that they assign to outcomes are different from probabilities.

People who face very bad options take desperate gambles, accepting a high probability of making things worse in exchange for a small hope of avoiding a large loss. Risk-taking of this kind often turns manageable failures into disasters.

Because defeat is so difficult to accept, the losing side in wars often fights long past the point at which the victory of the other side is certain, and only a matter of time.

From his detailed discussions of the topic, we note that loss aversion is a state where our motivation to avoid supersedes our motivation to achieve. From these discussions, we clearly see why so many people would rather remain comfortable in their comfort zone, rather than set big goals.

Part 5: Two Selves

The main elements in the fifth part of thinking fast and slow are decisions, emotions, and wellbeing.

On decisions, Daniel Kahneman notes our assumption that all our decisions are in our best interest or have our best interest at heart. It is not usually the case. Our memories, which are not always right or interpreted correctly, often cost a great influence on our choices and punch shots.

“We are prone to blame decision makers for good decisions that worked out badly and to give them too little credit for successful moves that appear obvious only after the fact.” 

Daniel Kahneman

Decisions that do not produce the best possible experience and erroneous forecasts of future feelings—both are bad news for believers in the rationality of choice. We cannot fully trust our preferences to reflect our interests, even if they are based on personal experience, and even if the memory of that experience was laid down within the last quarter of an hour!

Tastes and decisions are shaped by memories, and the memories can be wrong.

Inconsistency is built into the design of our minds. We have strong preferences for the duration of our experiences of pain and pleasure. We want the pain to be brief and pleasure to last. But our memory, a function of System 1, has evolved to represent the most intense moment of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end. A memory that neglects duration will not serve our preference for long pleasure and short pains.

The experience of a moment or an episode is not easily represented by a single happiness value. There are many variants of positive feelings, including love, and joy. Negative emotions also come in many varieties, including anger and loneliness.

Although positive and negative emotions exist at the same time, it is possible to classify most moments of life as ultimately positive or negative

An individual’s mood at any moment depends on her temperament and overall happiness, but emotional well-being also fluctuates considerably over the day and the week. The mood of the moment depends primarily on the current situation.

Conclusion

#1: Your mind has two systems, system 1 and system 2. System 1 is automatic, instinctive, and a fast thinker. While system 2 is more conscious, the slow thinker.

#2: Although two systems have a very cordial working relationship. They are constantly jostling for your attention and mental resources.

#3: System 1 is constantly drawing the conclusion, even in the absence of adequate evidence, leading to ineffective decisions (biases).

#4: Our main motivation is to avoid risk and losses.

#5: Because of our ill-conceived belief that we know all there is to know about our past, we assume we can predict how future, which is not true.


What did you learn from the summary of Thinking, Fast and Slow? What was your favorite takeaway? Is there an important insight that we missed? Comment below or tweet to us @storyshots.

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