Thinking, Fast and Slow provides an outline of the two most common approaches our brains utilize. Like a computer, our brain is built of systems. System 1 is fast, intuitive, and emotional. Daniel Kahneman encourages us to move away from our reliance on this system. System 1 is the most common source of mistakes and stagnation. In comparison, system 2 is a slower, more deliberate, and logical thought process. Daniel recommends tapping into this system more frequently. As well as this advice, Daniel provides guidance on how and why we make our decisions.
About Daniel Kahneman
Daniel Kahneman is Professor of Psychology and Public Affairs Emeritus at the Princeton School of Public and International Affairs, the Eugene Higgins Professor of Psychology Emeritus at Princeton University, and a fellow of the Center for Rationality at the Hebrew University in Jerusalem. Dr. Kahneman is a member of the National Academy of Science, the Philosophical Society, and the American Academy of Arts and Sciences. He is also a fellow of the American Psychological Association, the American Psychological Society, the Society of Experimental Psychologists, and the Econometric Society. In 2015, The Economist listed him as the seventh most influential economist in the world. Plus, in 2002, Daniel was awarded a Nobel Prize in Economic Sciences.
Part 1: The Two Systems
The first part of Thinking, Fast and Slow introduces the two systems associated with our thoughts processes. For each system, Daniel outlines the primary functions and the decision making processes associated with each system.
System 1 includes all capabilities that are innate and generally shared with similar creatures within the animal kingdom. For example, each of us is born with an innate ability to recognize objects, orient our attention to important stimuli, and fear things linked to death or disease. In addition to innate abilities, system 1 also deals with mental activities that have become near-innate by becoming faster and more automatic. Generally, these activities move into system 1 because of prolonged practice. Certain pieces of knowledge will be automatic for you. For example, you do not even have to think about what the capital of England is. Over time, you have built an automatic association with the question, ‘What is the capital of England?’ As well as intuitive knowledge, system 1 also deals with learned skills, such as reading a book or riding a bike. Plus, how to act in common social situations.
There are also certain actions that are generally in system 1 but can also fall into system 2. This overlap occurs if you are making a deliberate effort to engage with that action. For example, chewing will generally fall into system 1. However, suppose you become aware that you should be chewing your food more than you had been. In that case, some of your chewing behaviors will be shifted into the effortful system 2.
Attention is often associated with both systems 1 and 2. They work in tandem. For example, system 1 will be driving your immediate involuntary reaction to a loud sound. However, your system 2 will then take over and offer voluntary attention to this sound and logical reasoning about the sound’s cause.
Essentially, system 1 is a filter by which you interpret your experiences. It is the system you use for making intuitive decisions. Therefore, it is undoubtedly the oldest brain system as it is evolutionarily primitive. System 1 is also unconscious and impulse-driven. Although you might feel system 1 is not having a significant impact on your life, it influences many of your choices and judgments.
“Nothing in life is as important as you think it is, while you are thinking about it” – Daniel Kahneman
System 2 comprises a range of activities. However, each of these activities requires attention and is disrupted when attention is drawn away. Without attention, your performance in these activities will diminish. Significantly, system 2 can change the way system 1 works. For example, detection is generally an act of system 1. However, you can set yourself, via system 2, to search for a specific person in a crowd. This priming by system 2 allows your system 1 to perform better, meaning you are more likely to find the specific person in the crowd. This is the same process we utilize when we are completing a word search.
Because system 2 activities require attention, they are generally more effortful than system 1 activities. Plus, it is challenging to simultaneously carry out more than one system 2 activity. The only tasks that can be simultaneously completed fall on the lower limits of effort-For example, holding a conversation while driving. However, it is not wise to hold a conversation while overtaking a truck on a narrow road. Essentially, the more attention a task requires, the less viable it is to be completing another system 2 task simultaneously.
System 2 is younger, having developed in the last several thousand years. System 2 has become increasingly important as we adapt to modernization and shifting priorities. Most of the second system’s operations require conscious attention, such as giving someone your phone number. 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. It is the conscious, reasoning self that has beliefs, makes choices, and decides what to think about and what to do.
How Do the Two Systems Work and Interact?
“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
Based on the two systems’ descriptions, it could become easy to imagine that the systems occur one after the other. However, Daniel explains that these two systems are actually integrated and mutually supportive. Hence, almost all tasks are a mix of both systems and are complementary. For example, emotions (system 1) are crucial in adopting logical reasoning (system 2). Emotions make our decision-making more meaningful and effective.
Another example of the two systems working in tandem is when we are playing sport. Certain parts of the sport will be automatic actions. Consider a game of tennis. Tennis will utilize running, which is an innate skill in humans and is controlled by system 1. Additionally, hitting a ball can also become a system 1 activity through practice. However, there will always be specific strokes or tactical decisions that will require your system 2. Therefore, both systems are complementary to each other as you play a sport, such as tennis.
Issues can arise when people over-rely on their system 1, as it requires less effort. Plus, additional issues are associated with activities that are out of your routine. This is when systems 1 and 2 will become conflicted.
Part 2: Heuristics and Biases
“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
The second part of the book introduces the concept of heuristics. Heuristics are mental shortcuts we create as we make decisions. We are always seeking to solve problems with the greatest efficiency. Therefore, heuristics are highly beneficial for conserving energy throughout our everyday lives. For example, our heuristics help us to automatically apply previous knowledge to slightly different circumstances. Although heuristics can be positive, it is also essential to consider that heuristics are the source of prejudice. For example, you may have one negative experience with a person from a specific ethnic group. If you rely solely on your heuristics, you might stereotype other people from the same ethnic group. Additionally, heuristics can cause cognitive biases, systemic errors in thinking, bad decisions, or misinterpretation of events.
“Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.” – Daniel Kahneman
- The law of small numbers – This law shows our strongly biased belief of smaller numbers or samples resembling the population from which they come.
- Anchoring – Anchoring happens when considering a specific unknown value before estimating its quantity with estimates.
- Biases – Because being consciously aware all the time is a futile effort. System 1 is always active, meaning that avoiding biases and errors in judgment is very difficult. However, if done effectively, this is highly beneficial because it limits the occurrence of judgment mistakes.
- Risk and failures – Daniel Kahneman notes that risk is a human invention. The initial intent of human invention was to help us face and survive uncertainties and dangerous terrains or circumstances.
Part 3: Overconfidence
The third part of the book explores how we continuously misconstruct our experiences. Due to our overconfidence and reliance on flimsy accounts, we are wrongly predisposed to believe we understand our past. Out of this understanding, we then believe we can predict the future.
Using various elements, Daniel Kahneman shows how little of our past we understand. He mentions hindsight, a bias that has an especially negative effect on the decision making process. Specifically, hindsight shifts the measure used to assess the soundness of decisions. This shift moves the measure from the process itself to the nature of the outcome. Daniel notes that actions that seemed prudent in foresight can look irresponsibly negligent in hindsight.
A general limitation of humans is our inability to accurately reconstruct past states of knowledge or beliefs that have changed. Hindsight bias has a significant impact 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, and politicians. We are prone to blaming decision makers for good decisions that worked out badly. Plus, we give them too little credit for successful actions that only appear evident after the outcomes. Hence, within humans, 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. An example of this is entrepreneurs who take crazy gambles and luckily win. Additionally, lucky leaders are never punished for having taken too much risk.
Part 4: Choices
Kahneman notes that humans tend to be risk-averse, meaning we tend to avoid risk whenever we can. Most people dislike risk due to the potential of receiving the lowest possible outcome. Therefore, if they are offered the choice between a gamble and an amount equal to its expected value, they will pick the sure thing. The expected value is calculated by multiplying each of the possible outcomes by the likelihood each outcome will occur and summing all of those values. A risk-averse decision-maker will choose a sure thing that is less than the expected value of the risk. In effect, they are paying a premium to avoid uncertainty.
Kahneman also introduces the concept of loss aversion. Many options we face in life are a mixture of potential loss and gain. There is a risk of loss and an opportunity for gain. Hence, 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 achieve gains. A reference point is sometimes the status quo, but it can also be a goal in the future. For example, not achieving a goal is a loss; exceeding the goal is a gain.
The two motives are not equally powerful. Failure aversion is far stronger than the motivation to obtain a goal. Hence, people often adopt short-term goals that they strive to achieve but not necessarily exceed. They are likely to reduce their efforts when they have reached immediate goals. Subsequently, their results can sometimes violate economic logic.
Daniel also explains that people attach value to gains and losses rather than wealth. Therefore, the decision weights that they assign to outcomes are different from probabilities. People who face terrible 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. Additionally, because defeat is so difficult to accept, the losing side in wars often fights long past the point that victory is guaranteed for the other side.
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 suggests that we all hold an assumption that our decisions are in our best interest. This is not usually the case. Our memories, which are not always right or interpreted correctly, often significantly influence our choices.
Decisions that do not produce the best possible experience are bad news for believers in the rationality of choice. We cannot fully trust our preferences to reflect our interests. This lack of trust is real, even if they are based on personal experience and recent memories.
Memories shape our decisions. Worryingly, our 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 pain to be brief and pleasure to last. However, our memory, a function of System 1, has evolved to represent the most intense moments of an episode of pain or pleasure. A memory that neglects duration will not serve our preference for long pleasures and short pains.
A single happiness value does not easily represent the experience of a moment or an episode. Although positive and negative emotions exist simultaneously, it is possible to classify most moments of life as ultimately positive or negative. An individual’s mood at any moment depends on their temperament and overall happiness. Still, emotional wellbeing also fluctuates daily and weekly. The mood of the moment depends primarily on the current situation.
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