Thinking, Fast and Slow
May 2012, pp. 512, Softcover
In his book Thinking, Fast and Slow Daniel Kahneman offers a fascinating insight on how the human mind works. The book presents Kahneman’s understanding of judgement and decision-making and is underpinned by a rich collection of psychological discoveries, some being his own achievements, others signed by other scientists.
Kahneman’s objective is not an easy one: he aims to “improve the ability to identify and understand errors of judgement and choice, in others and eventually in ourselves” (p. 4). Of paramount importance in accomplishing this is to acquire a precise vocabulary. Therefore, Kahneman hopes that words such as “anchoring effects”, “narrative fallacy” or “priming effects” would become relevant labels for the readers in identifying biases (systematic errors), their causes and what might one do about them.
The book consists of five main parts, an introduction and a short conclusion. An avid reader might want to have a look at two original articles written in co-authorship with Amos Twersky that are reprinted at the end of the book in the appendixes A and B: Judgement under Uncertainty: Heuristics and Biases and Choices, Values and Frames.
In the Introduction Daniel Kahneman states the reasons for writing this book, its target readership and what he hopes to achieve. He addresses a rather wide audience and he makes clear that his focus on judgmental errors is not a critique to human intelligence. He connects the origins of the book to his life-long friendship and collaboration with Amos Twersky, a cognitive and decision scientist, but he maintains that Thinking, Fast and Slow is not an account of their research together. The volume builds extensively also on other studies in cognitive and social psychology.
Part I. Two Systems
In the first part titled Two Systems the author presents the main ‘characters’ of the book: System 1 and System 2 which govern the workings of human mind in different ways. While System 1 “operates automatically and quickly with little or no effort and no sense of voluntary control” (p. 20), System 2 is responsible for effortful mental activities. System 1 for instance is at work when we drive a car on an empty road, but much more attention is needed when we need to park a car in a narrow space and this is where System 2 is activated.
Kahneman warns the reader that the two systems are not systems in the ‘real’ sense of the word, but fictitious characters, nicknames used for a very good reason though: “Anything that occupies your working memory reduces your ability to think” (p. 30). Therefore, the reader should know at any time what Kahneman means when he writes System 1 or System 2 throughout the book.
System 1 is fast, but tends to make systematic errors and statistics and logic are not among its strengths (p. 25). System 2 works to overcome the intuitions and impulses of System 1, but System 2 is described as lazy and reluctant to invest more effort than necessary (p. 31). The author introduces in this part many concepts (priming, the halo effect, cognitive ease and cognitive strain, affect heuristic, happiness heuristic, etc.), he describes experiments to support the understanding of the concepts and he frequently asks the reader to participate mentally in short exercises to understand the point he wants to make.
Part II. Heuristics and Biases
In the second part Heuristics and Biases Kahneman shows the difficulties of statistical thinking and how we let ourselves guided by our (sometimes) misleading intuition. The author indicates many situations in which the human mind seeks causes (causal thinking) where there are none, focuses too much on the content of some messages without questioning the reliability of that information, and rejects the idea of randomness. Kahneman points out that
We are pattern seekers, believe in a coherent world in which regularities […] appear not by accident, but as a result of mechanical causality or of someone’s intention.p. 115
He further draws attention on how anchoring (“when people consider a particular value for an unknown quantity before estimating that quantity” – p. 119) affects our judgement and choices. An easy to remember example for the anchoring effect is the one of a person who intends to buy a house: the listing price undoubtedly influences how much the person will be willing to pay for it.
Particular attention is given to judgement by availability (availability heuristics), which causes systematic errors with long-term consequences. For instance, because there are so many reports in the media about terror attacks, we might believe that terrorism is an immediate risk and that it causes many deaths. Yet, according to Kahneman “the number of casualties from terror attacks is very small relative to other causes of death” (p. 144). Kahneman’s juxtaposition of some of Paul Slovic’s research on risk and that of Cass Sunstein and Timur Kuran are worth reading for a better understanding of how biases influence regulations and risk policies (pp. 140-145).
Kahneman also raises awareness on the fact that “intuitive predictions tend to be overconfident and overly extreme” and he offers important advice and tools (e.g. regression to the mean) for how to mitigate them (see pp. 191-192).
Part III. Overconfidence
In Part III. Overconfidence Daniel Kahneman explores another flaw of human thinking: the exaggerated and unquestioned confidence in what we think we know. The author signals in an ironic sentence that “Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance” (p. 201).
He reiterates what he calls the WYASATI rule or “what you see is all there is”. The human mind builds out of scarce information a coherent story and disregards anything else that actually might be relevant. Jumping to conclusions is a result of WYASATI. The author strongly disapproves and discourages the use of the word “to know” in sentences such as “I knew well before it happened that …” (this is the hindsight bias) as some events are not knowable (for example a financial crisis) (p. 201).
Moreover, Kahneman reminds the reader that luck plays also a large role in human life, he examines the illusion of stock-picking skills and he stresses the importance of a strong professional culture in upholding the illusion of skill in the financial world.
In the decision between intuition and formulas/algorithms Kahneman brings strong evidence for the latter and postulates that
an algorithm that is constructed on the back of an envelope is often good enough to compete with an optimal weighted formula, and certainly good enough to outdo expert judgement.p. 226
Further topics that Kahneman addresses in this part of the book are the planning fallacy (“just one of the manifestations of a pervasive optimistic bias” p. 255), optimism, entrepreneurial delusions, competition neglect, and Gary Klein’s solution in tempering overconfidence: the premortem.
Part IV. Choices
In the fourth part dealing with Choices Kahneman elaborates on parts of his and Amos Twersky’s research which brought them fame and recognition: the prospect theory and framing effects. The prospect theory “documents and explains systematic violations of the axioms of rationality in choices between gambles” (p. 271) while framing effects are responsible for changes in preferences due to variations in how a “choice problem” is worded.
The story of how the two friends and researchers came up with the prospect theory is instructive. Kahneman and Twersky noticed that Bernoulli’s expected utility theory is flawed and Kahneman describes in this context what he calls theory-induced blindness:
once you have accepted a theory and you used it as a tool in your thinking, it is extraordinarily difficult to notice its flaws. If you come upon an observation that does not seem to fit the model, you assume that there must be a perfectly good explanation that you are somehow missing.p. 277
The author applies this idea also to prospect theory and he is able to critically analyze it and find blind spots in it.
The predictions of economic theory that builds on a rational-agent model are severely shaken in this part of the book, but the reader might gain hope by following some of the advice proposed by Kahneman, for instance avoiding a preference reversal with the help of a joint evaluation of options.
Part V. The Two Selves
In Part V. The Two Selves Kahneman examines the conflict between the experiencing self and the remembering self, a conflict born at the intersection between experience and memory. According to Kahneman the experiencing self answers the question “Does it hurt now?” while the remembering self answers the question “How was it, on the whole?” (p. 381) Based on different experiments (e.g. the cold-hand experiment), it has been shown that, if made to choose between two painful experiences, people choose the experience, which was designed to cause more pain. It seems that all that matters is the retrospective assessment, an action of the remembering self.
Two rules govern the remembering self: the peak-end rule and duration neglect (p. 380). The peak-end rule is responsible for the fact that all that is saved in our memory is an average between the level when the pain was at its peak and the level at the end of the experience. Moreover, the duration of the experience is not relevant for the assessment (duration neglect). Kahneman speaks of the “tyranny of the remembering self” and explores the consequences of the conflict between the two selves for medical practice and for well-being measurements.
In his Conclusions Kahneman summarizes, this time in reverse order, the main concepts of the book and shortly addresses the issue of decision-making in organizations. He points out one main deficiency in the organizational context: “the absence of systematic training for the essential skill of conducting efficient meetings” (p. 418).
Thinking, Fast and Slow is a work of great erudition on judgement and decision-making. Based on scientific knowledge, the book brings together a collection of insights into the orchestrations of the human mind. It is a popularization book as it addresses a lay audience, but this does not affect in any way the book’s value. By providing a huge number of examples, by describing so many experiments and by asking the readers to mentally participate in short experiments, Kahneman ensures an active engagement with the text. Moreover, the short sections “Speaking of…” accompanying every sub-chapter reiterate and illustrate through simple sentences the main concepts discussed in the respective sub-chapter.
The autobiographical tone used in describing some of his discoveries with Amos Twersky and other researchers is also very pleasant and it helps in setting the context. Less pleasant is sometimes the feeling that some of the experiments are repeatedly presented. However, many of the concepts and ideas Kahneman explores are actually connected and sometimes he describes them from different perspectives, therefore it can add up to an enriching experience.
There are certainly many new discoveries since 2011, when Kahneman published Thinking, Fast and Slow. However, the book is a highly recommendable reading, it is an intellectual experience that one should not miss.
Daniel Kahneman was born in Tel Aviv in 1934. He obtained his first degree in psychology and mathematics from the Hebrew University in Jerusalem. He wrote his dissertation in 1961 at the University of California in Berkeley.
In 2002 Kahneman was awarded the Nobel Prize in Economic Sciences
for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertaintyhttps://www.nobelprize.org/prizes/economic-sciences/2002/summary/
For more information on Kahneman including a list of his publications, see Kahneman’s biography on the Nobel Prize site.
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