Thinking Fast And Slow Book Summary By Daniel Kahneman

Daniel Kahneman is a fellow of the Center for Rationality at the Hebrew University in Jerusalem as well as an emeritus professor of psychology and public affairs at the Princeton School of Public and International Affairs and the Eugene Higgins Professor of Psychology at Princeton University. Dr. Kahneman belongs to the American Academy of Arts and Sciences, the Philosophical Society, and the National Academy of Science. Additionally, he is a fellow of the Econometric Society, the Society of Experimental Psychologists, the American Psychological Association, and the American Psychological Society. He was ranked eighth on The Economist’s list of the most influential economists worldwide in 2015. Kahneman also received the Nobel Prize in Economic Sciences in 2002.

The two methods our brains use most frequently are outlined in Thinking, Fast and Slow. Our brain is composed of systems, just like a computer. Fast, intuitive, and emotive describe System 1. In his book, Daniel Kahneman exhorts us to stop depending on this system. The most frequent cause of errors and stagnation is System 1. System 2 is a slower, more careful, and rational mental process in comparison. Kahneman advises making more frequent use of this system. Kahneman offers suggestions on how and why we make decisions in addition to this.

Table of Contents

First System Is Innate

Our mental processes are connected to two systems. Kahneman identifies the key features of each system and the accompanying decision-making procedures.

All natural talents that are often shared with species like them in the animal kingdom are included in System 1. For instance, we all have the intrinsic capacity to detect items, focus our attention on relevant inputs, and fear things that are associated with illness or death. System 1 also deals with mental processes that have advanced to the point where they are almost automatic. Due to extensive practise, these activities typically migrate into system 1. For you, some information will come naturally. You don’t even need to consider what the capital of England is, for instance. You’ve developed an automated association with the query over time.

What is the name of England’s capital? System 1 deals with taught abilities like reading a book, riding a bike, and how to behave in typical social circumstances, in addition to intuitive knowledge.

Additionally, some behaviours that typically belong to system 1 can also belong to system 2. If you are purposefully attempting to participate in that action, then there is an overlap. For instance, chewing often belongs in system 1. Having stated that, imagine you realise you need to chew your meal more than you previously did. The effortful system 2 will then take over portions of your chewing behaviours.

It is common knowledge that systems 1 and 2 are related to attention. They collaborate. For instance, system 1 will control your immediate, automatic response to a loud noise. Your system 2 will then take control and provide willing attention to this sound and rational justification for the sound’s existence.

Your system 1 filter is how you make sense of your encounters. It is the process you employ to make decisions based on intuition. As a result of its basic evolutionary state, it is unquestionably the oldest brain system. Additionally unconscious and impulsive, System 1 operates. Even while you might think system 1 isn’t having a big impact on your life, it actually has a big impact on a lot of your decisions and assessments.

Parts of System 1 can be controlled by System 2

System 2 includes a variety of operations. However, each of these tasks demands attention and is disturbed when it is diverted. Your performance in these tasks will suffer if you are not paying attention. Significantly, system 2 has the ability to alter how system 1 functions. For instance, system 1 often does detection. System 2 allows you to programme yourself to look for a certain person in a crowd. Your system 1 will work better thanks to the priming provided by system 2, increasing the likelihood that you will spot the right person in the crowd. This is the same method we do when finishing a word search.

Activities in the system 2 need more effort than those in the system 1 because they demand more focus. Additionally, performing multiple system 2 tasks at once is difficult. The only simultaneous tasks are those that require the least amount of effort, like talking on the phone while driving. Nevertheless, conversing with someone while passing a truck on a small road is not a good idea. In essence, it becomes less feasible to complete another system 2 work at the same time the more focus a task demands.

System 2 is more recent, having emerged within the previous few thousand years. As we adjust to modernization and shifting goals, System 2 has grown in importance. Giving someone your phone number is one of the majority of operations in the second system that demand deliberate attention. System 2’s functions are frequently linked to the individual’s sense of agency, control, and concentration. We identify with System 2 when we think about ourselves. The conscious, logical self is what decides what to think about and do, has beliefs, and makes decisions.

The two systems complement one another.

It could be simple to assume that the two systems happen one after the other based on the descriptions of the two systems. These two systems are genuinely connected and mutually helpful, according to Kahneman. As a result, practically all jobs combine both systems and work in unison. For instance, system 1 emotions are essential for adopting logical reasoning (system 2). Our decision-making is enhanced and strengthened by emotions.

Playing sports is another instance of how the two systems interact. There will be some automatic acts in the sport. Think about a tennis match. Tennis will make use of running, a human natural skill that is managed by system 1.

Through practise, hitting a ball can potentially develop into a system 1 activity. That said, your system 2 will always be needed for certain strokes or tactical choices. While a result, as you engage in an activity like tennis, both systems are complementary to one another.

People who rely too heavily on system 1 may experience problems because it needs less effort. Activities that are outside of your routine can cause further problems. Systems 1 and 2 will then clash at this point.

As Mental Shortcuts, Heuristics

Heuristics are a notion that is introduced in the second section of the book. Heuristics are mental stumbling blocks we develop during decision-making. We are constantly looking for the most effective solutions to solve issues. Heuristics are therefore quite helpful for saving energy in our daily life. Our heuristics, for instance, enable us to automatically adapt prior knowledge to somewhat changing situations. Heuristics can be helpful, but it’s also important to remember that they can also be the root of bias. For instance, you might have a bad encounter with someone from a certain ethnicity once. You risk stereotyping members of the same ethnic group if you only use your own heuristics. Additionally, heuristics can result in cognitive biases, systematic errors in judgement, poor choices, or incorrect understanding of events.

The Biases We Create in Our Own Minds

Eight typical biases and heuristics that can result in subpar decision-making are introduced by Kahneman:

small numbers : The principle of tiny numbers This law demonstrates our firmly held misconception that smaller samples or numbers accurately reflect the community from which they are drawn. Most people don’t realise how variable tiny samples can be. Or, to put it another way, individuals exaggerate the impact of a small study. Let’s assume that 80% of patients respond favourably to a medicine. If five patients are treated, how many will respond? In actuality, there is only a 41% likelihood that all five members of the sample will answer.
Anchoring: People frequently rely more heavily on information that they already know or that they first encounter when making decisions. We call this anchoring bias. You are more likely to ignore the second shirt if you first see one that costs $100 before seeing one that costs $1,200. If you had only seen the second shirt, which costs $100, you wouldn’t have thought it was inexpensive. Your choice was improperly influenced by the anchor, which was the first price you noticed.
Making associations between words and things is how our minds function, or priming. As a result, we are vulnerable to priming. Anything can evoke a common association, which influences our decisions and steers us in a specific way. According to Kahneman, pleasant images in advertisements and nudges are based on priming. Nike, for instance, encourages emotions of accomplishment and activity. Customers are likely to consider Nike products when beginning a new sport or trying to keep fit. Nike encourages professional athletes and promotes their success and tenacity with catchphrases like “Just Do It.” Here’s another illustration: A restaurant owner that has too much Italian wine in stock, can prime their customers to buy this sort of wine by playing Italian music in the background.
Cognitive simplicity: System 2 is more likely to believe whatever is simpler. Repetition of the idea, a clear depiction, a prepared thought, and even one’s own positive mood all contribute to ease. It turns out that even the repeating of a falsehood can cause people to believe it even though they are aware that it is inaccurate since the idea becomes ingrained in their minds and is simple to digest. An illustration of this would be a person who is surrounded by others who spread and believe false information. Despite the fact that data says this belief is untrue, it is now much simpler to believe it due to how easily it can be processed.
Jumping to conclusions: According to Kahneman, human system 1 operates by making snap judgements. What you perceive is all there is, which is the foundation for these judgements. System 1 effectively makes decisions based on easily accessible, occasionally false information. Once these judgements have been made, we firmly hold them to be true. Aspects of leaping to conclusions in practise include halo effects, confirmation bias, framing effects, and base-rate neglect.

The halo effect is when you give a person or item more positive traits based on a single favourable perception. For instance, supposing someone is smarter than they actually are just because they are attractive.
When you look for evidence to support a belief you have, this is known as confirmation bias. You also disregard data that refutes this notion. For instance, a detective might identify a suspect early on in the investigation but might only look for confirming rather than contradictory evidence. Confirmation bias in social media is amplified by filter bubbles or “algorithmic editing.” Instead of exposing the user to opposing viewpoints, the algorithms achieve this by giving them just content they are likely to agree with.

Framing effects deal with how a situation’s context can affect how people act. For instance, when offered with a positive frame, people tend to avoid danger and when presented with a negative frame, they tend to seek risk. When a penalty for late registration was instituted in one research, 93% of PhD students registered early. However, when it was indicated as a discount for early registration, the number dropped to 67%.
Our propensity to concentrate on individuating information rather than base-rate information is referred to as base-rate neglect or base-rate fallacy. Information that can be used to identify someone or an event. Information with a base rate is factual and statistical. We frequently overlook the base rate information entirely and give the specific information a higher importance.

As a result, we are more likely to base our judgements on unique traits than the overall presence of something. The base rate fallacy is demonstrated via the false-positive dilemma. In some instances, there are more false positives than true positives. For instance, only 20 out of 1,000 persons who test positive for an infection actually have it. This implies that 80 tests returned false positive results. The likelihood of successful outcomes is influenced by a number of variables, such as the reliability of the test and the characteristics of the population that was sampled.

Prevalence, or the percentage of people with a particular ailment, may be lower than the test’s false-positive rate. In such a case, tests will nevertheless result in more false positives than true positives overall, even if they have an extremely low chance of doing so in a given instance. Here’s another illustration: The likelihood that someone in your Chemistry elective course is studying medicine is minimal, even if they appear and behave like a typical medical student. The reason for this is that medical programmed often only enroll around 100 students, as opposed to the thousands of students that attend other faculties like business or engineering.

Availability: When we base our decisions on a prominent event, a recent experience, or something that is especially vivid to us, we exhibit the bias of availability. The Availability bias is more likely to affect those who are led by System 1 than other people. An illustration of this prejudice would be hearing on the news that a significant plane tragedy occurred in another nation. You can have an exaggerated assumption that your flight will likewise crash if you had a flight the following week.
The Sunk-Cost Fallacy: When better investments are available but consumers keep putting more money into a losing account, this fallacy takes place. For instance, investors commit the sunk cost fallacy when they let the price at which they purchased a stock dictate when they can sell. Research has shown that investors tend to hang onto failing equities for an excessively long time while selling winning stocks prematurely. Another illustration would be continuing a long-term relationship despite its negative emotional effects. They worry about starting over because it would indicate that everything they had accomplished in the past had been in vain, yet this anxiety is typically more damaging than letting go. Additionally, this misperception contributes to people developing gambling addictions.

Abstraction from the Mean

Any series of trials will eventually converge to the mean, which is known statistically as regression to the mean. Despite this, people often mistake lucky and bad streaks for indicators of future events, such as I am due a win because I have lost five consecutive spins on the slot machine. This belief is linked to a number of mental flaws, according to Kahneman:

Illusion of comprehension: In order to make sense of the world, we create narratives. We search for causality in the absence of any.
Illusion of validity: Stock analysts, pundits, and other professionals grow overconfident in their abilities.
Expert intuition: Disciplined algorithms frequently outperform experts and their intuition.
The planning fallacy is when someone overestimates the benefits of a chance-based encounter because they prepared for it.
Optimism and the Entrepreneurial Delusion: The majority of people have excessive self-confidence, a propensity to overlook rivals, and a conviction that they will outperform the norm.

Risk Aversion

Humans, according to Kahneman, are typically risk-averse, which means we want to minimise risk wherever possible. Because risk carries the possibility of the worst outcome, most people dislike it. Thus, if given the option between a gamble and money equivalent to its predicted worth, people will choose the safe option. The likelihood that each of the possible outcomes will occur is multiplied by each result to determine the expected value, which is then computed by adding up all of those values. A person who is risk-averse will make a decision that is less certain than the risk’s predicted value. They are essentially paying more to avoid uncertainty.

Loss Aversion

In addition, Kahneman proposes the idea of loss aversion. In many situations, we have the choice between potential gains and losses. Loss is a possibility, but there is also room for gain. Therefore, we must choose whether to accept or reject the gamble.

We are motivated more strongly to avoid losses than to acquire benefits, which is referred to as loss aversion. The present reality can serve as a reference point occasionally, but it can also be a target for the future. For instance, failing to reach a goal is a loss, while succeeding in doing so is a gain.

Both of the motivations are not equally strong. The desire to avoid failure is far stronger than the desire to accomplish a goal. As a result, many people set short-term objectives that they try to meet but may not always surpass. When they have achieved their immediate aims, they are prone to exert less effort. This implies that their outcomes occasionally defy economic rationality.

Kahneman further notes that rather than valuing money, individuals place value on wins and losses. As a result, they do not assign outcomes decision weights that are similar to probabilities. When faced with awful options, people make desperate bets, accepting a high likelihood of things getting worse in exchange for a slim chance of averting a significant loss. Such risk-taking frequently results in disasters from manageable failures.

Never rely on your preferences to accurately reflect your interests

Daniel Kahneman believes that when making decisions, we all make the assumption that we are acting in our own best interests. Typically, this is not the case. Our decisions are frequently greatly influenced by our recollections, which are not always accurate or accurately understood.

Decisions that do not result in the best experience possible are bad news for proponents of choice rationality. Our tastes do not always accurately represent our interests. Even though they are based on recent recollections and personal experience, this lack of trust is genuine.

Decisions are influenced by memories

Decisions are affected by memories. Uncomfortably, our memories can be inaccurate. Our minds are created with inconsistency in mind. We have significant choices for how long we want to feel pain or pleasure. We desire lasting pleasure and transient misery. The most intense parts of a painful or enjoyable episode are stored in our memory, which is a function of System 1. Our preference for extended pleasures and brief sorrows will not be served by a memory that disregards longevity.

It is difficult to accurately capture the experience of a second or an episode with a single happiness value. Even while good and negative feelings coexist, the majority of life’s situations can be categorized as ultimately positive or bad.

An individual’s temperament and level of happiness at any given time determine their mood. However, emotional health can change on a daily and weekly basis. The existing circumstances are mostly responsible for the mood at the time.

The book Thinking, Fast and Slow describes how all human minds function. We all have two systems that cooperate and assist one another. When we rely too much on our rapid and impulsive system, we run into problems. This over-reliance generates a variety of biases that can have a detrimental effect on decision-making. Understanding the sources of these biases and using our analytical system 2 to balance out our system 1 are crucial.

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