Thinking, Fast and Slow by Daniel Kahneman

Thinking, Fast and Slow by Daniel Kahneman

Book Genre – Non fiction

Rating- 4/5

This is one the few books I rate close to Homo Sapiens by Yuval Noah Harrari. Coincidently this author is also from Israel!

“It was the 2012 winner of the National Academies Communication Award for best creative work that helps the public understanding of topics in behavioral science, engineering and medicine” this is the description of the book in Wiki.

The book is an ode to his friend buddy and co researcher Amos Tversky and in many places he remembers Amos with so much pride and emotion that is is endearing that even in these days and times friendship is present!

Before you begin the book you must understand this basic theory which Daniel has namely that humans have two system of thought and response and he called them System 1 and System 2.
Now, whole through the book you will be made to realise that System one is the small inner child who jumps for the deal without a thought while system 2 is a mature adult who takes it own time to answer the thought or make a decision usually with logic!

It’s like life is a volleyball match and your body is actually two player who gets to decide in that instant who will take the ball! Now if the decision does not need too much thinking or logic like say 1 plus 1 then it’s system one which take the ball so to speak while if the decision is like driving a car or little more complex then its system 2 which takes over.
This whole system analysis is described by Daniel is a series of experiments and test elaborated very well in the book. My added advantage was that I heard the book in audible so it was relatively easier to understand! I earlier started reading this book via ebook when nothing entered my brain, system notwithstanding!

You will get many examples on when which system is active and when which system takes over! Listening to the examples while driving most of the information made sense and i knew that my system one was doing it when suddenly he will ask a complex question and I will realise that system two is taking over and I park the car to the side to be more attentive!

After introducing the basic he goes to the next section of Heuristic and Biases! It’s like how a child will identify an image as two whales and how an adult will think something else! Some concepts discussed in this are

Anchoring this was described in a series of examples! If you are asked whether this prisoner gets 10 years or so then the judge uses this anchor to give a judgement close to 10 while if you ask 5 then he or she will give a decision close to 5! It’s like when you raise the price of an object the given price will automatically be high! This is the way I understood this concept!

Availability is another concept in which if you know or have the data available of a particular thing in your mind then automatically it either becomes more common or important!

Substitution is a concept when you are asked to think about Linda a fictional character and you will either think or a commercial Bank or the bank of a river depending on your stimulation!

In Optimism and loss aversion he explains how people tend to over estimate benefits and underestimate loss! It’s like how you go one channelling money and resources over a failed project in the hope that it may recover while not trying anything new which can actually give benefit!

Framing; decision is heavily influenced by statements which are the same but you make completely different decision! Like if someone says that you have 90 percent chance of making profit then you will go ahead and invest but if someone says it will make 10 percent loss (which is the same statement!) then you may hesitate to invest! This is a common marketing ploy used worldwide!

These decision are a result of overconfidence and sunk cost and Daniel Kahneman’s opinions concerning overconfidence are influenced by Nassim Nicholas Taleb.

Kahneman developed prospect theory, the basis for his Nobel prize, to account for experimental errors he noticed in Daniel Bernoulli’s traditional utility theory. This was also a collaboration with Amos and here he tries to put forward his counter arguments!

His final chapters discussed things such as recent evidence which introduces a distinction between two selves, the ‘experiencing self’ and ‘remembering self. He ends by thinking about life and experiencing well being and thinking of his life as a story!

WHAT YOU SEE IF ALL THERE IS!
This is the primary theory!

This is a reference book of course and only a true economist will truly understand the contexts in the book though many controversies have also been apparently raised by the book!

In the end since this was my first audible which ran for over 17 hours which in real life would have taken me ages to read I finished in a matter of a week!

I suggest you also do the same!