Thinking Fast and Slow

Daniel Kahneman’s book, Thinking, Fast and Slow, summarizes the research that he has done over the past forty years; beginning with his work with Amos Tversky.

What Kahneman, through numerous experiments, comes to demonstrate, is that human beings are intuitive thinkers and that human intuition is imperfect. There’s a large part of the book dedicated to explain the many ways our thinking is biased and how humans make irrational choices.

I studied Economics in the early 80s. Although much of what I studied is buried is some rather inaccessible part of my brain, I still remember a couple of assumptions often at the core of much of what we were taught:  one was that “consumers are rational and make rational choices”, the other was the idea that ”consumers are risk averse”. I never felt quite comfortable with the first (this book proves that my intuition was at least correct that time)

Daniel Kahneman won a Nobel prize in Economics in 2002. Over the last recent decades his research has had a major influence in the area of Behavioral Economics. One key contribution is the demonstration that human beings do make choices that are not rational and this leads to real world results that significantly differ from theoretical predictions based on economics models.

Our “fast thinking” (system 1) is effortless, is an intuitive thinking and is actually the one that takes control most of the time. Our “slow thinking” (system 2) is the one we use to resolve complicated problems; it is effortful, requires attention and, interestingly,  happens to be slept most of the time and is “lazy”, often endorsing what comes from our intuitive selves (without realizing it). Our system 1 is, as Kahneman puts it “a machine for jumping to conclusions” even if there is very little evidence to sustain them and, consequently, our conclusions are sometimes wrong; especially when having to make choices in situations where there is a high degree of uncertainty.

Three interesting features of fast thinking are largely discussed in the book:

• People make decisions in a rather “narrow way”, focusing a lot on the immediate emotional reaction to an outcome rather than to long term consequences
• People are much more sensitive to potential losses than to potential gains, this tends to makes people unreasonably risk averse
• People tend to be optimistic and overconfident, and this leads people to take unreasonable risks

Thinking Fast and Slow is a long book, to read it takes time and patience. It is, I promise, a healthy exercise for our System 2. I found the time invested in it both enjoyable and instructive. 

If you’d rather read some serious review before trying the book itself there’s plenty available in the internet. Lastly, if you do not have much time but are ready to spend an hour having the author walking you through some of the main themes of the book here’s a video for you. Enjoy!