Thinking, Fast and Slow
Before their judges’ dinner, Israeli convicts have a 0% chance at parole, according to a 2011 study. After an afternoon lunch, they have a 65% chance. Similar statistics, studies, and stories in Thinking, Fast and Slow lend writer Daniel Kahneman his hallmark clarity and applicability.
While Thinking, Fast and Slow plows through esoteric and abstract topics, from the availability heuristic to prospect theory, Kahneman ties such disparate ideas together with the central issues of decision making and cognitive biases.
The first section of Thinking, Fast and Slow deals with the human mind, in particular its dual nature as a rational and intuitive agent. Kahneman introduces this idea with an activity: reacting to a picture contrasted against two digit multiplication.
From this first subject through the final chapters on risk aversion and rare events, Kahneman’s narration follows a similar structure. He first illustrates new concepts using our own reactions or impressions, then elaborates on the same concept in theory and research. Each chapter concludes with a summary of applications of his theories in hypothetical examples. Kahneman applies his thesis that humans learn best through stories in these hypotheticals which explain logical shortcomings or illogical biases using the potential mistakes of friends, students or coworkers. In one example, Kahneman warns against a man “underestimat[ing] the risks of indoor pollution because there are few media stories on them. That’s an availability effect. He should look at the statistics.”
The mixture of application meshed with theory and a sprinkling of data along with his conversational, informative tone makes Thinking, Fast and Slow pleasant, if not quite light, reading, despite its 400 pages and densely packed chapters. Thinking, Fast and Slow is a masterpiece for its objective explanation of the human mind, subjective explanation of our own minds explanation of how to correct their subjectivity and biases.
In particular, Kahneman’s explanations of anchoring effects, heuristic questions and prospect theory reshape the standard model of the human mind to a more nuanced often irrational but generally predictable understanding of human thought. Thinking, Fast and Slow‘s chapter on anchoring effects explains that random, unrelated numbers and ideas prime people to see and respond with similar numbers and ideas. For example after reading the number 10 from a random number generator, the average respondent will adjust most answers up or down to the number 10. Just as the anchoring effect undermines the rational model of thought in dealing with numbers, prospect theory debunks the rational model of gains and losses widely accepted in human emotions, from joy to pain. In prospect theory Kahneman explains losses are felt more acutely than equal gains, and the experiences of neither gains nor losses scale linearly with actual gains and losses. In other words, losing $1 hurts more than a free $1 and losing $1 hurts more than half of losing $2.
Kahneman’s 77 years of research that culminated with a nobel prize are distilled in Thinking Fast and Slow, but remain broad enough to be relevant to every reader. CEOs should not “make additional investments because they do not want to admit failure … an instance of the sunk-cost fallacy,” whereas us students “can’t assume we will really learn anything from mere statistics. Let’s see one or two representative individual cases to influence our intuitive judgment.”
Thinking, Fast and Slow is uniquely applicable and accessible for a variety of audiences; here is a list of applications and observations I’ve made since I read it:
- The high profile court case between Apple and Samsung was an example of what Kahneman describes as “the planning fallacy.” Both companies must have consulted with similar legal experts and came to the same conclusion: their side would win. However as we now know Apple won nearly all of the points of contention, so Samsung’s confidence undoubtedly (well at least partially) stemmed from their awareness of the time, money and effort they put into legal aid, and their lack of awareness of Apple’s similar efforts (the planning fallacy.)
- Before reading Thinking, Fast and Slow, I disliked the phrase “a good compromise leaves everyone unhappy,” because I interpreted its advice as: leave everyone unhappy to make a good compromise (an obviously inferior solution to leaving everyone happy). Kahneman’s satisfaction, or happiness graph explains that losses hurt more than gains, meaning an equal compromise will leave both parties unhappy.
- Some teachers at M-A (notably Mr. Florio) prefer large and legible fonts for tricky questions; however, Kahneman’s research suggests small, difficult to read text stimulates the brain’s logical processes.
Daniel Kahneman’s Thinking, Fast and Slow introduces, explains, and corrects flaws in human reasoning to improve decision making from the everyday to corporate mergers to guesses of Gandhi’s age at death.