Thinking Fast and slow

System 1 and System 2 form the backbone of this book.

System 1 is impulsive, and provides heuristic and intuitive guesses and reactions to stimuli without prompting. It can't be turned off. Why You See Is All There Is (WYSIATI). But it's also responsible for remarkably well-tuned intuitions, fast information-processing, "muscle memory," pattern-matching, intensity matching, face & situation recognition, and much of what makes human minds human. Author points out situations in which System 1 is scientifically poor, including statistics (like the difference between 0.01% and 0.001%), random events, weighting time & duration in retrospect.

System 2 is more calculated, requires devoted effort and concentration in rationalizing & making decisions. It assigns value to past events, keeps score, questions bias, and carries out more intensive, deliberate calculations involving more data. It's like fetching data from main memory, rather than relying on the cache.

Kahneman's prose is rich with examples and experimental case studies, from visceral phenomena like pleasure vs. pain tolerance, and the tendency to derive general from specific, rather than the specific from the general (statistic).... to logic fallacies like optimism in planning, misjudging statistics, underestimating sampling, and sunk costs. He gives simple, easy-to-remember names to a lot of the phenomena he observed in studies, like the peak-end rule that describes how humans tend to judge pain or pleasure of a past event based on an average of how it ended and the peak of the experience, neglecting duration. He also provides solutions and checks & balances that can help us reduce bias, where possible. For example, to mitigate the planning fallacy, he writes:

1.) Identify an appropriate reference class.

2.) Obtain the statistics of the reference class. Use the statistics to generate a baseline prediction.

3.) Use specific information about the case to adjust the baseline prediction, if there are particular reasons to expect the optimistic bias to be more of less pronounced in this project than in others of the same type.

Finally, I thought he -- and his editors -- divided the book brilliantly. Chapters are short, usually 8~16 pages, and they always concentrate on some nugget or fallacy that could be later referenced by a single term, like "anchoring," "regression to the mean," "the fourfold pattern," or "the halo effect." He builds up knowledge brick by brick, experiment by experiment, that after a few nights of reading, you begin to recognize fallacies and patterns in everyday life by the terms Kahneman has assigned to them.

My favorite part of each chapter is the end: a short section of quotations that describe and use key terms from the chapter, in an everyday, relatable way.

There are too many topics and quotes to list them all. Some of my favorites:

"The best we can do is a compromise: learn to recognize situations in which mistakes are likely and try harder to avoid significant mistakes when the stakes are high. The premise of this book is that it is easier to recognize other people's mistakes than our own."

"Self-control requires attention and effort."

"His System 1 constructed a story, and his System 2 believed it. It happens to all of us."

"They didn't want more information that might spoil their story. WYSIATI."

"We often compute much more than we want or need. I call this excess computation the mental shotgun. It is impossible to aim at a single point with a shotgun because it shoots pellets that scatter, and it seems almost equally difficult for System 1 not to do more than System 2 charges it to do."

"Money-primed people become more independent than they would be without the associative trigger."

"He was asked whether he thought the company was financially sound, but he couldn't forget that he likes their product."

"Our aim in the negotiation is to get them anchored on this number."

"Let's make it clear that if that is their proposal, the negotiations are over. We do not want to start there."

"When the evidence is weak, one should stick with the base rates."

"They added a cheap gift to the expensive product, and made the whole deal less attractive. Less is more in this case."

"System 1 can deal with stories in which the elements are causally linked, but it is weak in statistical reasoning."

"The experiment shows that individuals feel relieved of responsibility when they know that others have heard the same request for help."

"We can't assume that they will really learn anything from mere statistics. Let's show them one or two representative individual cases to influence their System 1."

"But those with the most knowledge are often less reliable. The reason is that the person who acquires more knowledge develops an enhanced illusion of her skill and becomes unrealistically overconfident."

"The question is not whether these experts are well trained. It is whether their world is predictable."

"The research suggests a surprising conclusion: to maximize predictive accuracy, final decisions should be left to formulas, especially in low-validity environments."

"In this view, people often (but not always) take on risky projects because they are overly optimistic about the odds they face."

"A well-run organization will reward planners for precise execution and penalize them for failing to anticipate difficulties, and for failing to allow for difficulties that they could not have anticipated --the unknown unknowns."

"She is the victim of a planning fallacy. She's assuming a best-case scenario, but there are too many different ways for the plan to fail, and she cannot foresee them all."

"He weighs losses about twice as much as gains, which is normal."

"Think like a trader! You win a few, you lose a few."

"Decision makers tend to prefer the sure thing over the gamble (they are risk averse) when the outcomes are good. They tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative."

"We are hanging on to that stock just to avoid closing our mental account at a loss. It's the disposition effect."

"The salesperson showed me the most expensive car seat and said it was the safest, and I could not bring myself to buy the cheaper model. It felt like a taboo tradeoff."

"Did he really have an opportunity to learn? How quick and how clear was the feedback he received on his judgments?"

"We want pain to be brief and pleasure to last. But our memory, a function of System 1, has evolved to represent the most intense moment of an episode of pain or pleasure (the peak) and the feelings when the episode was at its end. A memory that neglects duration will not serve our preference for long pleasure and short pains."

There are many, many more. Read the book for yourself and enjoy the wisdom!