- Author: Daniel Kahneman.
- Genre: Non-fiction.
- Awards: Winner of the national academics communication award in year 2012.
- About: Understanding behavioral psychology and decision making.
Daniel Kahneman, winner of the Nobel Prize in Economics, summarizes his research over decades about the way we think and take decisions in this book: Thinking, fast and slow. This books is about a behavioral psychology and decision making. This book explains 2 systems that drive the way we think in daily life.
System 1 is intuitive and fast thinking system. Decision making ability of humans is an evolutionary ability which helps us to take decisions instantly and comfortably. This makes us very easy to move away from rationality. Our biases often lead us to make choices which might be unreasonable. Kahneman terms system 1 as “Auto pilot thinking” and to explain this thinking, Kahneman says: “brain is a machine for jumping to conclusions”.
“There is a direct link from more precise gossip at the water cooler to better decisions”.Daniel Kahneman in Thinking, fast and slow
System 2 is more logical, deliberative and slow thinking system. This system is more effortfull and takes more reasoning to tackle harder situations. System 2 helps you to dig into your memory and recognize things or park in to a tight parking space. This book says that System 2 is lazier than system 1 so most of our decisions are inspired by our proactive system 1 of thinking which is fast thinking. To show importance of system 2 in our thinking process, Kahneman says:
“If there is a time to reflect, slowing down is likely to be a good idea”Daniel Kahneman in Thinking, fast and slow
Key Learnings from Thinking fast and slow
According to the book, we spend all most all of our time engaged in system 1 (which is fast thinking) but we consider ourselves rational and analytical human beings which are trait of system 2 thinking. This cause some potential errors in our judgment as below:
Law of small numbers: If we see one incident we are more likely to generalize its occurrence to the whole population. People overestimate result of limited people’s survey and apply it conclusion to large population.
Assigning cause to random chance: Many facts of the world are due to chance. Our system 1 thinking has ability to assign cause to such chances. This may result in, we believing many statistical observation which are results of chance.
Illusion of understanding: People often create flawed explanations for past events. It is easy to explain any result by assigning larger responsibility to individual talent or intentions or stupidity and ignoring all other aspects.
Hindsight Bias: Also termed as “I-knew-it-all-along” bias. For any past events people can reconstruct a story by believing they knew it was going to happen that way. In case any decisions work out badly, people will ignore how good the decision was in given circumstances and will blame the decision maker.
Confirmation Bias: People tend to believe limited evidence which will confirm their prospective and will easily ignore facts which will contradict the story they want to believe.
Overconfidence: Thanks to above 3 judgmental errors people becomes overconfidence in their judgments and predictions. We will achieve high confidence easily by ignoring what we don’t know.
Over optimism: People have tendency to create plans and forecasts that are unrealistically close to best case scenario. When forecasting people often become over optimistic towards benefits and underestimates costs.
By applying knowledge we get from this book, we can be aware about ourselves when we are living in system 1 or system 2. This awareness will help us to know when we need to switch to slow thinking mode and save us form few of above potential errors.
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