Thinking, Fast and Slow by Daniel Kahneman: Book Summary and Key Lessons

Category
📖Books
Date published
May 16, 2021
Last updated
Jul 31, 2021 3:55 PM

image
Nothing in life is as important as you think it is, while you are thinking about it

1. We use 2 types of thinking

According to Kahneman, two opposing systems co-exist in the human brain and jointly help us navigate life: System 1 and System 2.

System 1 (fast thinking) operates automatically and quickly, with little or no effort and no sense of voluntary control. System 1 is an intuitive system that cannot be turned off; it helps us perform most of the cognitive tasks that everyday life, such as identifying threats, navigating our way home on familiar roads, knowing that 2+2=4, recognize friends, and so on.

System 2 (slow thinking) allocates attention to the effortful mental activities that demand it, including complex computations. The operations of System 2 are often associated with the subjective experience of agency, choice, and concentration. System 2 can help us analyze complex problems, do math exercises, do crossword puzzles, and so on. Even though System 2 is useful, it takes effort and energy to engage it.

Thus, every life choice we make is controlled by these two systems. And which system is taking charge dependent on the nature of the situation.

2. There are at least 180 ways to trick the human's mind

The book illustrates the concept called cognitive bias, which are essentially pre-programmed flaws of our cognitive system (the way we think.) Much like logical fallacies, cognitive biases can be viewed either as causes or effects. Still, they can generally be reduced to broken thinking.

For example, one of them is Confirmation Bias — the tendency to overvalue data and observation that fits our existing beliefs.

You are most likely falling victim to this bias when you are Googling something that supports your opinion rather than confronts it. It is just one of the examples of how irrationally we may act.

During the years of research, Kahneman and his colleagues have identified the most common cognitive biases. The idea is that by pointing out and labeling cognitive biases, they become easier to identify, emphasize, analyze, and ultimately avoid.

Buster Benson categorized the cognitive biases into 4 broad categories:

  1. Too Much Information — how we navigate in a world full of information
  2. Not Enough Meaning — how we create meaning and fill in the gaps
  3. Need To Act Fast — what drives our actions
  4. What Should We Remember? — how do we process and store information

There is also an excellent diagram summarizing all the biases and the core messages behind them.

image

3. Prospect Theory

You are offered two options:

  1. You get $1000
  2. You get a 50-50 chance to win $2000 or $0

What would you choose?

Most people will prefer the sure smaller win compared to a riskier option to get a better prize.

What about the opposite situation? You have two choices:

  1. You lose $1000
  2. You get a 50-50 chance to lose $2000 or lose nothing

Is it different this time? Most people will choose the second option to avoid a sure loss.

That's the Prospect Theory in a nutshell. People prefer sure gains and willing to take more risks to avoid losses.

Prospect Theory is perhaps one of the most interesting cognitive biases and is used in many life situations:

  • Insurances: people are willing to pay a premium for insurance even when the risk is too small for the price
  • Lawsuit settlements: people in a winning position are more likely to accept unfavorable settlement just to avoid getting to court
  • Gambling: after losing money, people are willing to invest more with hopes to strike a huge win to cover for the past losses

Summary

Knowing how my mind works helps to understand where I should dedicate my focus and which areas to improve.

The implications of Kahneman's research and cognitive biases are enormous. They directly impact what we do every day, on a personal and a professional level.