Thinking, Fast and Slow by Kahneman

• Thinking, Fast and Slow is an internationally renowned book written for anyone interested in personal well-being and human development.
• The book gives a schematic explanation of how people can make better choices by describing how our thinking interprets past, future, and present situations in correct and incorrect ways.

‘Thinking, fast and slow’, a New York Times bestseller and multiple prize winner, is a highly praised book that provides us many insights into the human mind. It is seen as a guide to detecting and correcting our biased misunderstandings of the world. We see ourselves as rational thinkers and decision makers, but this book demonstrates how we are subject to many systematic errors, which we are not even aware of or tend to ignore.

The author, Daniel Kahneman, won the Nobel Prize in economics in 2002. Kahneman

How do System 1 and System 2 deal with effortful tasks? - Chapter 2

System 2 is defined by its effortful operations, although it is also lazy: it puts in no more effort than needed. Some crucial tasks can only be performed by System 2, because they require self-control and effort to overcome the impulses and intuitions of System 1.

The ‘Add-1’ task puts our System 2 to work and demonstrates the limits of our cognitive abilities within seconds. If you truly want to challenge yourself, try Add-3. Your body will also react to the mental work. Eckhard Hess, psychologist, described pupils as windows to the soul. He found that the pupils indicate the level of mental effort: they dilate more if people have to solve more difficult problems. Kahneman set up an experiment to study the reaction of pupils while the

How does the 'associative machinery' of fast thinking work? - Chapter 4

Read the following words:

“Mango”                              “Puke”

In a few seconds you will experience appalling images and pull a disgusted face. You automatically responded to the word ‘puke’ like you would respond to the actual event. Our minds automatically assume causality between the words mango and puke, forming a scenario in which the mango caused nausea. This results into a short-term aversion to mangos. You are also extra ready to recognize and respond to concepts and objects associated with ‘puke’, such as vomit, sick, nausea and words associated with ‘mango’, such as exotic, fruit and red. Words associated with other causes of puking are also easier to recognize (food poisoning, hangover). You were a little surprised, as your System 1 noticed the uncommon juxtaposition of the words.

This wide

The main function of System 1 is maintaining and updating a model of your personal world, which represents normality. This model is constructed by associations that connect ideas of events, circumstances, outcomes and actions that regularly occur. The formed connections become a pattern of associated ideas, which represents the structure of events in your life. It determines how you interpret the present and your future expectations.

Surprises are crucial elements of our mental life, they are the most sensitive indication of our understanding of the world and our expectations from it. Surprises can be divided into two varieties: conscious and active surprises, and passive surprises. Around dinner time, you expect your partner to return home from work. When you hear car doors slamming, you expect to see his face. It would be a surprise if someone else walks in. In case of a passive

System 2 deals with both questions from someone else (“Did you like the food?”) and from your own mind (“Do I really need to buy this?”). Both answers come from directing your attention and searching your memory. That is not how System 1 operates. It constantly monitors what is happening inside and outside our mind. It unintentionally and effortlessly assesses the elements of the situation. These ‘basic assessments’ affect our intuitive judgment, because they are easily replaced with harder questions. Two other characteristics of System 1 supporting the replacement of one judgment with another are the ability to translate values across dimensions (“If Chloe were as heavy as she is smart, how heavy would she be?”) and triggering other computations, like basic assessments.

An example of a ‘basic assessment’ is the ability to distinguish between an enemy and a friend in the blink of

A study of cancer diagnoses in the United States showed a pattern: the number was lowest in sparsely populated, rural and Republican areas. What you make of this information, through searching memory and formulating hypotheses, is an operation of System 2. System 1 was also involved: System 2 depends on the suggestions and facts retrieved from associative memory. You probably focused on the rural-fact and did not link the lowest number to Republican policies. It makes sense to attribute it to the rural environment, with fresher foods and cleaner air. The number of diagnosis was highest in also rural and sparsely populated areas. You might link this information to poverty, access to good healthcare or smoking. However, living in rural areas cannot explain both numbers. The main factor was not the areas being Republican or rural, but having small populations. This example shows the complex relation between

What do people do when they want to estimate the frequency of certain categories (for example the divorce rate among professors, poisonous snakes)? The reliance on the ease of memory search (instances coming to mind) is called the ‘availability heuristic’. This heuristic is both an automatic operation (System 1) as a deliberate problem-solving strategy (System 2).

The availability heuristic substitutes questions, which results into biases (systematic errors).  Examples of factors that are potential sources of bias are:

• Conspicuous events attract attention and are easy to retrieve from memory. Instances of divorces among famous actors will come easily to mind, making you prone to exaggerate the frequency of divorces among famous actors.

• Dramatic events temporarily increase the availability of the concerning category. Hearing about a fatal accident with a bike on the news temporarily influences

Imagine drawing one ball from a jar. To determine whether the ball is more likely to be black or yellow, you need to know how many balls of each color there are in the jar. The proportion of balls of a specific color is called a ‘base rate’.

If you have to guess the graduate specialization of university student Patrick by ranking a list of fields in order of likelihood, you quickly realize that the relative size of enrollment in these field is important. Due to the absence of more information about Patrick, you will go by the base rates and predict that Patrick is more likely to be enrolled in law, than in medicine or art history, because there are more students overall in law. We use base-rate information when there is no further information.

Now you are asked to

Read the following problem, what is your intuitive answer?

“Last night, a bus was involved in a traffic accident. Two bus companies, the Yellow and the Brown, operate in the area. 80% of the busses are Yellow and 20% are Brown. A witness declared the bus being Brown. The reliability of the witness in similar circumstances was tested: the witness correctly identified each color 75% of the time and failed 25% of the time. What is the probability that the bus was Brown?”

There are two pieces of information: a base rate and the not fully reliable testimony of the witness. Without the witness, the probability of the bus being Brown is 20%: the base rate. If the bus companies had been equally large, the base rate would be useless (50/50) and merely the reliability of the witness would be considered. Most people

Forecasting is a major part of our professional and private lives. A number of predictive judgments are based on analyses or computations, but most involve System 1 and intuition. Some intuitions draw on expertise and skill, gained through experience. The automatic and quick judgments and decisions of physicians, chess masters and fire chiefs are examples of skilled intuitions. They quickly come with solutions, because they recognize familiar cues. Other intuitions are the result of (substitution) heuristics. Numerous judgments arise from a combination of intuition and analysis. 

What are nonregressive intuitions?

A question regarding a current situation and a prediction activates System 1. “Mark is currently a bachelor student. He could count to 30 when he was two years old. What is his GPA?” People who have knowledge about the educational system provide quick answers thanks to the operations of System 1:

System 1 is known for jumping to conclusions from limited evidence (WYSIATI). The coherence of the story created by System 1 and System 2 makes us confident about our opinions. The quality and amount of the evidence are less important, because poor evidence created a good story. We even have beliefs without any evidence for them, we just believe something because our partner or friend does. It is ridiculous how confident we are in our beliefs when we know so little.

The illusion of validity can be explained by the following experiment. Two psychology students watched soldiers in officer-training trying to solve a problem. They decided to evaluate them: who would make a great army leader? The exercise was exhausting and required several attempts. Some soldiers seemed arrogant, persistent, submissive, hot-tempered, stubborn, patient or quitters. Some were expected to become great leaders, others were

Gary Klein is the intellectual leader of students of Naturalistic Decision Making (NDM), who study real people in natural situations. He rejects the focus on biases in heuristics, doing artificial experiments and is highly skeptical about choosing algorithms over human judgments. Klein is known for studies of expertise in firefighters and the development of intuitive skills in experienced experts. Despite their differences, Kahneman worked together with Gary Klein on a joint project in order to answer the question “When can you trust an experienced professional who claims to have an intuition?” They both agreed about Gladwell’s bestselling book ‘Blink’ about art experts that had the gut feeling that the object was a fake, but could not tell what it exactly was that made them think it was not the real deal. They knew it was a fake without knowing how they knew: a perfect example of intuition.

The planning fallacy is one of many manifestations of the optimistic bias. Many people view their attributes as more favorable than they probably are and consider their goals as more achievable than they probably are. Optimistic bias can be a risk as well as a blessing, which is why you should be cautious when you feel optimistic.

Some people are more optimistic than others. They are usually happy, popular and resilient. Optimists play a disproportionate role in shaping society. Their decisions have an impact on others: they are leaders, inventors, entrepreneurs. They seek challenges and take risks, are talented and lucky. Their successes and the admiration by others makes them even more confident. This description results into the following hypothesis: the most influential people are likely to be overconfident and optimistic, and take more risks than they are aware of. The evidence indicates that

What is the prospect theory? – Chapter 26

In utility theory, the utility of a gain is determined by comparing the utilities of two states of wealth. The utility of receiving an extra € 400 when your wealth is € 2 million is the difference between the utility of € 2.000.400 and the utility of 2 million. If you lose € 400, the disutility is again the difference between the utilities of both states of wealth. It was assumed that the distinction between losses and gains did not matter and was not examined due to the theory-induced blindness.

Kahneman and Amos had focused on differences between gambles with low or high probabilities of winning, until Amos casually mentioned the losses. The risk aversion turned out to be replaced by going for the risk. Consider the following problems:

1. Which do

In an experiment, people lying in a brain scanner were shown several images. Among them were pictures of the eyes of a happy person and of a terrified person. They were shown for a fraction a second: the participants never consciously knew they had seen the pictures. One part of their brain did know: the amygdala, the ‘treat center’. Brain images showed an intense reaction to the threatening picture. The same process makes us process angry faces (a possible threat) more efficiently and faster than happy faces. An angry person in a happy crowd gets noticed faster than the opposite situation. Our brains are equipped with a mechanism that gives priority to bad news.

Our brains also respond faster to merely symbolic threats. Bad words (war, murder),  emotionally loaded words and opinions with which you strongly disagree attract attention quicker than their opposites. Loss aversion

Try remembering a time in which terrorist attacks in public transport were relatively common. The attacks were fairly rare in absolute numbers and the risks for travellers very small, but that is not how they felt about it. People tried to avoid public transport or were very cautious. Kahneman also disliked being near buses, even though he knew the risk of a terrorist attack happening was negligible. People assigned an absurdly high decision weight to a very small probability due to the experience of the moment: being near a bus made them have unpleasant thoughts, so they avoided buses. Terrorism is effective because it evokes an availability cascade. Very vivid images of victims, constantly mentioned by media and the topic of many conversations, become highly accessible, especially if it related to a specific situation (seeing a bus). This emotional response is automatic, uncontrolled, associative and it generates

For most people, gaining money reflects achievement and self-regard. We keep score in our mind when we lose or gain money and consider them punishments and rewards, threats and promises. The ‘scores’ motivate our actions and influence our preferences. Cutting our losses feels like a failure, so we refuse doing it.

We hold money in both physical and mental accounts. We have general savings, special savings for our kids or emergencies and money to spend. We are more willing to draw on some of these accounts compared to other accounts to cover current needs. Self-control also plays a role: some accounts can be used only for household expenses, they limit have much we can spend. Mental accounts are a form of narrow framing: they keep things manageable and under control. Mental accounts are used for keeping score. For instance, successful golfers have a separate

France and Argentina competed in the 2022 World Cup final. The following sentences both describe the outcome: “Argentina won.” “France lost.” Whether these statements have the same meaning or not depends on your idea of ‘meaning’.

The truth conditions of the two interchangeable descriptions are identical: one is true, so the other is true as well. Economics consider the preferences and beliefs of people as reality-bound, which are not influenced by the wording of their descriptions. There is another sense of ‘meaning’, in which both sentences have different meanings. The two sentences induce different associations (System 1). “Argentina won” induces thought of the actions of their national team and “France lost" induces thought of what they did that made them lose. In terms of induced associations, the sentences mean something else.

Most people do not have reality-bound preferences as System 1

When people are about to die, their loved ones rush to them for one last moment, before death sets in. Why do we care so much about that final moment? Why is it so important that a movie ends with people arriving in time, while the length of the life was not taken in consideration? It hardly matters learning that they actually had several days together instead of 5 minutes, but someone being too late would be a big deal to you. Stories are about memorable moments and important events, not about the passing of time. In a story, duration neglect is normal and the ends often defines whether it’s a good or bad story.

Caring for someone usually means being concerned for the quality of his/her story, not for his/her feelings. We also deeply care for the narrative of our own life story.

The decision to marry someone reflects a huge error of ‘affection forecasting’. On their big day, the groom and bride know that the divorce rate is high, but they believe that these numbers do not apply to them.

A study on the level of life satisfaction from the day people get married shows a gradual drop. It is argued that the honey moon phase fades and married life becomes a routine. Another example is plausible: heuristics of judgment. A mood heuristic is one way of answering questions about life-satisfaction. In addition to the current mood, people are likely to think about significant events in the recent past. Only a few relevant ideas come to mind, but most do not. The rating of life-satisfaction is heavily influenced by a small amount of highly available ideas, not by carefully weighting all life domains. People who recently