# Thinking, Fast and Slow - Daniel Kahneman Created: 2022_02_27 22:16 Tags: [[Book]] [[Psychology]] [[Model]] The book's main thesis is that of a [dichotomy](https://en.wikipedia.org/wiki/Dichotomy "Dichotomy") between two modes of [thought](https://en.wikipedia.org/wiki/Thought "Thought"): "System 1" is fast, [instinctive](https://en.wikipedia.org/wiki/Instinct "Instinct") and [emotional](https://en.wikipedia.org/wiki/Emotion "Emotion"); "System 2" is slower, more [deliberative](https://en.wikipedia.org/wiki/Deliberation "Deliberation"), and more [logical](https://en.wikipedia.org/wiki/Logic "Logic"). The book delineates rational and non-rational motivations or triggers associated with each type of thinking process, and how they complement each other, starting with Kahneman's own research on [loss aversion](https://en.wikipedia.org/wiki/Loss_aversion "Loss aversion"). From [framing choices](https://en.wikipedia.org/wiki/Framing_effect_(psychology) "Framing effect (psychology)") to people's tendency to replace a difficult question with one which is easy to answer, the book summarizes several decades of research to suggest that people have too much confidence in human judgement ## Two systems Kahneman describes two different ways the brain forms thoughts: ![[Thinking Fast and Slow.excalidraw.svg]] ### Cognitive biases Kahneman describes a number of cognitive biases that influence our thinking and decision-making, such as the **availability heuristic**, the **confirmation bias**, and the **hindsight bias**. These biases can lead us to make errors in judgement and decision-making. ### Prospect theory **Prospect theory** proposes that people *make decisions based on their perceptions of gains and losses, rather than on the outcome itself*. According to prospect theory, people tend to be *risk-averse when it comes to gains* and *risk-seeking when it comes to losses*. People evaluate potential outcomes based on a reference point, such as their current status quo or their expectations. The perceived *value of gains and losses is not linear, but rather diminishing*. This means that people tend to value gains less as they become larger, and losses more as they become greater. #### Loss-aversion People tend to be **loss-averse**, meaning that *losses are felt more acutely than gains*. The pain of a loss is typically *twice as powerful* as the pleasure of a gain of the same magnitude. As a result, *people may be more willing to take risks to avoid a loss than to achieve a gain.* Implications: - People may be more willing to accept a sure gain than a risky gain - People may be more willing to take a risk to avoid a sure loss than a risky loss. ### Anchoring **Anchoring** is a cognitive bias that describes the *tendency to rely too heavily on the first piece of information encountered when making a decision*. This first piece of information, or anchor, is often arbitrary or irrelevant, yet it can have a *powerful influence on subsequent judgements or decisions*. Once an anchor is set, subsequent judgements or decisions tend to be *biased in the direction of the anchor*, even when the anchor is completely unrelated to the decision at hand. Awareness of anchoring can help to reduce its influence, but people are *still prone to be affected by anchors even when they consciously try to avoid them*. Anchoring is prevalent in many different domains, including pricing, negotiation, forecasting, and other areas of decision-making. ### Intuition and expertise **Intuition is a fast and effortless** form of thinking that *can be a valuable source of information in situations where we have limited time or information*. However, it can also be **prone to bias and error**, as it is influenced by cognitive biases and other forms of distortion. **Expertise is built through deliberate practice and experience**, resulting in a large repertoire of mental models and patterns that enable *more accurate and efficient judgements*. Although even experts are prone to cognitive biases, they are generally *better able to recognize and correct for them*. **When combined**, intuition and expertise can lead to *better decision-making* by allowing experts to quickly identify relevant information and make more informed decisions. - Self-control: Kahneman describes the challenges of self-control and the ways in which our System 2 thinking can be used to overcome impulsive and irrational behavior. ## References - https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow - [[IKEA effect]] - [[Nudge - Richard H. Thaler and Cass R. Sunstein]]