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Book Review: 'Thinking, Fast and Slow' by Daniel Kahneman

Get your copy here: Daniel Kahneman is a Princeton University psychologist who won a Nobel Prize in economics. What’s interesting is that he’s a psychologist winning an economics prize. By bridging psychology and economics, Kahneman’s influential work — influencing the likes of Steven Pinker to Malcolm Gladwell — has spawned the exciting field of behavioral economics. Daniel Kahneman’s Thinking, Fast and Slow is a highly interesting book that explains how people think, and will change the way you think about thinking. It establishes the idea that the mind essentially works in two streams: System 1 and System 2. System 1 is the fast, intuitive and emotional brain. System 2 is the slow, deliberate and logical brain. This explains how we make decisions, some fast, some slow, and some in combination. At times, for certain decisions, we rely on our gut, instinct and intuitions. During other times, we rely on slow, logical, reasoning. There is a contrast in how these two biases impact the way we think about decisions and contrast the thinking proposed by the standard rational economic agent. This book helps people think about thinking, offering practical insights into how choices are made and can improve the way we take personal and professional decisions, and is therefore a refreshing read.

The human mind is a complex one. It’s filled with biases, heuristics, cognitive processes and influences that are within and beyond our control. Daniel Kahneman’s Thinking, Fast and Slow is a highly influential book that gets under the inner workings of the mind, and offers readers a grip on how the mind decides. Drawing from real experiments, scientific research and stories, this book explores the complexities of the human mind, while giving practical tips on managing it with greater effect.

Daniel Kahneman’s Thinking, Fast and Slow introduces the key concept that the human mind is driven by two types of thinking. System 1: fast, intuitive, initiative mind. System 2: slow, deliberate, logical mind. By revealing examples of how these two types of thinking determine pretty much every decision we take, Kahneman helps readers make sense of, and realise, the ways humans decide and judge.

Daniel Kahneman’s Thinking, Fast and Slow’ brings to light a whole range of human behavioral biases and heuristics that determine our decisions. For instance, ‘availability heuristic’, which describes the human tendency to use the information that comes to mind most quickly in making decisions about the future, or ‘anchoring effect’, which describes the human tendency to rely too heavily on the first piece of information offered in making decisions, and so on. By shedding light on these kinds of biases and heuristics, Kahneman informs readers of the many ways that determines the decisions we take every day. 

Daniel Kahneman’s Thinking, Fast and Slow is a book that reveals other common human phenomena, such as overconfidence. Which is the basis that humans tend to justify their beliefs and actions with conviction, no matter how wrong they are, based on stories that justify their beliefs and actions. These kinds of human phenomena have major implications in decisions pertaining to say, finance or policy making, and Kahneman’s book helps readers realise the dangers of such tendencies.

Daniel Kahneman’s Thinking, Fast and Slow expands on the complexities of the human condition by introducing fundamental choice concepts such as ‘prospect theory’, which suggests that people, especially investors, value gains and losses differently, placing more weight on perceived gains than perceived losses. Or its related effect, ‘loss-aversion’ theory, which suggests that the pain of losing something is twice as powerful as the pleasure of gaining, and so on. Such concepts go against the conventional held theories proposed by economics, which suggest that humans are always acting rational, with the amazing capacity of maximum gains and minimizing losses.

We all tend to think that we have a grasp on what’s going on in the world, when in reality, the world is far more complex than we know of. This is a cognitive bias called the ‘illusion of understanding’. Daniel Kahneman’s Thinking, Fast and Slow introduces such biases, and unpacks it to help readers understand the complexities of the world, and the narrative fallacies we tend to create to justify our positions and reasons. It prevents us from falling for such fallacies, and assumes that every cause and effect has a logical chain of actions. It reminds us that although we make stories to make sense of the world, those may not always be the way things are held together, and so on.

Kahneman’s Thinking, Fast and Slow brings to attention the dichotomy of our two selves: the experience self and the remembering self. Kahneman reveals that the experiencing self knows only the present moment, but the remembering self is a storyteller that dictates our actions based on past memories. Such insight into the human mind is extremely useful in realizing areas like how happiness works. Because lives are mostly made up of experiences that aren’t remembered and the ones that we remember aren’t reflective of what actually happened. Kahneman explores the implications of such distinctions to help our overall wellbeing and decision-making.

Kahneman’s Thinking, Fast and Slow explores biases like anchors. Anchor bias, he notes, is a form of priming where one thing influences the other. For instance, salary negotiations revolve around the first figure, which is an anchor, in influencing the discussion around the negotiation. The book dives into the role of such anchors, or initial pieces of information, and their impact on subsequent biases and decisions.  

Kahneman’s Thinking, Fast and Slow reveals the battle between intuitive judgements and judgements based on formulas and algorithms. By studying a wide range of subjects, Kahneman suggests that decisions based on formulas beat intuition some 60% of the time. The reason being, experts tend to get clever in their decisions and often make misjudgments, whereas formulas and algorithms are more predictable and accurate. He analyses the advantages and disadvantages of one over the other, offering a compelling read that gets us thinking. He makes the case for when to use intuitive and when to use formal models to achieve the greatest effect in decisions.

Kahneman’s Thinking, Fast and Slow enumerates a number of useful concepts that influence the way we think. Like dual systems: the interplay between System 1 and System 2 thinking. System 1 is fast, intuitive, emotional thinking and System 2  is slow, deliberate, logical thinking. System 1 explains our ability to drive a car, recognize a face, or make casual decisions, whereas System 2 explains our ability to make complex decisions, like choosing an insurance plan. Cognitive biases, such as confirmation bias, which is to treat new information as confirmation of one’s biases, to the framing effect, decisions about options are made based on the way the options are presented, and so on. Power or anchors, which sway subsequent decisions. The advantages and limitations of intuition and formulas, and when to rely on which way to achieve the best decisions. This is a book full of interesting concepts, blending evidence and wisdom, about the way humans decide and can be applied across all areas from everyday finance to governmental policy making. It’s a book that combines psychology and economics to reveal interesting insight into the human decision making process.

Kahneman’s Thinking, Fast and Slow is a book that helps readers understand how thinking works. It introduces the two types of thinking that influences our decisions, and how they interact continuously, but always smoothly. It shows that people tend to make sense of the complex world by creating stories that stitch cause and effect, and random events. That people tend to distort reality, estimate value and risk, gains and losses in different ways. That people have two selves, the remembering self and the experiencing self; the former evaluates experiences, where the latter just lives life. All these biases and tendencies basically disprove the conventional economics theories that suggest that people are perfectly rational beings. Get your copy here:



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