Thinking Fast and Slow
Thinking Fast and Slow, Daniel Kahneman
I’ve been a big fan of Danny Kahneman ever since I was introduced to his teachings as part of Terry Odean’s behavioral economics class when I was at Berkeley (which turned out to be my favorite class at Haas…). My past exposure to Kahneman’s work was to his academic vitae, mainly his papers and published articles from industry rags. Thinking Fast and Slow is more of memoir of his life’s work portrayed for the laymen, an insightful and educational read about how our brains work when confronted with decision-making processes. What Kahneman includes in his book that is not so much a focus of his academic work is the application of his key theories to everyday life: why humans typically pay more for insurance than is rationally necessary; the reasoning behind why we typically hold onto losers and sell winners in our personal investment portfolios; how advertising companies pick on irrational aspects of our thought processes when plastering billboards with media… Even though I had been exposed to a lot of the contents of the book before reading it, I thoroughly enjoyed a refresher on the work of such a revolutionary figure. Highly recommended.
Publisher’s Weekly: The mind is a hilariously muddled compromise between incompatible modes of thought in this fascinating treatise by a giant in the field of decision research. Nobel-winning psychologist Kahneman posits a brain governed by two clashing decision-making processes. The largely unconscious System 1, he contends, makes intuitive snap judgments based on emotion, memory, and hard-wired rules of thumb; the painfully conscious System 2 laboriously checks the facts and does the math, but is so “lazy” and distractible that it usually defers to System 1. Kahneman uses this scheme to frame a scintillating discussion of his findings in cognitive psychology and behavioral economics, and of the ingenious experiments that tease out the irrational, self-contradictory logics that underlie our choices. We learn why we mistake statistical noise for coherent patterns; why the stock-picking of well-paid investment advisers and the prognostications of pundits are worthless; why businessmen tend to be both absurdly overconfident and unwisely risk-averse; and why memory affects decision-making in counterintuitive ways. Kahneman’s primer adds to recent challenges to economic orthodoxies about rational actors and efficient markets; more than that, it’s a lucid, marvelously readable guide to spotting – and correcting – our biased misunderstandings of the world.