Thinking Fast and Slow: Book Review (Monday Musings 84)

I heard about this book from one of my streamer friends after I mentioned how I don't think of myself as good at responding to unexpected things. I rarely think on my feet as well as I'd like. She'd heard about Thinking Fast and Slow by Daniel Kahneman and felt it might explain why some people can't respond quickly to surprises. Further, those types of people are more thoughtful, so I might not feel too bad about myself.

However, the book goes into different matters than what I hoped. Kahneman's thesis is that humans are not rational and how that was a huge breakthrough in the world of economics. This surprised me, because we all know that people do really stupid things, even the most rational among us...for example, we all know usually sensible people who don't wear helmets or seatbelts nor take other easy to implement safety precautionss.

Even so, the predominant tendency in economics for most of its existence as a science is to hold that people are rational and will do rational things. Kahneman proposes otherwise. He describes two systems that we use: System 1 is the immediate reaction we have to stimulus, our gut instinct. If we see an animal, we know right away that it's a dog, we don't have to think about it. Or, if we see smoke, we're know to try to put the fire out...or to flee.

While System 2 is your conscious mind, where you think things through. For instance, making a decision to buy one product rather than another. In a series of experiments, Kahneman shows that System 2 isn't always rational and thoughtful, but can be rather lazy. This can be very true, because we have to deal with a lot of issues in life, so that we can't spend that much energy carefully thinking through every decision and thought process. That would be too exhausting.

One experiment proving his thesis is the following problem: A ball and a bat costs $1.10, and the bat costs $1.00, how much does the ball cost?

I would immediately say "definitely not 10 cents" but only because I'm aware of these psychological experiments where the answer is often not what you think at first.

Even so, if I were a participant in this study, I would've answered, "Definitely not 10 cents, but I'm too tired to figure out the true cost of the ball". Most people answer 10 cents, because that's your impulse from System 1, and System 2 is too lazy to override the impulse.

As you can see from this example, your system 1 comes up immediately 10 cents, but your system 2 doesn't override this answer. The correct answer is 5 cents.

Kahneman also describes how system 2 is very biased - in one of many experiments he conducted, he showed how sentences in big bold letters are believed to be true more so than the same sentences in small lettering.

I found the first few chapters very interesting, and the experiments thought provoking. However, midway through the book, I couldn't get past the rest of the book because Kahneman gives so many thought experiments, it becomes tiring.

Indeed, the book appeared to be a monograph, where he would make a statement and then show examples to prove his theory. By answering all of the questions that he asks, I got fatigued.

As a result, I skipped the rest of the book to the conclusion. Because humans don't do things that are good for us, policies should allow for freedom of choice, but steer people toward the right thing to do.

For instance, employees are automatically opted in an IRA retirement savings plan at 10% of their salary. However, you can easily opt out of this plan if you want to.

Therefore, you have a choice to opt in or opt out. But with this policy, people may be too "lazy" to opt out, and unbeknownst to them, 10% goes into retirement fund. 10 years later, they will be surprised that it increased to a really nice sum.

Kahneman didn't mention this in his conclusion, but the conclusion I got from the book is to be open minded. We may think something is absolutely true, come to find out, we didn't realize that we were wrong all along, and never questioned it. By being open minded and nonjudgmental, your life will be more enriching. 

For instance, someone whom you had negative first impressions (System 1 making snap judgments), keep an open mind about that person, and you may find the person becoming your friend. Of course, if that person does awful things one after the other, then your first impressions were correct and System 2 will note to avoid that person. But this will be due to empirical evidence as opposed to a snap judgment.

It's easy to say people do dumb things all the time, but how do you explain why that's the case, and how do you prove it in a systematic way? In Thinking Fast and Slow, Kahneman does a superb job answering those questions, albeit in an eventually exhausting to read manner.

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