“Thinking Fast and Slow”

‘Thinking Fast and Slow’ by author: Daniel Kahneman – a great read!

Daniel Kahneman is the recipient of the Nobel Prize in Economic Sciences for his seminal work in psychology that challenged the rational model of judgment and decision making. He has recently brought together his many years of research and thinking in one book – Thinking Fast and Slow. The book takes the reader on a tour of the mind and Kahneman explains the two systems that drive the way we think and the way we make choices.
Daniel Gilbert, Professor of Psychology, Harvard University; author of Stumbling on Happiness has this to say about the book: “Thinking Fast and Slow is a masterpiece – a brilliant and engaging intellectual saga by one of the greatest psychologists and deepest thinkers of our time. Kahneman should be parking a Pulitzer next to his Nobel Prize.”
Two systems of thinking:

System 1	System 2
System 1 is fast, intuitive and emotional System 1 is automatic	System 2 is slower, more deliberative and more logical System 2 is effortful
Operates automatically and quickly with little or no effort and no sense of voluntary control	Allocates attention to the effortful, mental activities that demand it, including complex computations The operations of System 2 are often associated with the subjective experience of agency choice and concentration
	Is active in deliberate memory search, complex computations, comparisons, planning and choice. System 2 is ultimately in charge with the ability to resist the suggestions of System 1, slow things down and impose logical analysis. Self-criticism is one of the functions of System 2.
System 1 generates impressions, feelings and inclinations; when endorsed by System 2 those become beliefs, attitudes and intentions.	In the context of attitudes, System 2 is more of an apologist for the emotions of System 1 than a critic of those emotions – an endorser rather than an enforcer.
System 1 can be programmed by System 2 to mobilize attention when a particular pattern is detected

Emotional learning is quick. Expertise takes a long time to develop. The acquisition of expertise is intricate and slow because in a domain it is not a single skill but rather a collection of mini-skills.
Two basic conditions for acquiring a skill:

– An environment that is sufficiently regular to be predictable

– An opportunity to learn these regularities through prolonged practice

Choices between gambles and sure things are resolved differently depending on whether the outcomes are good or bad

Program A is adopted – 200 people will be saved
Program B is adopted – there is 1/3 probability that 600 people will be saved and 2/3 probability that no people will be saved

Majority choose A – preferring the certain option over the gamble

Framed differently:

Program A is adopted – 400 people will die
Program B is adopted – there is 1/3 probability that nobody will die and a 2/3 probability that 600 people will die

A and A are identical

B and B are identical

In 2^nd frame huge majority choose B

Decision makers tend to prefer sure things over a gamble (they are risk averse) when the outcomes are good
Decision makers tend to reject the sure thing and accept the gamble (they are risk seeking) when both outcomes are negative.
This happens with money and also when outcomes are measured in lives saved or lost.

Posted on June 25, 2012 by Pulse Insights

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