Thinking, Fast and Slow

• BookURL

• a lengthy, self-conscious and a challenging read but highly recommended

• author: 2012 winner of the National Academies Communication Award

• Three main parts: cognitive biases, prospect theory, the author’s later work on happiness

• main idea: Kahneman describes two different ways the brain forms thoughts:
  • System 1: Fast, automatic, frequent, emotional, stereotypic, unconscious.
  • System 2: Slow, effortful, infrequent, logical, calculating, conscious.
  • the differences between these two thought systems: coherence, attention, laziness, association, jumping to conclusions, WYSIATI (What you see is all there is), and how one forms judgments. The System 1 vs. System 2 debate dives into the reasoning or lack thereof for human decision making, with big implications for many areas.
• 1 cognitive biases
  • explanations for why humans struggle to think statistically.
  • The “anchoring effect” names our tendency to be influenced by irrelevant numbers. Shown higher/lower numbers, experimental subjects gave higher/lower responses
  • The availability heuristic is a mental shortcut that occurs when people make judgments about the probability of events on the basis of how easy it is to think of examples.
  • Substitution: System 1 is prone to substituting a difficult question with a simpler one.
  • Overconfidence: Kahneman writes of a “pervasive optimistic bias”, which “may well be the most significant of the cognitive biases.” This bias generates the illusion of control, that we have substantial control of our lives.
  • Framing effect (psychology)

  • Sunk cost fallacy: to avoid feelings of regret or loss

  • more about cognitive bias:
    • One great figure summarizing human’s cognitive bias. Image Credit from URL
    • The author of above post about cognitive-bias-cheat-sheet grouped 175 biases into vague categories (decision-making biases, social biases, memory errors, etc). The author explains roughly the four types of cognitive biases as follows:

Group Index	About Positive	About Negative	Example Biases
1	Too much information, so we aggressively filter.	We don’t see everything. Some of the information we filter out is actually useful and important.	e.g., Availability heuristic, Attentional bias, Illusory truth effect, Mere exposure effect, Context effect, Cue-dependent forgetting, Mood-congruent memory bias, Frequency illusion, Baader-Meinhof Phenomenon, Empathy gap; Bizarreness effect, Humor effect, Von Restorff effect, Negativity bias, Publication bias, Omission bias; Anchoring, Contrast effect, Focusing effect, Framing effect, Weber–Fechner law, Distinction bias; Confirmation bias, Congruence bias, Post-purchase rationalization, Choice-supportive bias, Selective perception, … Bias blind spot, …
2	Lack of meaning is confusing, so we fill in the gaps. Signal becomes a story.	We sometimes imagine details that were filled in by our assumptions, and construct meaning and stories that aren’t really there.	e.g., Halo effect, In-group bias, Out-group homogeneity bias, Cross-race effect, Stereotyping, Just-world hypothesis, Argument from fallacy, Authority bias, Automation bias, Curse of knowledge, Illusion of transparency, Spotlight effect, Streetlight effect, Illusion of external agency, Illusion of asymmetric insight, Extrinsic incentive error, Impact bias, Pessimism bias, Planning fallacy, Time-saving bias, Pro-innovation bias, Projection bias, Restraint bias, Self-consistency bias…
3	Need to act fast otherwise we lose our chance, so we jump to conclusions. Stories become decisions.	Some of the quick reactions and decisions we jump to are unfair, self-serving, and counter-productive.	e.g., Sunk cost fallacy, Irrational escalation, System justification, Reactance, Reverse psychology, Decoy effect, Social comparison bias, Ambiguity bias, Information bias, Belief bias, Rhyme as reason effect, …
4	To keep doing all above as efficiently as possible, our brains need to remember the most important and useful bits of new information and inform the other systems so they can adapt and improve over time, but no more than that.	Our memory reinforces errors. Some of the stuff we remember for later just makes all of the above systems more biased, and more damaging to our thought processes.	e.g, Peak–end rule, Misattribution of memory, Source confusion, Cryptomnesia, False memory, Suggestibility, Spacing effect, Implicit associations, Implicit stereotypes, Stereotypical bias, Prejudice, Fading affect bias, Picture superiority effect, Levels of processing effect, Testing effect, Absent-mindedness, Next-in-line effect, Tip of the tongue phenomenon, Google effect, Self-relevance effect, …

• 2 prospect theory
  • The author discusses the tendency for problems to be addressed in isolation and how, when other reference points are considered, the choice of that reference point (called a frame) has a disproportionate impact on the outcome. This section also offers advice on how some of the shortcomings of System 1 thinking can be avoided.
  • Kahneman developed prospect theory, the basis for his Nobel prize, to account for experimental errors he noticed in Daniel Bernoulli’s traditional utility theory (not take into account cognitive biases).
  • The theory describes the decision processes in two stages:
  • a. During an initial phase termed editing, outcomes of a decision are ordered according to a certain heuristic. In particular, people decide which outcomes they consider equivalent, set a reference point and then consider lesser outcomes as losses and greater ones as gains. The editing phase aims to alleviate any framing effects.[3] It also aims to resolve isolation effects stemming from individuals’ propensity to often isolate consecutive probabilities instead of treating them together. The editing process can be viewed as composed of coding, combination, segregation, cancellation, simplification and detection of dominance.
  • b. In the subsequent evaluation phase, people behave as if they would compute a value (utility), based on the potential outcomes and their respective probabilities, and then choose the alternative having a higher utility.
• 3 the author’s later work on happiness
  • “experienced-self”: an alternative measure that assessed pleasure or pain sampled from moment to moment, and then summed over time.
  • “remembered-self” that the polls normally attempted to measure. The author’s significant discovery was that the remembering self does not care about the duration of a pleasant or unpleasant experience. Instead, it retrospectively rates an experience by the peak (or valley) of the experience, and by the way it ends. The remembering self dominated the patient’s ultimate conclusion.