Daniel Kahneman
Thinking,
Fast and Slow
Explore the two systems of the brain:
Fast, intuitive System 1 and Slow, rational System 2
The Architecture of Thought
Daniel Kahneman divides his research on human judgment and decision-making into five key parts, forming the foundation of modern behavioral economics.
Part 1
Two Systems
Two Systems
The two modes of thinking in the brain: fast thinking (System 1) and slow thinking (System 2).
Part 2
Heuristics & Biases
Heuristics & Biases
Why we struggle with statistical thinking and how we rely on rules of thumb.
Part 3
Overconfidence
Overconfidence
Revealing our excessive trust in our intuitions and judgments, and the illusion of this confidence.
Part 4
Choices
Choices
Challenging the rational person assumption, introducing prospect theory to explain our decisions under risk.
Part 5
Two Selves
Two Selves
Distinguishing between the experiencing self (current feelings) and the remembering self (retrospective memories).
Trap
Bat and Ball
System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. It is prone to biases and systematic errors.
Try this classic puzzle. Answer as quickly as you can.
A bat and a ball cost $1.10 in total.
The bat costs $1.00 more than the ball.
How much does the ball cost?
Bias
Anchoring Effect
When people consider a particular value for an unknown quantity before estimating that quantity, the estimates stay close to the number that people considered.
Quiz
Which cause of death is more likely in the US?
Recall
Availability Heuristic
We judge the frequency or probability of an event by the ease with which instances come to mind.
- Media coverage biases our view of the world.
- Recent events weigh more heavily than past data.
- Vivid experiences trump statistics.
Conflict
Stroop Effect
Your System 1 wants to read the word because reading is automatic. Your System 2 must work to suppress this impulse and say the color.
Task: Say the color of the word, not the word itself.
Confidence
Illusion of Validity
We often believe in our ability to predict the future, even when the evidence is weak. This is the illusion of skill.
Stock Picking Challenge: Can you pick a stock that beats the market?
Risk
Prospect Theory
"The response to losses is stronger than the response to corresponding gains." We are risk-averse when facing gains, and risk-seeking when facing losses.
Scenario: Gain
Memory
Two Selves
We have an experiencing self (who lives in the present) and a remembering self (who keeps score).
Experiencing Self
"Does it hurt now?"
- 01Lives in the present.
- 02Feels the moment's pleasure or pain.
- 03Its moments are lost forever.
Remembering Self
"How was it overall?"
- 01The narrator of our lives.
- 02Ignores duration (Duration Neglect).
- 03Remembers only the Peak and the End.
Peak-End Rule
In the cold-hand experiment, subjects preferred the longer trial (B) because it ended with slightly warmer water. The remembering self chose unnecessary pain because the ending was better.
What Can We Do?
Thinking, Fast and Slow is not about System 1 being "bad" and System 2 being "good". In fact, System 1 is the foundation of our survival, allowing us to quickly identify danger, understand facial expressions, and conduct daily conversations.
The key is recognition. When we face important decisions, complex calculations, or high-stakes judgments, we need to learn to recognize the limitations of System 1 and actively engage the lazy System 2.
By understanding cognitive biases like anchoring, framing, and loss aversion, we can better examine our own judgments and make more rational decisions.
WHICH SYSTEM DECIDED?
THINKING, FAST AND SLOW
Your System 1 wants to buy it now. Your System 2 wants to analyze the value. Both will agree it's a masterpiece.
Cognitive Library
Recommended Reading
Nudge
Richard Thaler & Cass Sunstein
Co-authored by Kahneman's colleague. It applies the concepts of System 1 and 2 to public policy, showing how 'choice architecture' can influence behavior.
Predictably Irrational
Dan Ariely
While Kahneman focuses on the 'why' of cognitive biases, Ariely focuses on the 'how' in daily life. A more accessible companion to understanding human irrationality.
The Undoing Project
Michael Lewis
The biography of the friendship between Daniel Kahneman and Amos Tversky. It provides the emotional and historical context behind the theories in Thinking, Fast and Slow.