Thinking, Fast and Slow, by Daniel Kahneman, is a very intriguing book, not another dry psychological treatise that puts the reader to sleep. Mr. Kahneman uses many basic exercises to prove his points. The exercises show how every person thinks fast or slow in any given situation.
The book is a result of his working with another colleague in the areas of bias and judgment. Some of it deals with research Mr. Kahneman and his colleague, Amos Tversky when he won the Nobel Prize for economics. Unfortunately, Amos died before they presented the award.
The book has five separate parts. The first part describes the two systems of thinking: System 1 and System 2. Mr. Kahneman uses significant detail to explain this whole concept. Part 2 tries to answer the following question. Why is it so hard to think statistically? The inference from Part Two is that often statistics are not altogether trustworthy. Often situations present themselves that we think are unique when in reality they are common. By saying that rural areas have a higher incidence of cancer, economists much not generalize as much as they do. The law of small numbers proves that extremes happen to make an outcome look worse than it is.
That leads into a deeper discussion of statistical thinking in part 3. This part explores the idea of belief and how people refuse to acknowledge that they do not understand or accept other beliefs. Mr. Kahneman admits that he agrees with the author in the book, the Black Swan.
Part four adds economics to decision-making. The two authors discovered that people make choices by using known points of reference and their fear of losing. The studies used gambling as the basis for the results. For instance, if the person could win $100 at a 50% chance, or a lose $200 at 50%, which would he choose? The book says nothing about people who do not gamble period.
The final part brings current thinking and research into the mix. In the previous chapters or parts, the authors used research done by people in the early 1900s. In this final chapter, they use their own studies to show how the decision and experience utility work. Mr. Kahneman used the experience of pain to discover how people arrive at this decision. Remembering, the second self, defines how a person views their experience either good or bad.
The appendices of the book are the actual articles that won the Nobel Prize: “Judgment Under Uncertainty” and “Choices, Values, and Frames.”
