Thinking, Fast and Slow

Quite long, maybe too much… a pity, because the author explores the wide frontiers of psychology, presenting a myriad of interesting biases. Unfortunately I felt the length; it seemed never-ending.

In short, we have two systems, 1 more “immediate” and 2 more “rational.” We often make decisions without thinking carefully with 2, and we should be careful: there are dozens of experiments that document these irrational choices.

Notes

• We do not think well statistically: we should reason with absolute frequencies, not negatives, to understand clearly
• Anchoring effect: classic bias; we base our estimates on nearby reference points (for example, an overpriced menu item to make the mid-priced option look like a good deal)
• Availability: the easier we “recall” something, the better we think of it. Risky, because what is familiar is not always better
• Optimism and loss aversion: a bit long, but basically he shows that loss aversion depends on the case. For example, people are inclined to take big risks in the face of possible losses, while they hold back with gains
• Framing: it depends on how you frame the question (Mortality vs Survival)
• Sunk Cost: would you drive through a storm for a game if the ticket was a gift or you bought it? People end up in lost causes because they have invested; be careful here too
• Prospect Theory: his theory, which won the Nobel, that challenges Bernoulli’s theory by introducing the context of choices. If someone is rich, they will be less willing to risk for 100 euros than someone poor
• Two Selves: paradoxically, people prefer a long, painful experience to a less painful one that ends badly: we remember the ending
• His favorite term: WYSIATI (What You See Is All There Is): we simplify complex questions into an immediate one, letting System 1 take over. For example, if someone asks how we are, we will be strongly influenced by what just happened, not by our broader life situation. Careful: this is very, very common. Think with a broad view, do not substitute complex questions. Use System 2 when necessary.