Thoughts on Thinking Fast and Slow
This book was awesome. I think Kahneman is a wizard of sorts.
It sort of wrapped up my current time spent reading about behavioral econ. I think this book and Nudge by Richard Thaler are some of the foundations into a lot of this insight, and then Misbehaving by Thaler talks more broadly about behavioral econ and The Undoing Project by Michael Lewis was just an enjoyable book that gave more insight into Kahneman and his research partner/friend Amos Tversky.
I got a ton of enjoyment between this set of books.
If I were to pick one to read it’d be Thinking Fast and Slow. The reason is that it’s a super comprehensive overview of many different heuristics, biases, fallacies, and flaws in our thinking/decision making.
I’ll give two of the examples that I’ve been thinking most about.
Broad vs. narrow framing
Most people wouldn’t accept a bet where there’s a 50% chance for them to win $150 and a 50% chance for them to lose $100. The expected value is >0, but there’s a lot of risk here and humans, overall, are risk averse.
If someone offered me the above bet, before reading this book I would have probably also said no, but what we’re doing when we say no is looking at it through a super narrow frame. “In this one situation, what do I want to do?”
The more effective approach is to think about this above example as one within a set of hundreds that occur during our lifetime. There are many times when we have the chance to take a 60/40 bet, and if you look at it broadly, with the perspective that is “I might lose this time, but making this bet consistently will give me a higher payoff” causes you to actually accept the bet.
The big precaution is in super high stakes situations. Not sure how many times I’d have the chance to gamble away my house for a 200% bigger house in return, so if I lose in that situation, it could be quite bad.
Generally, though, it means that we should think about these probabilistic decisions more broadly. A great use case is with warranties. If you add up all the money spent on warranties vs. how much it saves you, that number is negative. Unless you’re a big clutz.
Experiencing vs. remembering self
There are two versions of ourselves related to every event that we go through. One is the experiencing self that is the person that literally experiences an event. Like going to a football game. Then there’s the remembering self, which is what we are as we look back on a given event or moment.
The remembering self is swayed by a few things. One is the intensity of emotion or feeling. Super extreme pain or pleasure in one given moment makes the intensity of our memory stronger. Also, the way an event ends has a high (disproportionately so) weight.
There are studies where someone has an uncomfortable experience for 60 seconds in one hand and 90 seconds in the other, but in the 90 second case, the last 30 seconds aren’t as bad (while the first 60 mirror the first case). Those people chose to re-undertake the 90-second case. Then there are people that experienced intense pain over a one minute span, versus moderate pain (let’s say 50% of intense pain) for 5 minutes. Despite the fact that the total pain was much higher for the 50% pain, they’d rather go through that than the intense case.
This has interesting implications for how we remember events in our lives and what we get the most happiness from.
Those are two fun and interesting examples, but the book dives into tons of them, and Kahneman explains and details them really well.
Good read :)
If you have any other behavioral econ books that you recommend (given that I’ve already read those mentioned above), I’d love to hear! Just don’t think I’d get much value from additional ones at this point.
Thoughts on this review/the book in general? Comment or send me a note :)
Full reading list here
