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Thinking, Fast and Slow

Daniel Kahneman

Summary: clever and courageous; it strongly supports my convinction that we are just a bit better than apes

Score: 90 / 100

I started reading a Czech translation but then switched to the English version.

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II

II Heuristiky a zkreslení

Kindle highlights

Availability effects help explain the pattern of insurance purchase and protective action after disasters.

Protective actions, whether by individuals or governments, are usually designed to be adequate to the worst disaster actually experienced.

people who do not display the appropriate emotions before they decide, sometimes because of brain damage, also have an impaired ability to make good decisions.

Jonathan Haidt said in another context, “The emotional tail wags the rational dog.”

in the social context, “all heuristics are equal, but availability is more equal than the others.”

a basic limitation in the ability of our mind to deal with small risks: we either ignore them altogether or give them far too much weight—nothing in between.

base rates matter, even in the presence of evidence about the case at hand.

Anchor your judgment of the probability of an outcome on a plausible base rate. Question the diagnosticity of your evidence.

teaching psychology is mostly a waste of time.

The experiment shows that individuals feel relieved of responsibility when they know that others have heard the same request for help.

Subjects’ unwillingness to deduce the particular from the general was matched only by their willingness to infer the general from the particular.

There is a deep gap between our thinking about statistics and our thinking about individual cases.

rewards for improved performance work better than punishment of mistakes.

the feedback to which life exposes us is perverse. Because we tend to be nice to other people when they please us and nasty when they do not, we are statistically punished for being nice and rewarded for being nasty.

success = talent + luck great success = a little more talent + a lot of luck

The fact that you observe regression when you predict an early event from a later event should help convince you that regression does not have a causal explanation.

Regression to the mean was discovered and named late in the nineteenth century by Sir Francis Galton, a half cousin of Charles Darwin and a renowned polymath.

Piano-playing success depends only on weekly hours of practice.

whenever the correlation between two scores is imperfect, there will be regression to the mean.

our mind is strongly biased toward causal explanations and does not deal well with “mere statistics.”

Max Bazerman’s excellent text Judgment in Managerial Decision Making:

We shouldn’t be surprised that the very best candidates often fail to meet our expectations.”

Gary Klein has described in Sources of Power

the prediction of the future is not distinguished from an evaluation of current evidence—prediction matches evaluation.

Taleb suggests that we humans constantly fool ourselves by constructing flimsy accounts of the past and believing they are true.

The human mind does not deal well with nonevents.

Paradoxically, it is easier to construct a coherent story when you know little, when there are fewer pieces to fit into the puzzle. Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.

A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge, or beliefs that have changed.

Your inability to reconstruct past beliefs will inevitably cause you to underestimate the extent to which you were surprised by past events. Baruch Fischh off first demonstrated this “I-knew-it-all-along” effect, or hindsight bias,

Leaders who have been lucky are never punished for having taken too much risk.

The sense-making machinery of System 1 makes us see the world as more tidy, simple, predictable, and coherent than it really is.

The illusion that one has understood the past feeds the further illusion that one can predict and control the future.

people are often reluctant to infer the particular from the general.

Confidence is a feeling, which reflects the coherence of the information and the cognitive ease of processing it.

Burton Malkiel’s wonderful book A Random Walk Down Wall Street.

on average, the most active traders had the poorest results, while the investors who traded the least earned the highest returns.

The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the industry.

We know that people can maintain an unshakable faith in any proposition, however absurd, when they are sustained by a community of like-minded believers.

humans are incorrigibly inconsistent in making summary judgments of complex information.

Experienced radiologists who evaluate chest X-rays as “normal” or “abnormal” contradict themselves 20% of the time when they see the same picture on separate occasions.

The widespread inconsistency is probably due to the extreme context dependency of System 1. We know from studies of priming that unnoticed stimuli in our environment have a substantial influence on our thoughts and actions.

Robyn Dawes’s famous article “The Robust Beauty of Improper Linear Models in Decision Making.”

formulas that assign equal weights to all the predictors are often superior, because they are not affected by accidents of sampling.

In a memorable example, Dawes showed that marital stability is well predicted by a formula: frequency of lovemaking minus frequency of quarrels You don’t want your result to be a negative number.

“The situation has provided a cue; this cue has given the expert access to information stored in memory, and the information provides the answer. Intuition is nothing more and nothing less than recognition.”

Studies of chess masters have shown that at least 10,000 hours of dedicated practice (about 6 years of playing chess 5 hours a day) are required to attain the highest levels of performance.

We are confident when the story we tell ourselves comes easily to mind, with no contradiction and no competing scenario. But ease and coherence do not guarantee that a belief held with confidence is true.

the confidence that people have in their intuitions is not a reliable guide to their validity. In other words, do not trust anyone—including yourself—to tell you how much you should trust their judgment.

Remember this rule: intuition cannot be trusted in the absence of stable regularities in the environment.

expert in the Middle East knows many things but not the future.

System 1 is often able to produce quick answers to difficult questions by substitution, creating coherence where there is none.

the proper way to elicit information from a group is not by starting with a public discussion but by confidentially collecting each person’s judgment.

This is a common pattern: people who have information about an individual case rarely feel the need to know the statistics of the class to which the case belongs.

you should be both happy and wary if you are temperamentally optimistic.

Optimists are normally cheerful and happy, and therefore popular;

a hypothesis: the people who have the greatest influence on the lives of others are likely to be optimistic and overconfident, and to take more risks than they realize.

One of the benefits of an optimistic temperament is that it encourages persistence in the face of obstacles. But persistence can be costly.

the financial benefits of self-employment are mediocre: given the same qualifications, people achieve higher average returns by selling their skills to employers than by setting out on their own.

“90% of drivers believe they are better than average”

President Truman famously asked for a “one-armed economist” who would take a clear stand; he was sick and tired of economists who kept saying, “On the other hand…”

An unbiased appreciation of uncertainty is a cornerstone of rationality—but

Can overconfident optimism be overcome by training? I am not optimistic.

Bernoulli’s essay

The poorer man will happily pay a premium to transfer the risk to the richer one, which is what insurance is about.

I call it theory-induced blindness: once you have accepted a theory and used it as a tool in your thinking, it is extraordinarily difficult to notice its flaws. If you come upon an observation that does not seem to fit the model, you assume that there must be a perfectly good explanation that you are somehow missing. You give the theory the benefit of the doubt, trusting the community of experts who have accepted it.

As the psychologist Daniel Gilbert observed, disbelieving is hard work, and System 2 is easily tired.

You know you have made a theoretical advance when you can no longer reconstruct why you failed for so long to see the obvious.

The high price that Sellers set reflects the reluctance to give up an object that they already own, a reluctance that can be seen in babies who hold on fiercely to a toy and show great agitation when it is taken away. Loss aversion is built into the automatic evaluations of System 1.

Brain recordings also indicate that buying at especially low prices is a pleasurable event.

The fundamental ideas of prospect theory are that reference points exist, and that losses loom larger than corresponding gains.

The experimental economist John List, who has studied trading at baseball card conventions, found that novice traders were reluctant to part with the cards they owned, but that this reluctance eventually disappeared with trading experience.

biological and psychological view in which negativity and escape dominate positivity and approach.

amygdala, which has a primary role as the “threat center”

Some experimenters have reported that an angry face “pops out” of a crowd of happy faces, but a single happy face does not stand out in an angry crowd.

The psychologist Paul Rozin, an expert on disgust, observed that a single cockroach will completely wreck the appeal of a bowl of cherries, but a cherry will do nothing at all for a bowl of cockroaches.

They cite John Gottman, the well-known expert in marital relations, who observed that the long-term success of a relationship depends far more on avoiding the negative than on seeking the positive.

Loss aversion is a powerful conservative force that favors minimal changes from the status quo in the lives of both institutions and individuals. This conservatism helps keep us stable in our neighborhood, our marriage, and our job; it is the gravitational force that holds our life together near the reference point.

However, our brains are not designed to reward generosity as reliably as they punish meanness.

On the other hand, when you do not ignore the very rare events, you will certainly overweight them. Most of us spend very little time worrying about nuclear meltdowns or fantasizing about large inheritances from unknown relatives.

people attach values to gains and losses rather than to wealth, and the decision weights that they assign to outcomes are different from probabilities.

A lottery ticket is the ultimate example of the possibility effect. Without a ticket you cannot win, with a ticket you have a chance, and whether the chance is tiny or merely small matters little.

People are willing to pay much more for insurance than expected value—which is how insurance companies cover their costs and make their profits.

systematic deviations from expected value are costly in the long run—and this rule applies to both risk aversion and risk seeking. Consistent overweighting of improbable outcomes—a feature of intuitive decision making—eventually leads to inferior outcomes.

As predicted by denominator neglect, low-probability events are much more heavily weighted when described in terms of relative frequencies (how many) than when stated in more abstract terms of “chances,” “risk,” or “probability” (how likely).

When it comes to rare probabilities, our mind is not designed to get things quite right. For the residents of a planet that may be exposed to events no one has yet experienced, this is not good news.

people tend to be risk averse in the domain of gains and risk seeking in the domain of losses.

The sunk-cost fallacy keeps people for too long in poor jobs, unhappy marriages, and unpromising research projects.

unusual events are easier than normal events to undo in imagination.

people expect to have stronger emotional reactions (including regret) to an outcome that is produced by action than to the same outcome when it is produced by inaction.

you should not put too much weight on regret; even if you have some, it will hurt less than you now think.

This is a preference reversal: people choose B over A, but if they imagine owning only one of them, they set a higher value on A than on B.

Theoretical beliefs are robust, and it takes much more than one embarrassing finding for established theories to be seriously questioned.

The fact that logically equivalent statements evoke different reactions makes it impossible for Humans to be as reliably rational as Econs.

Should the child exemption be larger for the rich than for the poor?

If in the first version you want the poor to receive the same (or greater) benefit as the rich for having children, then you must want the poor to pay at least the same penalty as the rich for being childless.

We can recognize System 1 at work. It delivers an immediate response to any question about rich and poor: when in doubt, favor the poor. The surprising aspect of Schelling’s problem is that this apparently simple moral rule does not work reliably.

Our preferences are about framed problems, and our moral intuitions are about descriptions, not about substance.

sunk costs should be ignored.

Tastes and decisions are shaped by memories, and the memories can be wrong.

Caring for people often takes the form of concern for the quality of their stories, not for their feelings.

In intuitive evaluation of entire lives as well as brief episodes, peaks and ends matter but duration does not.

Odd as it may seem, I am my remembering self, and the experiencing self, who does my living, is like a stranger to me.

the second best predictor of the feelings of a day is whether a person did or did not have contacts with friends or relatives. It is only a slight exaggeration to say that happiness is the experience of spending time with people you love and who love you.

Surprisingly, however, religion provides no reduction of feelings of depression or worry.

being poor makes one miserable, and that being rich may enhance one’s life satisfaction, but does not (on average) improve experienced well-being. Severe

“The easiest way to increase happiness is to control your use of time. Can you find more time to do the things you enjoy doing?” “Beyond the satiation level of income, you can buy more pleasurable experiences, but you will lose some of your ability to enjoy the less expensive

Experienced well-being is on average unaffected by marriage, not because marriage makes no difference to happiness but because it changes some aspects of life for the better and others for the worse.

Nothing in life is as important as you think it is when you are thinking about it.

it appears that the remembering self is subject to a massive focusing illusion about the life that the experiencing self endures quite comfortably.

The remembering self’s neglect of duration, its exaggerated emphasis on peaks and ends, and its susceptibility to hindsight combine to yield distorted reflections of our actual experience.

It is a good bet that many of the things we say we will always remember will be long forgotten ten years later.

When engaged in searching for an answer to one question, it simultaneously generates the answers to related questions, and it may substitute a response that more easily comes to mind for the one that was requested. In this conception of heu Septtedristics, the heuristic answer is not necessarily simpler or more frugal than the original question—it is only more accessible, computed more quickly and easily. The heuristic answers are not random, and they are often approximately correct. And sometimes they are quite wrong.

cognitive illusions are generally more difficult to recognize than perceptual illusions.

Availability is a useful clue for assessing frequency or probability, because instances of large classes are usually recalled better and faster than instances of less frequent classes.

If the frequency of words is judged by the availability of the contexts in which they appear, abstract words will be judged as relatively more numerous than concrete words.

Lifelong experience has taught us that, in general, instances of large classes are recalled better and faster than instances of less frequent classes; that likely occurrences are easier to imagine than unlikely ones; and that the associative connections between events are strengthened when the events frequently co-occur.

The general tendency to overestimate the pr [timrall obability of conjunctive events leads to unwarranted optimism in the evaluation of the likelihood that a plan will succeed or that a project will be completed on time.

Studies of language comprehension indicate that people quickly recode much of what they hear into an abstract representation that no longer distinguishes whether the idea was expressed in an active or in a passive form and no longer discriminates what was actually said from what was implied, presupposed, or implicated (Clark and Clark 1977).

observation that the standard deviation of the prices that different stores in a city quote for the same product is roughly proportional to the average price of that product

In general, loss aversion favors stability over change.

An objective improvement can be experienced as a loss, for example, when an employee receives a smaller raise than everyone else in the office.

von Neumann, J., and O. Morgenstern. 1947. Theory of Games and Economic Behavior, 2nd ed. Princeton: Princeton University Press.

published: 2013-04-13
last modified: 2023-02-21
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