Thinking Fast And Slow by Daniel Kahneman is a genius work of art that uses various methods that can be used to improve our thinking power and our cognitive ability to make certain decisions in our day to day life eventually leading us to make the right decisions and choices over time.
In the book, Daniel Kahneman explains various components based on Two Systems, Heuristic Biases. Overconfidence, Choices, Law of Availability and many more.
Let’s share some insights on the below :
1. Two Systems
There are two ways how we think i.e
a) Fast / Automatic / Illogical and Irrational
b) Slow / Logical / Rational
Both are equally important in the way we make choices coherently.
In the fast, irrational way called “System 1,” we assume things as they happen. It is an unbiased way of our cognitive thinking and decision making. Assuming things on irrational behavior without any logical support system.
Rational. logical thinking or slow thinking called “System 2” is moreover a logical way in which we think and decides on any given point. This lets us analyze the situation, predict outcomes systematically.
If I were to ask you these two questions what answer would you give –
i) Is the height of the tallest Redwood be less or more than 1200 ft and what would be your guess about it. So one group was asked these question and another group was asked the same question.
ii) Except for the 1200ft this time it was more or less than 180ft.
To our surprise, the answer which the two groups gave was astonishingly varied. Group 1 mean guess was 844 ft and the other group’s mean guess was 282 ft. That’s a huge difference, This is called Anchoring, which means when we lack sufficient data to guess we hover around the pre-provided data.
According to Daniel Kahneman availability of any sort of information regularly consumed widely causes us to believe unlikely things have a higher chance of happening because we keep looking or consuming them regularly and this even causes us to believe those scenarios or situations which weren’t even there at the first place.
4. Loss Aversion
In this method, Daniel Kahneman gives a glance at the prospect of loss aversion theory that many of the options we face in life are “mixed”. There is a risk of loss and an opportunity for gain and we must decide whether to accept the opportunity for a gamble or reject it. An investor who invests in a startup, Lawyer who files a lawsuit and politician who must decide whether to run for an election or not are faced with similar aversion theory of winning or losing.
We as humans are very inaccurately good in framing our mindset for the future happening likely to occur with us, This is where Daniel Kahneman identifies our ability to frame a future situation with regards to our present scenario. Our feelings towards our future and upcoming life are determined by how our present is.
6. Sunk Cost Fallacy
This is all about our past decision influencing our present decision. It is a very crucial behavioral mindset in which if a person has invested money or time in buying or doing something, even if it is of no use, making him lose, It keeps the person invested in it due to this fallacy syndrome. Here the best optimal method is to use system II but he/she will not use it due to the false notion of investing time or money.
To conclude, this book summarizes vital aspects of the rational and irrational mindset a human mind possesses and a major intellectual event. A crucial pivot point in the way we see ourselves.