Cover

Date read: 13/03/2017

Summary
The Nobel Prize winning Psychologist Daniel Kahneman presents a scientific and detailed account of how the human brain processes and deals with information. He summarises the many illusions, biases and fallacies that are hardwired into our brains, all of which explain why have limited conscious control over what we think and do.

Structure
The book is split into 5 sections:

  • Two Systems (System 1: automatic, and System 2: conscious)
  • Heuristics and Biases (Nothing is objective)
  • Overconfidence (Your brain believes that its right)
  • Choices (How your decisions can be influenced)
  • Two selves (The remembering self and the experiencing self)

Quotes
“A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. - p62

“If you care about being thought credible and intelligent, do not use complex language where simpler language will do.” - p63

“A lazy System 2 often follows a path of least effort and endorses a heuristic answer without much scrutiny of whether it is truly appropriate.” - p99

“Your thoughts and behaviour may be influenced by stimuli to which you pay no attention at all, and even by stimuli of which you are completely unaware.” - p128

“Individuals feel relieved of responsibility when they know that others have heard the same request for help.” - p171

“Declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily a story that is true.” - p212

“Do not simply trust intuitive judgement - your own or that of others - but do not dismiss it, either.” - p232

“The proper way to elicit information from a group is not by starting with a public discussion but by confidentially collecting each person’s judgement.” p245

“We focus on what we know and neglect what we do not know, which makes us overly confident in our beliefs.” - p259

“Your moral feelings are attached to frames, to descriptions of reality rather than to reality itself.” - p370

“Nothing in life is as important as you think it is when you are thinking about it.” - p402

“The acquisition of skills requires a regular environment, an adequate opportunity to practice, and rapid and unequivocal feedback about the correctness of thoughts and actions.” - p417

Key Takeaways
The two systems
System 1: operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2: allocates attention to the effortful mental activities that demand it, including complex computation. This is subjective experience.

System 2 can be depleted, whereas System 1 will work all the time, so System 1 takes command when we are tired or stressed.

Casual thinking
Everything must have a cause, which is simply not true.

Priming effect
Exposure to a stimulus influences the response to a subsequent stimulus. If you first read the word EAT, you are more likely to see SO_P as SOUP (instead of SOAP).

Cognitive ease
This is how easy it is for our brains to process information. When in a state of cognitive ease, you are more likely to be in a good mood, believe what you see and hear, and be more casual or superficial on your thinking. On the other hand, cognitive strain will make you more vigilant and suspicious, invest more effort in what you are doing and make fewer errors, but be less creative overall.

Confirmation bias
Your existing beliefs or hypotheses affect how you interpret and receive new information. You will seek out information that confirms existing opinions and overlook or ignore information that refutes them.

Statistical intuition
We seek patterns in outcomes that are actually random chance. This is an example of the Texas Sharpshooter fallacy, where differences in data are ignored but similarities are stressed, which results in seeing a pattern that isn’t there. Another example is how the results of a previously random event affect this random event, the previous lottery draw has no impact on this one.

For example, the gender of babies born in a hospital could follow these (equally likely) patterns:

BBBBGGGG
GGBBGGBB
BGBBBBGB

Anchoring effect
We rely too heavily on the first piece of information offered, this can then skew subsequent judgments.

Availability cascade
Similar to ‘outrage porn’, an availability cascade is a self-reinforcing cycle that results in certain kinds of collective beliefs. A novel idea or insight triggers a chain reaction whereby it gains more popularity, an example of this in present day would be flat earth theory.

Bayesian reasoning
Keys to disciplined reasoning:

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

Hindsight bias
‘I knew it all along’, seeing the an event as being predictable after it has occurred, despite there having been little or no objective basis for predicting it.

Outcome bias
An error in evaluating a decision when the outcome of the decision is already known. Instead of judging a past decision objectively based on the time it was made, instead we evaluate it based on the ultimate outcome - which we already know.

Planning fallacy
Predictions about how much time will be needed to complete a future task display optimism bias and underestimate the time needed.

Loss aversion
People prefer to avoid loses than to acquire equivalent gains: it is better not to lose £5 than to find £5.

The endowment effect
People ascribe more value to things merely because they own them.

Denomination effect
This suggests people are less likely to spend larger currency denominations than equivalent value in smaller denominations. For example happily spending 5 20p’s but not wanting to spend £1.

Sunk cost fallacy
Decisions are effected by the emotional value you accumulate. The more you invest in something the harder it becomes to abandon it.

Framing
People react to a particular choice depending on how it is presented. Avoiding risk when a positive frame is presented but seeking risks when a negative frame is presented. For example, 93% of PhD students registered early when a penalty fee for late registration was emphasized, with only 67% doing so when this was presented as a discount for earlier registration.

Remembering self vs experiencing self
The experiencing self knows only the present moment, whereas the remembering self is a storyteller (that forgets a lot of details.) The famous study is one where participants were more likely to repeat putting their hand in freezing cold water for 90 seconds, where the last 30 seconds were slightly warmer, than just 60 seconds of freezing cold. This is known as the ‘Peak end effect’, where experiences are judged on how they felt at the peak, and at the end.

Focusing illusion
Placing too much importance on one aspect of an event, causing an error in accurately predicting a future outcome.