Thinking, Fast and Slow - Daniel Kahneman: Review
Everything that we are taught and everything that we know about how humans behave revolves around the idea that we are rational and logical. Together, they are the tools with which humans left behind all other animals.
From the hundred years before the French Revolution onwards until the detonation of the Soviet Union’s atomic bomb in 1949 which marked the moment when two opposing nations could destroy each other, humans created rational rules and logical ideas for how the military, society and markets should work and how individuals should behave if we are to avoid stupidity, stagnation and eventual devolution to where our species came from.
However, Daniel Kahneman’s 2011 book, which summarises his career from the 1960s onwards, challenges the idea that humans are defined by always superiour reasoning about our decisions. We don’t change our bank account even though there is a better competitor. We justify continuing to spend money on something because we have already spent money on it, even though we cannot recoup that money. We avoid difficult questions and substitute in easier questions without noticing it. For example, answering the question ‘Should I buy shares in a certain company?’ can require complex financial due diligence. But the question ‘Do I like the company’s products?’ is a far easier question which we substitute for the harder and slower work. We are scared of extremely rare terrorism but not scared of extremely common heart disease.
These are all examples of either a bias or a heuristic. Biases prejudice our judgement by neglecting or overstating certain factors. Heuristics are shortcuts for when making a truly rational decision is too difficult, boring or time-consuming. The solution cannot be labelled as mere ‘common sense’ as nobody can agree on what specifically comprises common sense. Instead, and for the first time, the complexity of human decision making and judgement has a name beyond simple logic and reason, and this name is Behavioural Economics.
Our brains, explains the father of Behavioural Economics Kahneman, work in two different ways: fast and slow. Fast is the intuitive and skilful ‘System 1’. Slow is the deliberative and effortful ‘System 2’. The two systems are employed for different types of tasks. Walk with a friend and ask them what is 2+2 and they will reply correctly and instantly as they walk; this is System 1. Walk with a friend and ask them 74 x 28 and they reply slowly, if they reply at all, and they will probably have to stop walking because System 2 has been called upon to help.
Heuristics, or shortcuts, pervade the use of System 1. If you watch the news and it shows you endless examples of violent crime your System 1 will instinctively overestimate the reality of violent crime. What System 1 sees is all there is, and it takes effort to employ System 2 to behave more rationally and to look beyond.
Since the brain will use System 1 whenever possible (System 2 is also lazy) Kahneman wryly concludes that the brain is a machine for jumping to conclusions. That doesn’t mean that everything would be solved if System 2 was in charge. Michael Jordan was the greatest basketball player of all time and it was mostly all System 1.
Keenly aware of the power of language, Kahneman writes not for Presidents, Prime Ministers or those in charge of pandemic responses, but for the chatty and gossipy human over ‘the watercooler’. Kahneman’s revolution is an organic one from the bottom up. Each chapter ends with 4 or 5 distinct sentences that summarise his findings in the language of the everyday person witnessing a remarkable event with new and better language. For example:
“Speaking of the Endowment Effect”
1 . “She didn’t care which of the two offices she would get, but a day after the announcement was made, she was no longer willing to trade. Endowment effect!”
2. “These negotiations are going nowhere because both sides find it difficult to make concessions, even when they can get something in return. Losses loom larger than gains.”
3. “When they raised their prices, demand dried up.”
4. He just hates the idea of selling his house for less money than he paid for it. Loss aversion is at work.”
5. “He is a miser, and treats any dollar he spends as a loss.”
Understanding human nature as the capacity to gossip is an understated insight that separates us from the animals as much as opposable thumbs. Kahneman knows this and bases his writing on that premise to transcend both academia and policy to be truly ‘popular’ science.
Gossip is the forerunner and sometime ingredient of ‘Story’ which is the kryptonite of Logic and Rationality. The book reveals the importance of story, or more specifically memory, both in the relation of biases and heuristics to how we make decisions but also as the mirror image of experience.
Are you happy now? Do you remember being happy yesterday? Dig into this and you will find contradictory answers that suggest we are not rational agents. Understand some of this and maybe you can do away with language that describes humans as either rational, irrational, illogical, hysterical or crazy and evolve vocabulary that better fits both our experiences and our memories. It is a step on the way to that old revolutionary idea of creating a better human and better type of human experience, without the killing of revolution. It is a humane revolution.
Speaking of stories, underneath the academic evidence is the story of Kahneman and his partner Amos Tversy who died 15 years before the book was published. Kahneman holds back outright nostalgia for him but does everything within his professional manner to point out that he owes so much to Tversky. Kahneman tells us that there are two minds and two selves. Nowhere is this admission of the duality of Man evident than in the hole in the author’s heart and mind where his other half Tversky used to be.
