Daniel Kahneman

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

System 1 is gullible and biased to believe, System 2 is in charge of doubting and unbelieving, but System 2 is sometimes busy, and often lazy.

The distinction between fast and slow thinking has been explored by many psychologists over the last twenty-five years.

The neglect of duration combined with the peak-end rule causes a bias that favors a short period of intense joy over a long period of moderate happiness.

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

The mental work that produces impressions, intuitions, and many decisions goes on in silence in our mind.

Intuition is nothing more and nothing less than recognition.

Most of what you (your System 2) think and do originates in your System 1, but System 2 takes over when things get difficult, and it normally has the last word.

People tend to assess the relative importance of issues by the ease with which they are retrieved from memory—and this is largely determined by the extent of coverage in the media.

We do not expect to see regularity produced by a random process.

Small samples yield extreme results more often than large samples do.

When faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.

When System 2 is otherwise engaged, we will believe almost anything.

People who say 10¢ appear to be ardent followers of the law of least effort.

The confidence that people have in their intuitions is not a reliable guide to their validity.

Two Systems of Thinking

Daniel Kahneman introduces the concept of two systems in human thinking: System 1 and System 2. System 1 operates automatically and quickly, making snap judgments and decisions based on associative memory and quick impressions. In contrast, System 2 is slow, deliberate, and requires conscious effort and attention. This distinction helps understand how we process information and make decisions. '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 computations.'

The Role of Heuristics and Biases

Kahneman highlights how heuristics, mental shortcuts that simplify decision-making, often lead to biases. For example, the availability heuristic makes people judge the frequency or probability of events based on how easily examples come to mind, often leading to systematic errors. 'Our subjective judgments were biased: we were far too willing to believe research findings based on inadequate evidence.' Recognizing these biases can help mitigate errors in our reasoning and decision-making.

The Power of Priming

Subtle environmental cues, known as priming, can influence human behavior in unexpected ways. Kahneman recounts experiments where participants altered their attitudes and actions based on minor, seemingly irrelevant stimuli, like recalling happy memories to improve performance on cognitive tasks. 'The general theme of these findings is that the idea of money primes individualism: a reluctance to be involved with others, to depend on others, or to accept demands from others.' This showcases the power of priming in shaping our judgment and actions.

Loss Aversion

Humans experience losses more intensely than equivalent gains, a phenomenon known as loss aversion. Kahneman illustrates this concept with various experiments, such as participants valuing coffee mugs more because they owned them. 'The response to a loss is stronger than the response to a corresponding gain.' This behavior can significantly impact decisions, making people overly conservative or risk-averse in the face of potential losses.

The Impact of the Framing Effect

The framing effect shows how presenting choices differently can lead to varied responses. For instance, people react differently to a tax reduction for having children versus a surcharge for being childless, even though the economic outcome is identical. 'The surprising aspect of Schelling’s problem is that this apparently simple moral rule does not work reliably. It generates contradictory answers to the same problem, depending on how that problem is framed.' This highlights the significant influence of context and wording in decision-making.

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 computations.

The main benefit of optimism is resilience in the face of setbacks.

Losses loom larger than gains.

The Planning Fallacy

Kahneman delves into the planning fallacy, where people consistently underestimate costs and time while overestimating benefits. He emphasizes using the 'outside view' by looking at statistical data from similar projects to create more accurate predictions. 'Executives too easily fall victim to the planning fallacy... they make decisions based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities.' This approach urges decision-makers to consider historical data for realistic planning.

Mental Accounting and Sunk Cost Fallacy

Kahneman discusses how mental accounting leads people to value money differently based on context, often resulting in irrational decisions. For example, people may irrationally continue investing in failing projects due to already spent resources (sunk costs). 'A loss of cash is charged to a 'general revenue' account.' This bias impacts personal and professional decision-making, often leading to further losses.

Adopt Broad Framing for Better Decision-Making

Consider multiple decisions as a comprehensive whole rather than in isolation. This approach can help in recognizing better overall strategies and mitigating individual biases.

Utilize the Outside View

When planning projects, use historical data from similar projects to establish baseline predictions. This helps counter overly optimistic forecasts and results in more realistic planning.

Practice Cognitive Restructuring

Identify stress triggers and apply cognitive restructuring techniques to alter your responses and improve decision-making.

Limit Investment Reviews

To avoid narrow framing and loss aversion in investments, limit how often you review your portfolio's performance. This can help reduce emotional reactions to short-term losses.

Acknowledge and Mitigate Loss Aversion

Recognize that the fear of loss can unduly influence decisions. Challenge yourself to weigh gains equally with losses to make more balanced choices.

The most effortful forms of slow thinking are those that require you to think fast.

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

Regression effects are ubiquitous, and so are misguided causal stories to explain them.

People are overconfident, prone to place too much faith in their intuitions.

Personal achievements that are driven mainly by regression and halo effects.

A general 'law of least effort'...applies to cognitive as well as physical exertion.

An intuitive answer to it came readily to mind.

The emotional tail wags the rational dog.

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

People often (but not always) take on risky projects because they are overly optimistic about the odds they face.

The world makes much less sense than you think. The coherence comes mostly from the way your mind works.

We shouldn’t focus on a single scenario, or we will overestimate its probability. Let's set up specific alternatives and make the probabilities add up to 100%.

Our predilection for causal thinking exposes us to serious mistakes in evaluating the randomness of truly random events.

Errors of intuitive thought are often difficult to prevent. Biases cannot always be avoided.

Loss aversion causes people to resist selling store items, even when it’s cost-effective to do so.

The sum of our six ratings predicted soldiers' performance much more accurately than the global evaluations of the previous interviewing method, although far from perfectly.

Most subjects bet on the less likely event in both comparisons. This pattern of choices illustrates a general finding.

Experience plays a crucial role in shaping behavior and judgments, reducing biases like the endowment effect as familiarity grows.

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

What we learn from the past is to maximize the quality of our future memories, not necessarily of our future experience.pLeaders Eat Las

A single cockroach will completely wreck the appeal of a bowl of cherries, while a cherry will do nothing at all for a bowl of cockroaches.

We just like winning and dislike losing, independently of our wealth, and we most certainly dislike losing more than we like winning.

Planning fallacy: plans/forecasts that are unrealistically close to a best-case scenario and/or could be improved by consulting statistics of similar cases.

Narrative fallacy: flawed stories of the past (sometimes made up by us) shape our views of the world and our expectations of the future.

Conjunction fallacy: people judge the conjunction of two events as more probable than one of those events separate.

Availability cascade: a self-sustaining chain of events, which may start with the media reports on a relatively minor issue and lead up to public panic and large-scale government action.

Affect heuristic: making decisions based on our emotions on the topic.

Anchoring effect: when people consider a particular value for an unknown quantity before estimating that quantity, and when estimating, people stay close to that first value considered.

System 2 is all about attention to detail and effortful mental activities. It takes the complex pattern of ideas provided by System 1 and constructs thoughts in an orderly series of steps.

System 1 is lazy, operates automatically and quickly. It generates impressions and feelings without effort, feeding the beliefs and choices of System 2.

It is a compelling cognitive illusion—and it is the substitution that makes us believe a past experience can be ruined. The experiencing self does not have a voice. The remembering self is sometimes wrong, but it is the one that keeps score and governs what we learn from living.

System 2 is the only one that can follow rules, compare objects on several attributes, and make deliberate choices between options. The automatic System 1 does not have these capabilities. System 1 detects simple relations (“they are all alike,” “the son is much taller than the father”) and excels at integrating information about one thing, but it does not deal with multiple distinct topics at once.

This remarkable priming phenomenon—the influencing of an action by the idea—is known as the ideomotor effect.

The gorilla study illustrates two important facts about our minds: we can be blind to the obvious, and we are also blind to our blindness.

This is the essence of intuitive heuristics: when faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.

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

System 1 is gullible and biased to believe, System 2 is in charge of doubting and unbelieving, but System 2 is sometimes busy, and often lazy.

The distinction between fast and slow thinking has been explored by many psychologists over the last twenty-five years.

The neglect of duration combined with the peak-end rule causes a bias that favors a short period of intense joy over a long period of moderate happiness.

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

Our mind is strongly biased toward causal explanations and does not deal well with 'mere statistics'.

Correlation and regression are two different perspectives of the same concept: Whenever the correlation between two scores is imperfect, there will be regression to the mean.

The mental work that produces impressions, intuitions, and many decisions goes on in silence in our mind.

Intuition is nothing more and nothing less than recognition.

Most of what you (your System 2) think and do originates in your System 1, but System 2 takes over when things get difficult, and it normally has the last word.

People tend to assess the relative importance of issues by the ease with which they are retrieved from memory—and this is largely determined by the extent of coverage in the media.

We do not expect to see regularity produced by a random process.

Small samples yield extreme results more often than large samples do.

When faced with a difficult question, we often answer an easier one instead, usually without noticing the substitution.

When System 2 is otherwise engaged, we will believe almost anything.

People who say 10¢ appear to be ardent followers of the law of least effort.

The confidence that people have in their intuitions is not a reliable guide to their validity.

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 computations.

The main benefit of optimism is resilience in the face of setbacks.

Losses loom larger than gains.

The most effortful forms of slow thinking are those that require you to think fast.

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

Regression effects are ubiquitous, and so are misguided causal stories to explain them.

People are overconfident, prone to place too much faith in their intuitions.

Personal achievements that are driven mainly by regression and halo effects.

A general 'law of least effort'...applies to cognitive as well as physical exertion.

An intuitive answer to it came readily to mind.

The emotional tail wags the rational dog.

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

People often (but not always) take on risky projects because they are overly optimistic about the odds they face.

The world makes much less sense than you think. The coherence comes mostly from the way your mind works.

We shouldn’t focus on a single scenario, or we will overestimate its probability. Let's set up specific alternatives and make the probabilities add up to 100%.

Our predilection for causal thinking exposes us to serious mistakes in evaluating the randomness of truly random events.

Errors of intuitive thought are often difficult to prevent. Biases cannot always be avoided.

Loss aversion causes people to resist selling store items, even when it’s cost-effective to do so.

The sum of our six ratings predicted soldiers' performance much more accurately than the global evaluations of the previous interviewing method, although far from perfectly.

Most subjects bet on the less likely event in both comparisons. This pattern of choices illustrates a general finding.

Experience plays a crucial role in shaping behavior and judgments, reducing biases like the endowment effect as familiarity grows.