“Thinking, Fast and Slow” by Daniel Kahneman

This book combines psychology and economics in really interesting ways. Kahneman is a psychologist by training, and he talks you through all of his experiments. He also gives questions to the reader, so you can judge your own reaction, before explaining what is going on. The main question here is “do people have good intuitive statistical reasoning?” You probably won’t be surprised to hear that the answer is “uh no, we definitely don’t make rational statistical decisions.”

Kahneman starts by introducing the two systems at play here, what he calls System 1 and System 2. System 1 makes quick judgements and doesn’t like thinking, while System 2 ponders questions and weighs the options. System 2 also makes up arguments for the decisions that System 1 makes. Of course, there is no biological aspect to these, it’s just shorthand for how we think. Since System 1 is quick and System 2 is slower, here is where the title comes from.

From these observations on our thought processes, Kahneman broadens his view to various applications within economics and otherwise. He demonstrates that we often don’t make rational decisions and are instead drawn to whatever seems appealing in the moment. For example, we rarely choose options worded as a “loss” instead of a “gain” regardless of the numbers.

Overall this was a great read. Kahneman explains everything clearly and illustrates all of his points with examples or stories of when he made similarly bad decisions. He also ends every chapter with examples of how to use these concepts more conversationally, since his goal here is to change our casual conversations so that we are more aware of our shortcomings. Because another aspect of humans is that we tend to think that statistics apply to other people and not to us, but that’s really not true. And if we are more aware of our natural shortcomings, maybe we can get better at avoiding these pitfalls and make better decisions.