PREFACE
In this summary, you will find the most important ideas contained in Kahneman's bestseller, Thinking, fast and slow. Do you want to know why this psychologist received the Nobel Prize in Economic Sciences? Then continue reading. Before we start, we would just like to make something clear. The word heuristics is very important and should be clarified before we begin with our summary. Although it looks a bit daunting, it's pretty simple: heuristics are rules and mental short-cuts people use to process information more efficiently. They are like a set of presumptions that usually lead to good predictions. The most important idea that you will able to draw from this book is the fact that the human intellect has two "modes" of mode and praise the other. Rather, the goal is to point out the good as well as bad sides of each mode of functioning. Let's start with the rational side. One may be too quick to make conclusions and say that the rational side is always superior to the intuitive side. However, this is not always the case. The exact and detailed differences are better explained later in the text, but for now, it can be mentioned that the intuitive side saves our energy in everyday, routine situations when there isn't much need to employ the slow and calculative mode of functioning. Of course, sometimes we need to just sit down and think carefully about a problem. These are situations in which we employ our rational thinking.
Finally, the rational, slow half and the intuitive, fast one aren't necessarily rivals. They often work together. For example, "raw" data can be gathered and organized by the fast, intuitive system, after which the more careful, slower side takes over.Heuristics and biases will be the main focus of this summary. Heuristics are groups of rules that, in most situations, lead us
mistakes by relying on heuristics. The fast system relies heavily on heuristics and biases, and, because this system is unable to experience doubt, it presumes that these hypotheses are always and inevitably true. Unfortunately, heuristics and biases sometimes backfire, and this is the moment when the slow system should take over. This book will help you to recognize these situations when usual presumptions are no longer working, and when slower, deeper processing is needed.
FAST AND SLOW THINKING
Anchoring is a type of heuristic that we employ when we have a certain referent point; for example when someone asks you: "Did Nelson Mandela spend more or less than 30 years in prison?" you may say "I don't know," and give some random answer. But, most interestingly, if someone asks you immediately after to give an estimation of the number of years Nelson Mandela spent in prison, you will most likely write a number around 30, because the first question made you biased in that direction. Now, everything works well when anchors aren't set randomly. In the Nelson Mandela example, the anchor wasn't set randomly because Mandela did spend about 30 years in jail. That way,
spend about 30 years in jail. That way, the anchor helps you to give the best estimation possible. Let's see another situation when this anchoring heuristic may be used against you. Some people like to go around pawn shops and try to sell some stuff they deem valuable. Steve, for example, did this often, and sometimes brought home significant amounts of money. However, this time, he stumbled upon a very greedy pawn-shop owner, a genius in haggling.
Steve brought some item that looked almost trivial, like some trifle you usually find in the attic. It was a little figurine of a soldier. It looked interesting, and Steve wanted to see if he could get a few dollars for it. So he brought it in the pawn shop and started arranging the price. Out of the blue, the owner asked him, "What do you think, does this little figurine cost more or less than 25 dollars?" Steve was intrigued, and jokingly said that it must cost more than 25 dollars. The owner didn't respond to his reply and just asked him how much he was requesting for the little toy. Steve was a little taken aback, but he just mumbled something like, "30 dollars."The owner gave it to him without trying to lower it a bit or anything. This looked a bit suspicious, but Steve just took the money and got out. The next day, he saw the same toy in the shop, with the price- 200 dollars. It became obvious to him that the owner tricked him into believing that the real price of the toy was around 25, and this deceitful anchor ultimately fooled Steve.
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