Sean's space

Thinking, Fast and Slow

Daniel Kahneman, 2011

System 1 (Fast Thinking): Intuitive, automatic, effortless, and emotional thinking.
System 2 (Slow Thinking): Deliberate, effortful, logical, and analytical thinking.
We rely on System 1 for most decisions, but it is prone to biases and errors.
System 2 can override System 1 but is lazy and often defers to it.

Anchoring Effect: We rely too much on the first piece of information encountered.
Availability Heuristic: We judge the probability of events based on how easily examples come to mind.
Representativeness Heuristic: We ignore statistical probability in favor of stereotypes.
Overconfidence Bias: People overestimate their knowledge and predictive abilities.
Loss Aversion: Losses loom larger than gains—people are more sensitive to losses than to equivalent gains.

The Illusion of Understanding: We believe we understand past events better than we actually do.
The Illusion of Validity: We overestimate our ability to make accurate predictions, especially in uncertain situations.
Planning Fallacy: People underestimate the time, costs, and risks of future actions while overestimating benefits.
Hindsight Bias: After an event occurs, people see it as having been predictable, though it was not.

Prospect Theory: People evaluate potential losses and gains differently, often leading to irrational decisions.
Endowment Effect: People value things they own more than things they do not.
Framing Effect: How a choice is presented affects decision-making (e.g., 90% survival rate vs. 10% mortality rate).
Sunk Cost Fallacy: People continue investments in failing projects due to past investments.

Experiencing Self vs. Remembering Self: The way we experience events differs from how we remember them.
Peak-End Rule: Our memory of an experience is shaped by the peak moment and the end, rather than the total experience.
Duration Neglect: The length of an experience has little impact on how we remember it.

Human thinking is riddled with biases, and intuition is often misleading.
Rational decision-making is difficult; we default to heuristics and emotional reasoning.
Understanding cognitive biases can help in making better choices in business, economics, and everyday life.