Customer Reviews

Thinking, Fast and Slow

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Daniel Kahneman may have won his Nobel Prize in Economic Sciences, but his work was psychological in nature as it challenged the rational model of judgment and decision-making. He's considered one of the most important psychologists alive today, and this book doesn't disappoint with its breakthrough approach to understanding the "machinery of the mind."

Kahneman introduces two mental systems, one that is fast and the other slow. Together they shape our impressions of the world around us and help us make choices. System 1 is largely unconscious and it makes snap judgments based upon our memory of similar events and our emotions. System 2 is painfully slow, and is the process by which we consciously check the facts and think carefully and rationally. Problem is, System 2 is easily distracted and hard to engage, and System 1 is wrong as often as it is right. System 1 is easily swayed by our emotions. Examples he cites include the fact that pro golfers are more accurate when putting for par than they are for birdie (regardless of distance), and people buy more cans of soup when there's a sign on the display that says "Limit 12 per customer."

There are lots of interesting anecdotes as well as layman's summaries of psychological research that will leave you feeling fascinated by the brain. The book has 38 chapters broken into five sections. I've listed some of the chapter titles for each section to give you a feel for what it's about:

PART ONE - TWO SYSTEMS
1. The Characters of the Story
2. Attention and Effort
3. The Lazy Controller
4. A Machine for Jumping to Conclusions
5. How Judgments Happen

PART TWO - HEURISTICS AND BIASES
6. The Law of Small Numbers
7. Availability, Emotion, and Risk
8. Tom W's Specialty
9. Linda: Less is More
10. Causes Trump Statistics
11. Taming Intuitive Predictions

PART THREE - OVERCONFIDENCE
12. The Illusion of Understanding
13. The Illusion of Vanity
14. Intuitions Vs. Formulas
15. Expert Intuition: When Can We Trust It?

PART FOUR - CHOICES
16. Prospect Theory
17. Bad Events
18. Risk Policies
19. Keeping Score

PART FIVE - TWO SELVES
20. Life as a Story
21. Experienced Well-Being

The kindle version of this excellent book is disappointing. Several features of the book are confusing in the ebook because the formatting is so poor. Tables with two columns run together because they are not boxed and the columns are only separated by one space. There are questions at the end of each chapter whose purpose is unclear until you see them in the real book, where they are set off in a box with a different type face. Most disappointing is the handling of the footnotes - they are relegated to the back of the book with no page number reference. There is few word phrase in the notes that corresponds to the place in the text to which the note refers, but it is up to the reader to scan the chapter to find the reference. The book reads like a mechanical translation of the physical book into a new format, with no effort taken to edit and format appropriately. So the reader loses. With the price of the ebook almost as much as the real book, you will be happier if you buy the real thing.

Daniel Kahneman, the author of this exceptional book, and Amos Tversky (who died in 1996) made economics and other disciplines a lot more realistic--and tougher--for economists, researchers and students. Prior to their work, economists and others maintained classical theories and explanations that relied on certain seemingly logical assumptions about human behavior. However, people don't always behave the way logic might suggest, for a variety of reasons that Kahneman (and Tversky) explained, starting in the 1970s. Today, the subject of behavioral decision-making is one of the more exciting ones in fields like economics, finance, medicine and even law, thanks to their pioneering work. In recognition of the impact of his work in economics, Kahneman, a cognitive psychologist and professor emeritus at Princeton, won the Nobel Prize in Economics in 2002, specifically for his work on prospect theory.

The title of this book comes from Kahneman's discussion of two simple models of how people think. "System 1" thinking corresponds to fast, intuitive, emotional and almost automatic decisions, though it sometimes leaves us at the mercy of our human biases. "System 2" thinking is more slow-going and requires more intellectual effort. To nobody's surprise, we humans are more likely to rely on System 1 thinking, because it saves us effort, even if it can lead to flawed thinking. Here is a quick way Kahneman uses to illustrate System 1 and System 2 thinking. Suppose that a bat and ball together cost $1.10 and that the bat costs $1.00 more than the ball. How much does the ball cost? Many people, relying mainly on System 1 thinking, will quickly say $0.10, but the correct answer is five cents. Think about it.

One of the book's main themes is the author's description of how little control we actually have over our own System 1 responses and the degree to which our subconscious intuition and biases affect System 1 choices. It's amazinging to me how much of our lives seems to run on System 1 autopilot. Of course, forewarned is forearmed, which another important theme. Basically, this book provides the reader an impressive overview of many key concepts in behavioral research, with lots of illuminating stories from Kahneman's work and experiences. Before you know it, you may find "heuristic" (a rule of thumb) working its way into your conversations.

I will expand on one of the book's chapters ("The Law of Small Numbers") to illustrate some of Kaneman's analysis. Suppose you learn that out of more than 3,000 counties in the United States, the incidence of kidney cancer is lowest in mostly rural, sparsely populated counties in the Midwest, the South, and the West. Before you are tempted to try to explain the lower cancer rates on some elements of rural living, you should realize that the highest rates of kidney cancer are also found in (other) rural, sparsely populated counties in those same states. The reason for these seemingly contradictory results is that the small sample sizes of kidney cancer in sparsely populated counties allow for widely varying cancer rates. Put differently, if the Law of Large Numbers says the average results obtained from a large number of trials should be close to the expected value (of cancer rates, or whatever), then the Law of Small Numbers says that the smaller the sample size you deal with, the greater the chance of obtaining results that are further from the overall expected value. The low cancer rates in some counties turn out to be artifacts, not statistically systematic results.

Here is one final example from Kahneman's work of some of the concepts the reader will encounter in this book. Suppose that Linda is 31 years old, single, outspoken, and very bright. In college, she majored in philosophy. As a student, she was deeply concerned with the issues of discrimination and social justice, and she also participated in anti-nuclear demonstrations. Which is more probable?

1. Linda is a bank teller.
2. Linda is a bank teller and is active in the feminist movement.

According to Kahneman, about 85% - 90% of undergraduates at several major universities chose the second option, that Linda was a bank teller and active in the feminist movement. However, this is an example of the "conjunction fallacy," since the probability of two events occurring together (in conjunction) must necessarily be less than the probability of either event occurring alone. Put simpler, the probability that Linda is a bank teller must be greater than the probability that she is a bank teller and active in feminist causes. (To be complete, Kahneman points out that there are critics of the Linda experiment who, for example, question whether it is reasonable for test subjects to understand the word "probability" as if it meant "plausibility.")

Okay, you hopefully have an idea about some of the ground covered in this book. If behavioral research interests you, this book merits your attention. I should also mention that there is blessedly little technical jargon in the book, so if you are new to the field of behavioral research you should be able to enjoy the book. Indeed, I think most people will get a lot from it.

Back in 1994, Massimo Piattelli-Palmarini, Director of the Institute of San Raffaele in Milan, Italy, wrote a charming little book about common cognitive distortions called Inevitable Illusions. It is probably the very first comprehensive summary of behavioral economics intended for general audience. In it, he predicted that the two psychologists behind behavioral economics - Amos Tversky and Daniel Kahneman - would win the Nobel prize. I didn't disagree with the sentiment, but wondered how in the world were they going to get it since these two were psychologists and there is no Nobel prize in psychology. I didn't think there was much chance of them winning the Nobel Prize in economics. I was wrong and Piattelli-Palmarini was right. Kahneman won the Nobel prize in Economic Sciences. (Tversky unfortunately prematurely passed away by this time.) Just as Steve Jobs who was not in the music industry revolutionized it, the non-economists Kahneman and Tversky have revolutionized economic thinking. I have known Kahneman's work for quite some time and was quite excited to see that he was coming out with a non-technical version of his research. My expectations for the book were high and I wasn't disappointed.

Since other reviewers have given an excellent summary of the book, I will be brief in my summary but review the book more broadly.

The basis thesis of the book is simple. In judging the world around us, we use two mental systems: Fast and Slow. The Fast system (System 1) is mostly unconscious and makes snap judgments based on our past experiences and emotions. When we use this system we are as likely to be wrong as right. The Slow system (System 2) is rational, conscious and slow. They work together to provide us a view of the world around us.

So what's the problem? They are incompatible, that's what.

System 1 is fast, but easily swayed by emotions and can be as easily be wrong as be right. You buy more cans of soup when the display says "Limit 12 per customer". We are on autopilot with this system. System 1 controls an amazing array of behavior. System 2 is conscious, rational and careful but painfully slow. It's distracted and hard to engage. These two systems together provide a backdrop for our cognitive biases and achievements.

This very well written book will enlighten and entertain the reader, especially if the reader is not exposed to the full range of research relating to behavioral economics.

This book serves an antidote to Malcolm Gladwell's Blink. Although Gladwell never says that snap judgments are infallible and cannot badly mislead us, many readers got a different message. As the Royal Statistical Society's Significance magazine put it "Although Gladwell's chronicle of cognition shows how quick thinking can lead us both astray and aright, for many readers Blink has become a hymn to the hunch." While Kahneman does show how "fast thinking" can lead to sound judgments, he also notes how they can lead us astray. This point is made much more clearly and deliberately in Kahneman's book

All my admiration for the brilliance and creativity of Kahneman (and Tversky) does not mean that I accept 100% of their thesis. Consider this oft-quoted study. Linda is 31 years old, single, outspoken, and very bright. As a student, she was deeply concerned with the issues of discrimination and social justice, and she also participated in anti-nuclear demonstrations. Which is more probable?
1. Linda is a bank teller.
2. Linda is a bank teller and is active in the feminist movement.
Eighty-five percent of test subjects chose the second option, that Linda was a bank teller and active in the feminist movement. Kahneman's interpretation is that this opinion is wrong because the probability of a (random) woman being a bank teller is greater that than person's being a bank teller AND a feminist. What Kahneman overlooks here is that what most people answered may not be the question that was asked. The respondents may not have been concerned with mathematical probabilities, but rather could be responding to the question in reverse: Is it more likely for a current activist to have been an activist in the past compared to others in the profession? A more formal and theoretically better argued rebuttal of some of Kahneman's hypotheses can be found in the works of Gerd Gigerenzer.

Kahneman notes that even top performers in business and sports tend to revert to the mean in the long run. As a result, he attributes success largely to luck. I'm not so convinced of this. There can be alternative explanations. People who achieve high degree of success are also exposed to a high degree of failure and the reversion to the mean may be attributable to this possible mirror effect. Spectacular success may go with spectacular failure and run-of-the-mill success may go with run-of-the-mill failure. Eventually everyone may revert the mean, but the ride can be very different. Chance may not account for that.

Another concern is that much of the work is done in artificial settings (read college students). While much of what we learnt can perhaps be extended to the real world, it is doubtful every generalization will work in practice. Some may find Kahneman's endorsement of "libertarian paternelism," not acceptable. More importantly, when applied to the real world it did not always found to work.

In spite to these comments this book is written carefully in a rather humble tone. I also appreciated Kahneman's generous and unreserved acknowledgement of Tversky's contributions and his conviction that, had he been alive, Tversky would have been the co-recipient of the Nobel Prize. My cautionary comments probably have more to do with the distortions that might arise by those who uncritically generalize the findings to contexts for which they may not applicable. As mentioned earlier, the wide misinterpretation of Gladwell's Blink comes to mind.

Nevertheless, Thinking Fast and Slow is a very valuable book by one of the most creative minds in psychology. Highly recommended. For a more complete and critical understanding, I also recommend the writings of the critics of behavioral economic models such as Gerd Gigerenzer.

PS. After I published this review, I noticed an odd coincidence between Thinking Fast and Slow and Inevitable Illusions that I mentioned in my opening paragraph. Both books have white covers, with an image of a sharpened yellow pencil with an eraser top. How odd is that?

I was privileged to have Daniel Kahneman for many years as a member of my research group "MacArthur Network on the Origin and Nature of Norms and Preferences," where I came to appreciate his dedication, intelligence, and friendship. At last Kahneman has written a book for the public, and is already a widely discussed best seller. I am convinced that the contributions of Kahneman and his coauthor Amos Tversky are fundamental and lasting, but I am concerned that his work not be seen as conveying the general message that "people are irrational."

I was motivated to write these hasty comments by the review of the book by Jim Holt in the New York Times Book Review (11/27/2011), p. 16ff. Holt writes "Although Kahneman draws only modest policy implications... others... go much further. [David Brooks, NY Times editorial writer], for example, has argued that Kahneman and Tversky's work illustrates `the limits of social policy'; in particular, the folly of government action to fight joblessness and turn the economy around." Of course, nothing of the sort follows from Kahneman and Tversky's work.

I know Kahneman and Tversky's work (hereafter KT) very well, but I am going through this book slowly, so I will add to my comments as they accumulate.

Psychologists have known for many years that humans make systematic visual mistakes, called "optical illusions." This does not elicit the general pronouncement that humans systematically error in their visual judgments. The same should apply to KW's results: the results are correct, but they should not be sloppily interpreted as saying that people are general illogical and error-prone decision-makers.

First main point: I believe KW's work does not at all suggest that people are poor at making logical inferences. The experiments which might suggest this are generally misinterpreted. A particularly pointed example of this heuristic is the famous Linda the Bank Teller problem, first analyzed in Amos Tversky and Daniel Kahneman, "Extensional versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment", Psychological Review 90 (1983):293-315. Subjects are given the following description of a hypothetical person named Linda: "Linda is 31 years old, single, outspoken, and very bright. She majored in philosophy. As a student, she was deeply concerned with issues of discrimination and social justice and also participated in antinuclear demonstrations." The subjects were then asked to rank-order eight statements about Linda according to their probabilities. The statements included the following two: "Linda is a bank teller" and Linda is a bank teller and is active in the feminist movement."
More than 80\% of the subjects---graduate and medical school students with statistical training and doctoral students in the decision science program at Stanford University's business school---ranked the second statement as more probable than the first. This seems like a simple logical error because every bank teller feminist is also a bank teller. However, there is another interpretation according to which the subjects are correct in their judgments. Let p and q be properties that every member of a population either has or does not have. The standard definition of "the probability that member x is p" is the fraction of the population for which p is true. But an equally reasonable definition is the probability that x is a member of a random sample of the subset of the population for which p is true.' According to the standard definition, the probability of p and q cannot be greater than the probability of p. But, according to the second, the opposite inequality can hold: x might be more likely to appear in a random sample of individuals who are both p and q than in a random sample of the same size of individuals who are p.
In other words, the probability that a randomly chosen bank teller is Linda is probably much lower than the probability that a randomly chosen feminist bank teller is Linda. Another way of expressing this point is that the probability that a randomly chosen member of the set "is a feminist bank teller" may be Linda is greater than the probability that a randomly chosen member of the set "is a bank teller," is Linda.

I believe my interpretation is by far the more natural. Moreover, why would the experimenters have included information about Linda's college behavior unless it were relevant? This behavior is completely irrelevant given KW's interpretation of probability, but wholly pertinent given a "conditional probability" interpretation. The latter can be colloquially restated as "the conditional probability that an individual is Linda given that she is a feminist bank teller is higher than the conditional probability that an individual is Linda given that she is a bank teller."

Second Main Point: Many of the examples of irrationality given by KW are not in any way irrational. Consider for example the chief investment officer described by Kahneman (p. 12). This man invested tens of millions of dollars in Ford Motor Company stock after having visited and automobile show and having been impressed with the quality of the current offering of Ford vehicles. Kahneman says "I found it remarkable that he had apparently not considered the one question that an economist would call relevant: I Ford stock currently underpriced?" In fact, there is no objective measure of a stock being "underpriced," and no known correlation between a measure of "being underpriced" and subsequent performance on the stock market. Moreover, the executive may not have revealed all of the reasoning involved in his decision, but rather only a "deciding factor" after other considerations had been factored in.

Third Main Point: We have long known that people do not generally act in their own best interest. We have weakness of will, we procrastinate, we punish ourselves for things that are not our fault, we act thoughtlessly and regret our actions, yet repeat them, we become addicted to cigarettes and drugs, we become obese even though we would like to be thin, we pay billions of dollars for self-help books that almost never work. KW have not added much, if anything, to our understanding of this array of bizarre behaviors. Of course, they do not otherwise. However, commentators regularly claim that this behavior somehow contradicts the `rational actor model' of economic theory, which it does not in any way. Economic theory explores the implications of human choice behavior without claiming that the choices people make are in some sense prudent or even desirable to the decision-maker (we cannot choose our preferences).

Economic theory is in general supportive of the notion that people should get what they want, but has included the notion of "merit goods" that society values or disvalues for moral or practical reasons that counterindicate consumer sovereignty. For instance, we regulate pharmaceuticals, we prohibit racial discrimination in public places, and we outlaw markets in body parts.

Fourth Main Point: KW are right on target in asserting that people make massive errors in interpreting statistical arguments (e.g., the base rate fallacy, or the interpretation of conditional probabilities). This has nothing to do with "illogicality" or "irrationality," but rather the complexity of the mathematics itself. For instance, KW have shown that physicians routinely fail to understand what the statistical accuracy of lab tests mean---the fact that at test is 95% accurate is compatible with the fact that it is wrong 95% (or any other, depending on the incidence of the condition that is test for) of the time.

The psychologist Gerd Gigerenzer has shown that if conditional probabilities are reinterpreted as frequencies, people have no problem in interpreting their meaning (see the discussion "Risk School" in Nature 461,29, October 2009). Gigerenzer has be promoting the idea that trigonometry be dropped from the high school math sequence (no one uses it except surveyors, physicists, and engineers) and probability theory be added. This sounds like a great idea to me.

Of course, if people do not do well a formal statistical analysis, how are to we defend the rational actor model, which is thoroughly Bayesian and implicitly assumes people are infinitely capable statistical decision-makers? The answer is not to abandon the rational actor model, which in general has had exceptional explanatory power---see my book, The Bounds of Reason (Princeton 2009) and my review of Ken Binmore's Rational Decisions (Economic Journal, February 2010). Rather, I believe the answer lies in replacing the subjective prior assumption of the rational actor model with a broader assumption that individuals make decision within networks of minds that are characterized by distributed cognition, much as social insects, except of course on a much higher level, using language instead of pheromones, with the cultural construction of iconic rather than pheromonic signals. But, that is the subject to be explored in the future. One of the payoffs of KT research is to make it clear how insufficient the standard economic model of decision-making under (radical) uncertainty really is.

Behavioral Economics is perhaps the most popular genre of non-fiction in the last decade. With bestsellers by the likes of Malcolm Gladwell, Steven D. Levitt, Dan Ariely, Richard Thaler, Tim Harford, and a number of other qualified journalists and academics, it seems as though the field contains an infinite wealth of fascinating material. And, it could be said, that all of this is due in large part to the work of Daniel Kahneman.

As a part of the pioneering team with Amos Tversky, Kahneman has practically shaped Behavioral Economics since the 1960s, when they began conducting experiments. This book brings together all of Kahneman's findings in one coherent study.

Since Kahneman's work has been so influential, a lot of the ideas presented here might not be new. Cognitive biases such as loss aversion, priming, and framing have all been presented and analyzed in nearly every Behavioral Economics book out there. But, while the ideas are not novel, it is rewarding to hear analysis from the original source of the studies. Kahneman provides insights into the rationale of the studies that other writers could not offer, and so this book seems more penetrative than the others. Where his successors string together pieces of interesting yet seemingly incoherent tid bits about cognition and behavior, Kahneman proposes a much more developed thesis on human cognition.

That thesis is summarized by the title--that there are two ways humans think and make decisions, "fast" and "slow," and that we cannot disregard either when considering people's thoughts and actions. The two ways can be described by a number of dichotomies: The first method of thinking is automatic, the second is controlled; the first is effortless, the second effortful; and so on. An easier way to describe the two systems would be to identify them as subconscious and conscious, though Kahneman does not explicitly make this description, perhaps because these concepts are so loaded with meaning.

Kahneman examines this concept by delving into the latest studies in the field and thus provides the avid Behavioral Economics reader a source of great new instances of it. The survey of cognitive errors includes research on the strange tendencies of golfers under stressful situations, parole officers after lunch, and shoppers under the influence of marketing ploys. As it has been in nearly all Behavioral Economics books, this material is absolutely fascinating and doesn't ever seem to lose its mystery.

Of course, despite being so fascinating, Behavioral Economics as a discipline has its flaws, and this book is no exception. In general, the flaws have to do with the fact that the studies assumed to prove various cognitive errors are rather abstract by nature and so rely on a number of qualifications to even be useful. In order to analyze behavior, for instance, there need to be objective standards for "right" and "wrong" actions, which I'm not sure has been investigated as thoroughly as it should. It is for this reason that far reaching claims about human behavior being irrational and the subsequent calls for changes in social structure (by whatever means) are typically unfounded and lead down a dangerous road of regulation and control (Thaler's Nudge and Ariely's Predictably Irrational come to mind). Kahneman does not jump to these conclusions, and certainly does not propose policy action a la Thaler or Ariely, but he does lay the groundwork for such ventures--after all, he is the pioneer.

Altogether, this book does not suffer from this inherent flaw, and rather simply encourages more study and debate. And that might make it a classic in the field.

Kahneman has been working since the 1970s to dismantle the idea that human economic behavior consists of rational decision making. He was given a nobel prize in 2002 for his work. This book is a continuation of that grand project. At the heart of the project is of course the contradiction of attempting to create a rational description of what the work ultimately wants to prove is irrational behavior. And within the contradiction is the deeper (unanswered) question of just what rational decision making is.

The book will be popular for many reasons. The worshippers of pure science will eat it up. The political right will see the book's conclusion as scientifically invalidating any attempts at social policy by the government. (people can't be helped because they are not rational) The political left will see the book's conclusion as scientifically invalidating the idea of free market economics in favor of the nanny state. (people can't make their own decisions and need the government to decide for them). The success of Kahneman as a writer is that he has created something that can appeal to a whole lot of people.

What drags down the book is its arrogance and tendency to operate at the boundary between philosophy and observational science. The author also has always had a habit of staying away from the bigger questions just below the surface of his work: The nature and definition of rationality itself. Are statistics and basic logic themselves rational? Can irrational behavior ever really be expressed or described by the arch rational model?

This is at its worst when the author comes back to now famous Linda problem. He admits the controversy around the problem but fails to really address it properly in the book. The Linda problem (in one form) gives a minimum amount of background about a person and then asks which is the more probable of two conclusions. The "correct" answer is based on what is called "reason" but which is in fact a strict interpretation of the question based on statistics and narrow, formal logic. A correct rational answer to the question might be that the information provided is insufficient to make any deduction and that forcing a choice between two alternatives is a false choice. But the author's view is that reason requires the mathematical answer that the probabilty of two conditions being true is always less than the probability of one condition being true. His answer is correct....but it is the only rational answer? Absolutely not. His right answer is the product of defining reason as the sole product of statistics and AND/OR/NOT style logic. Further, its the product of reading a question with a particular mindset in a particular way. The experiment is useful in capturing a type of decision people make. But using it to make a qualtitative judgement about that decision (irrational) is not useful. Its a prime example of how the author overreaches in various ways.

The author in the book comes up with an abstract structural model of human behavior. He divides reasoning into "system 1" (fast) and "system 2" (slow). Its very cute and very useful in this arguments. But I didn't find it very convincing. It doesn't seem to be speed that the issue. Its the approach and the context of the problem. Most people just don't treat life as an endless series of statistics and AND/OR/NOT logic problems on an SAT test. They don't treat decisions that way for good reasons. In particular, IMO, because rational decision making isn't equal to probabilistic statistical decision making or AND/OR/NOT logic. What the author seems IMO to be running into is the problems of his limited math-based model to represent human decision making rather than human decision making necessarly being irrational.

I found the observations in the book about human behavior interesting (the raw data). But not the author's interpretations, models or conclusions about the behavior. The models overreach too much in their conclusions and are too simplisitic (the curse of the so-called social sciences). To me, understanding that people will usually react a particular way in a given situation (observation) is far more interesting than coming up with a half-baked theory explaining "why".

By many accounts, Daniel Kahneman is the father of his field, Behavioral Economics, which is a mix between behavioral psychology and traditional economics and has provided perhaps the most fascinating material in recent pop science literature. While this book is no exception in that regard, it is plagued by the same deficiencies that other Behavioral Economics books are plagued by, and so doesn't quite accomplish the potential of the new science.

The premise behind Behavioral Economics is that people are irrational. Countering the standard of the `rational agent model', in which it is assumed that people think and act rationally based on their own interests, behavioral economists have shown that people consistently make decisions that are uneconomical and often self-defeating. The conclusion is that people cannot possibly be rational and that something else is going on.

Daniel Kahneman's thesis is that everyone possesses two systems of thought--the first is automatic, emotional, and intuitive (`fast' as he summarizes it); the second is deliberate, logical, and controlled (`slow'). This dichotomy means that we have the capacity for both reasoning and emotional functions; it also means that we are prone to mistakes. Kahneman shows how the two systems of thought are engaged and what happens when the two mix. Kahneman argues that we define ourselves by our `System 2' slow thinking, but in reality, we are largely governed by our `System 1' fast thinking. This is where a number of cognitive biases and errors come in.

Kahneman's work on these biases is legendary. As a part of a pioneering duo with Amos Tversky, he laid out a number of experiments that show how people consistently make faulty errors in all kinds of situations--at the grocery store, in the classroom, at the voting booth, etc. It is from these studies and other similar work that pop psychology issues such as `anchoring', `framing', `loss aversion', `hindsight bias', and others were introduced. Now--thanks in large part to Kahneman and this book--they are part of our everyday conversations.

Kahneman covers all of these concepts in this book, and does so par excellence since he has had such an integral part in forming them. And, the material is as fascinating as it is in any other Behavioral Economics book. But, as it is with other Behavioral Economics books, the argument is contingent on a number of premises that cannot be assumed, and so conclusions reached end up being far-fetched and rather illogical in themselves.

To begin, the theory has holes. It is argued that, since System 2 is where we conduct our rational choices, System 1 must therefore be non-rational or irrational. And, since we are largely governed by System 1, our actions are based on non-rational processes. But Kahneman does not explain how the different systems arise, nor does he examine what the systems are made up of; he simply shows that people think and make decisions in two different manners. Here, Kahneman shows that System 1 is quick and based on limited information, but this doesn't mean that it is irrational--impetuous and uninformed, maybe, but it still can be based in logic.

One would be right to question the method as well. Kahneman's research is largely based in thought experiments, psychological experiments, and surveys. While this doesn't mean that his conclusions are automatically false, it does mean that his findings are limited--a fact that he fails to guard against.

For example, throughout the book Kahneman would examine an experiment, determining that a group of people acted a certain way under certain circumstances, and then claim that the findings apply to everyone including the reader. An experiment described early in the book showed how a group of people were less helpful on average after being `primed' by the concept of money. Kahneman then says "You have no choice but to accept that the major conclusions of these studies are true. More important, you must accept that they are true about you. If you had been exposed to a screen saver of floating dollar bills, you too would likely have picked up fewer pencils to help a clumsy stranger." But this is a simple whole-to-part fallacy. Kahneman argues that because a group of people was influenced by a certain prime that all people would be influenced by that same prime. The claim cannot be logically defended--there are exceptions to all of these rules, and so the conclusion cannot be so absolute.

All of the studies and conclusions in this book are subject to similar criticism. This doesn't make the studies uninteresting or banal in any way. On the contrary, the material is that much more interesting when the reader realizes that there is something missing in the analysis. The intellectual agitation encourages a rebuttal in long form, which is on its way. In the meantime, enjoy this survey of some of the most fascinating material on human behavior.

As one who was brought up with Herbert Simon and"satisficing," I have mixed feelings about this book. As an intelligence professional I know for a fact that corrupt politicians have zero interest in the facts, only in what will profit them personally in the short-term. As much as I would like to see integrity restored as the core value of government, economy, and society, in the larger context in which we live this book is a curiosity.

There are gems and it is certainly worth reading, but as one other reviewer points out, it is not the easiest reading nor the most delightful. Here is what I got out of it (my summary notes, I donate all books right after I read them, to a nearby university).

For those instances when BOTH intelligence (decision-support) officers and their clients (politicians, policy makers, acquisition managers, operational commanders) have integrity--a condition that does not exist today, this book is very useful as a training aid.

01 It strives to provide a deeper understanding of judgments and choices by humans.

02 It fully documents the biases of intuition (judgment informed by past cases)

03 It documents the fact that decision making under uncertainty leads to humans being too prone to believe findings based on inadequate evidence, and too prone to avoid collecting a sufficiency of observations or research findings by others.

The essence of the book is the author's distinction between System 1 and System 2.

System 1 is automatic, fact, and falls prey to illusions.

System 2 is controlled, slow, requires attention, and is easily distracted.

Conclusions about judgment heuristics (rules of thumb):

HARD to think statistically

EASY to think associatively

We have EXCESS CONFIDENCE in what we think we know, and a deep, deep, deep inability to acknowledge our ignorance.

Humans DEVIATE from rational model with two major CORRUPTIONS:

01 Treat problems in isolation instead of as part of a systemic whole

02 Treat problems in relation to framing effects that distort perceptions with inconsequential trivia

QUOTE (34): We found that people, when engaged in a mental sprint, may become effectively blind."

That one sentence made the book worthwhile to me. I have long been a fan of Red Cells and walk-abouts and other forms of being forced to engage outside the box, this one sentence reminded me of my now firm view that all analytic teams need an independent Yoda to challenge them.

The author surprises me with a substantive discourse on how money has caused people to collaborate less--it makes them more independent of one another and displaces the social value of collaboration.

I am fascinated by the author's focus on surprise as a litmus test for the extent to which we are open.

He emphasizes that hypotheses should be confirmed by trying to REFUTE the hypothesis rather than by searching for additional supporting evidence. Having the hypothesis is enough. If it cannot be refutes, THAT is worth much more than a documented but not seriously challenged hypothesis.

QUOTE (117): The tendency to see patterns in randomness is overwhelming.

This in the context of the anchoring effect, and the stark strong impact of preconceived notions that shape perception of inclusive into conclusive, contradictory into confirming.

The discussion of risk, for an intelligence professional, is very very interesting. The author focuses on how critical it is to actually have a measure of risk--to know with some precision what you are defining as risk, why.

I am blown away by a discussion that makes it clear that praise or punishment are generally irrelevant for professionals. They tend to do the best they can, and the odds are such that praise or punishment have no effect but appear to have effect because they zig zag along a mean. "It is what it is." I connect this with the National Football League, and how calm most team players are when they miss a catch or a block. "It is what it is."

I'm not sure this is the book I would want for advanced intelligence courses, but I really like chapter 19 on the illusion of understanding and chapter 20 on the illusion of validity. Even if our political officials are corrupt, we intelligence professionals should at least strive to get it right.

The author is a believer in algorithms over experts. I have mixed feelings about that. Certainly I agree that most experts are wrong and much narrower in their understanding than common competence requires, but I am also very skeptical of algorithms, witness Google's math hacks against digital garbage. As a believer in collective human intelligence (citizen wisdom councils, etcetera), I accept the importance of taking algorithms as far as they can go, but algorithms are no better than the humans who constructed them and the data known to the humans at that time.

I give the author great credit for providing a superb overview across the book of stars in this field. This is not a selfish or self-centered book--it appears to do full justice to all others.

Great thoughts in this book:

01 Capitalists--both inventors and entrepreneurs--overestimate their success rate by two times.

02 Illusion of control is increased by a failure to seek out data from others [this is one reason I champion M4IS2--Multinational, Multiagency, Multidisciplinary, Multidomain Information-Sharing and Sense-Making) and public intelligence in the public interest).

QUOTE (262): Organizations that take the word of overconfident experts can expect costly consequences.

NEW TO ME: Psycho-physics--relation of mind and matter. This may be a different way of talking about quantum physics, but it is one more indication that mind-matter interfaces are going to be a huge area of study in the future.

The author confirms Machiavelli 101--defenders of the status quo are always stronger than reformers seeking change [he does not say this but Kuhn and others do: UNTIL the status quo self-destructs from its own corruption, and the reformers are free to build on its ashes].

On page 411 he provides a very serious critique of libertarianism, pointing out that libertarians assume all individuals are rational and see no value in aggregate services.

QUOTE (417): Observers are less cognitively bvusy and more open to information than actors.

The more I think about this, the more I think that we need a new class of intelligence professionals who are neither collectors nor analysts, but observers "in situ" with decision-makers or "in situ" with crisis situations, and they provide the "third eye". I am writing the chapter on "The Craft of Intelligence" for the next Routledge Handbook of Intelligence Studies, and this is one new idea that I credit to this book and author, that I plan to integrate into my thinking about the future of intelligence as a discipline.

There are two appendices and an excellent index.

As is my custom, I always use Amazon's link feature to point to other related books. Here are ten in the decision-making arena that I consider especially valuable.

Radical Man: The Process of Psycho-Social Development
The Knowledge Executive
Tools for Thought: The History and Future of Mind-Expanding Technology
Thinking in Time: The Uses of History for Decision-Makers
Planning with Complexity: An Introduction to Collaborative Rationality for Public Policy
Business War Games: How Large, Small, and New Companies Can Vastly Improve Their Strategies and Outmaneuver the Competition
Reflexive Practice: Professional Thinking for a Turbulent World
Open Space Technology: A User's Guide
Atlas of Science: Visualizing What We Know
Holistic Darwinism: Synergy, Cybernetics, and the Bioeconomics of Evolution

This is an excellent review of the research in the tradition initiated by Khaneman and Tversky. For those of you who are not familiar with this work, this is an interesting and very accessible introduction to that research. Sometimes I missed some references to recent research with contradictory conclusion, but given the format of the book that is acceptable. As an introduction into this research area I would give it 5 stars. Highly recommended.

For those of you familiar with Kahneman and Tversky's work from the 70s and 80s, the ideas discussed in the book should be mostly well known, perhaps with an exception for the first part. This is my reason for the 4-star rating.