Book Cover

Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.

# Review

This book is written by psychologist Daniel Kahneman, who, despite being a psychologist, won the Nobel Prize for Economics due to his contributions to behavioural economics. It covers a variety of topics surrounding human decision-making, including the drivers of decisions, the various heuristics which can impact decisions, and some techniques which can be used to make better, more fact-driven decisions.

I’ll be honest; this book took me months to finish. The book is packed with content and reads like a textbook at times. I read it on and off over two months to finish it. I’d be lying if I said it was an enjoyable book to read, but it certainly is a very useful book. The knowledge Kahneman shares in this book is very applicable to almost everyone and he backs up his assertions with interesting research, much of it conducted by himself and his research partner Amos Tversky.

My three takeaways are:

• We humans use a two-tier system for making decisions. The first tier is called System 1 and is fast and instinctive, while the second tier is called System 2 and is deliberate and logical. System 1 is extremely fast but prone to biases; while System 1 is good for everyday trivial decisions, one must make an effort to engage System 2 for larger, more difficult decisions which require lots of factual analysis.

• One of the biases that I personally have experienced in the past is our fixation on loss aversion. Humans tend to value potential loss more than potential gain. One should think about gambles pragmatically with System 2. On the flip side, humans also suffer from overconfidence. Kahneman attributes this to what he coins What You See Is All There Is. WYSIATI states that when the mind makes decisions, it only considers known knowns, and rarely considers known unknowns and unknown unknowns. Activities such as a premortem (imagining the project failing in the future and figuring out how it could have failed) can help in making better decisions.

• Kahneman explains a distinction between our two selves: “the experiencing self” and “the remembering self”. The experiencing self is focused on experiences as they occur in the moment; in other words, the experiencing self is what we are currently living through. On the other hand, the remembering self is what we recall from our past experiences. The remembering self tends to dominate our decisions but is biased, often focusing on the peaks and troughs of the experience, and how it ends.

# Conclusion

Not the best read, but a profoundly insightful book.

# Overall rating: 8.0

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