Steven Pinker calls him “the most important psychologist alive today”. Behavioural economist Daniel Kahneman’s new book, Thinking, Fast And Slow, proves how accurate Pinker is. All of us believe we think logically all the time, but our thinking capabilities are far worse than what we think. Kahneman shows how we get blindsided and make poor decisions. The book is a wakeup call and is highly relevant to people in all walks of life. According to the author, behavioural economics explains decision making very well as it recognises that people do not always behave rationally. The book examines three separate issues: intuitive thinking versus calculative thinking; how we gamble; and how we evaluate.

The systems: Our brain has two modes of thinking: system 1 and system 2. The first one is intuitive, quick, automatic, can never be turned off and tends to jump to conclusions. System 2 is statistical, slower, laboured and thorough, but due to laziness, it tries to shirk thinking or blindly accepts conclusions offered by system 1. For instance, most reviewers of this book felt that it focused only on one issue: intuitive thinking versus calculative thinking. They do this by basing upon a comment that US economist Steven D. Levitt made on the back flap. This is how reviewers could get carried away by impressions rather than carrying out an assessment. The book has a nice collection of technical terms — all admirably apt, simple, brief and evocative.

How we gamble: There is no denying that this book will be one of the finest in your shelf. Let us say you bought it at its reasonable price of Rs 499. As it is worth much more than that, you would feel far worse losing the book. Assume you bought this as a self-help book to improve your decision making skills. Then you are no different from the one buying an insurance policy. If you were an incurable optimist who bought it confidently expecting it to improve your decision making skills, you are no different from those who buy lottery tickets. If having bought it, you get sorely disappointed and go hammer and tongs, ad nauseum, criticising it on all forums, you are the fourth type of gambler.

How we evaluate: Just when we thought we are definitely not a split personality, the author proves us wrong. We all have two selves: the “experiencing self” and the “remembering self”. Let us say you have completed reading this book fully or gave up after reading it partly. Your remembering self ignores how long you took to read it and simply gives you a verdict: good, bad or neutral. The verdict, weirdly enough, is only an average of your peak feeling (of like or dislike) and the feeling you had at the very end of completing your reading. The author says that not only are we lazy about assessing (system 2), but we like to avoid choices as much as possible and simply select the default option.

It is interesting to note that a few behavioural economists, who are consultants to the Obama administration, have suggested the government apply “libertarian paternalism” to fix the budget deficit. They have made financial options which are most helpful to the country as the default option. This way, the US benefits and, yet, citizens cannot blame the government for curtailing freedom of choice. Rather smart, isn’t it?

Having said that, this excellent book needs a re-edit before a reprint for further conceptual simplification and gaining wider readership. The title mistakenly cues us that it is about quick thinkers and the dimwitted; an intro could help clear ambiguity. The last section abounds in premises that are plausible, but not proven — unlike the previous four parts. The arithmetical (statistical) miscalculation in the diagrammatical example in the chapter ‘Frames And Reality’ requires correction. In the chapter ‘Causes Trump Statistics’, the calculation in Bayesian statistics is, unfortunately, not given. Notwithstanding these, there is no denying the genius evident in the author and the book.

The verdict: why don’t you use your system 2 to decide whether you like the book or not? This review is meant for those relying mainly on system 1. If you feel you are mainly a system 2 person, you can read another version of system 2 thinking, which is more detailed and provides another perspective. Well, like everyone else, we have only wanted to cover all bases.

Author Details:
Daniel Kahneman is a Eugene Higgins Professor of psychology and Emeritus Professor of public affairs at Princeton University’s Woodrow Wilson School of Public and International Affairs. A member of the American Academy of Arts and Sciences and the National Academy of Sciences, he won the Nobel Prize in economic sciences in 2002.

Kumar is a retail consultant based in Chennai
 
(This story was published in Businessworld Issue Dated 06-02-2012)