Genres: Decision Making, Psychology, Business, Cognitive Psychology, Behavioral Economics, Behavioral Science
Recommend to: Decision makers, leaders, top management, middle management, marketers, key account managers, coaches, PR, HR, people in sales.
Number of pages: 499 pages
THOUGHTS ABOUT THE BOOK:
Have you ever asked yourself how you make your decisions? The easy decisions about everyday stuff and then there are of course the life altering decisions for which there is no coming back from. So based on what and how do you make those decisions? This is a very important question for each individual and also for businesses. I picked up this book because I want to know how I make decisions, and how and which tools do companies, brands and marketers use to try to influence my decisions. Don’t you? In the book, Daniel Kahneman explains how our mind works and how we make split decisions without even consciously being aware of all of the factors that weight in while making every decision. He explains that our mind is always on the look out and always making decisions even if we are not aware of it consciously. Those decisions are made by two different systems in our mind. System 1 makes quick decisions – thoughts are processed in the amygdala, while System 2 is slow and does deep analysis and it processes thoughts in the prefrontal cortex. When there is a problem System 1 can’t solve System 2 takes over. There is also an important point made in the book that we have limited mental energy, which System 2 “burns through” fast, and that is why if possible our mind will use as much as it can System 1.
In the book you will get to read a lot of examples how we are sometimes tricked by System 1 and in cases where System 2 should be activated but is not – as an example take a look at Puzzle 1 which is posted lower. There are more examples like that in the book. The author also gives us examples of how important framing is, that our brain is lazy and it would rather solve an easy problem then the right one if possible. Also we look for patterns in everything, if anchors with numbers are set it is hard to change our minds, also how we over-value things we own, and if we are to committed to a cause or project we get knowledge blindness in that matter and more.
If you are interested in how you make decision, being more mindful, understanding your actions and actions of others I highly recommend this book. I found it very interesting and useful for my personal use and in business/sales. Now it’s not all that great all the time. Keep in mind that the book has almost 500 pages and towards the end I found it less interesting and in some cases it feelt repetitive. To sum up, it’s a great book which I will definitely reread.
MY NOTES FROM THE BOOK:
- We have two systems/ways of thinking: System 1 operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2 allocates attention to mental activities.
- Intense focusing on a task can make people effectively blind.
- Anything that occupies your working memory reduces your ability to think.
- As you become skilled in a task, its demand for energy diminishes. studies of the brain have shown that the pattern of activity associated with an action changes as skill increases, with fewer brain regions involved.
- The “Law of least effort” asserts that if there are several ways of achieving the same goal, people will eventually gravitate to the least demanding course of action. Laziness is built deep into our nature.
- Acquisition of skill is driven by the balance of benefits and costs (effort is cost).
- People who are cognitively busy are also more likely to make selfish choices, use sexist language, and make superficial judgements in social situations. The same effect has a sleepless night.
- When you are actively involved in difficult cognitive reasoning or engaged in a task that requires self-control, your blood glucose level drops. You can undo this effect by ingesting glucose.
- You also think with your body, not only with your mind/brain.
- Your actions and your emotions can be primed by events of which you are not even aware.
- Common gestures (such as nodding) can also influence our thoughts and feelings.
- Money-primed people become more independent than they would be without the associative trigger. They are also more selfish, less willing to help others, and prefer being alone.
- Reminding people of their mortality increases the appeal of authoritarian ideas, which may become reassuring in the context of the terror of death.
- Whenever you are conscious multiple computations are going on in your brain, which maintain and update current answers to some key questions: Is Anything new going on? Is there a threat? Are things going well? Should my attention be redirected? Is more effort needed for this task?
- When you are in a state of cognitive ease, you are probably in a good mood, you like what you see, believe what you hear, trust your intuitions, and feel that the current situations is comfortably familiar. You are also likely to be relatively casual and superficial in your thinking.
- When you are in a state of cognitive strain you are more likely to be vigilant and suspicious, invest more effort in what you are doing, feel less comfortable, and make fewer errors, but you are also less intuitive and less creative than usual.
- A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth. You do not have to repeat the entire statement of a fact or idea to make it appear true. The familiarity of one phrase in the statement sufficed to make the whole statement feel familiar, and therefore true.
- The effect of repetition has a profounding impact on liking something.
- When we are uncomfortable and unhappy, we lose touch with our intuition.
- A large event is supposed to have consequences, and consequences need cause to explain them. When we have limited information System 1 is adept at finding a coherent casual story that links the fragments of knowledge at its disposal.
- The sequence in which we observe characteristics of a person matters, because the halo effect increases the weight of first impressions.
- Before an issue is discussed, all members of the discussion should be asked to write a very brief summary of their position. By doing so you can eliminate the “weight” of the opinions of those who speak early and assertively.
- Keep in mind the framing effect: Different ways of presenting the same information often evoke different emotions (90% fat-free or 10% fat).
- There are circuits in the brain that evaluate dominance from the shape of the face.
- The order of questions you ask someone is very important. If questions are on the same topic, the first question fixes the mood of that person and the following answers are influenced by that mood.
- The illusion of pattern affects our lives. We are programmed to seek patterns. We reject the belief that much of what we see in life is random.
- People stay closer to the anchor when their mental resources are depleted.
- The world in our heads is not a precise replace of reality; our expectations about the frequency of events are distorted by the prevalence and emotional intensity of the messages to which we are exposed.
- Even compelling casual statistics will not change long-held beliefs rooted in personal experience.
- When our attention is called to an event, associative memory will look for its cause – more precisely, activation will automatically spread to any cause that is already stored in memory.
- A general limitation of the human mind is its imperfect ability to reconstruct past states of knowledge, or beliefs that have changed once you adopt a new view of the world, you immediately lose much of your ability to recall what you used to believe before your mind changed.
- The idea that the future is unpredictable is undermined every day by the ease with which the past is explained.
- We cannot suppress the powerful intuition that what makes sense in hindsight today was predictable yesterday. The illusion that we understand the past fosters overconfidence in our ability to predict the future.
- Intuition is nothing more and nothing less than recognition. The situation provides a cue, this cue gives the person access to information stored in memory, and the information provides the answer.
- Skill does not become perfect all at once, and on the way to near perfection some mistakes are made with great confidence.
- The proper way to elicit information from a group is not by starting with a public discussion but by confidentially collecting each person’s judgment.
- Most of us view the world as more benign than it really is, our own attributes as more favorable than they truly are, and the goals we adopt as more achievable than they are likely to be.
- Many times we focus on what we know and neglect what we do not know, which makes us overly confident in our beliefs.
- Once you have accepted a theory and used it as a tool in your thinking, it is extraordinarily difficult to notice its flaws.
- People become risk seeking when all their options are bad.
- In gambles, where both a gain and a loss are possible, loss aversion causes extremely risk-averse choices or simple put sure things. But in bad choices, where a sure loss is compared to a larger loss that is merely probable, diminishing sensitivity causes risk seeking. The options people pick show what they prefer. Picking a sure thing or a gamble shows if they like winning and dislike losing (Risk Aversion), or they dislike losing more than they like winning (Risk Seeking).* Case study 1
- An important factor in taking risks is the reference point to which gains and losses are evaluated.
- When directly compared against each other, losses loom larger than gains. This asymmetry between the power of positive and negative expectations or experiences has an evolutionary history. Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce. The response to losses is stronger than the response to corresponding gains.
- The brain of humans and other animals contain a mechanism that is designed to give priority to bad news. Experimenters have reported that an angry face “pops out” in a crowd of happy faces, but a single happy face does not stand out in an angry crowd.
- Bad information is processed more thoroughly than good.
- Gottman estimated that a stable relationship requires that good interactions outnumber bad interactions 5 to 1.
- The boundary between bad and good is a reference point that changes overtime and depend on the immediate circumstances.
- Not achieving a goal is a loss, exceeding the goal is a gain. The aversion to the failure of not reaching the goal is much stronger than the desire to exceed it.
- A research done by neuroeconomists has shown that people who are engaged in punishing one stranger for behaving unfairly to another stranger had increased activity in the pleasure center of the brain. Altruistic punishment could well be the glue that holds societies together.
- Low-probability events are much more heavily weighted when described in terms of 1 of 100.000 than a 0,001% risk. The 99.999 people fade into the background. The more vivid description produces a higher decision wight for the same probability.
- Humans tend to make decisions as problems arise, even when we are specifically instructed to consider them jointly.
- People expect to have stronger emotional reactions to an outcome that is produced by action than to the same outcome when it is produced by inaction.
- Losses evoke stronger negative feelings than cost.
- A discount or a surcharge to the same value may be economically equivalent, but they are not emotionally equivalent. People will more readily forego a discount, than pay a surcharge.
- The amygdala is accessed very rapidly by emotional stimuli and it produces an immediate tendency to approach the sure thing or avoid a loss.
- Memories are all we get to keep from our experiences of living. Tastes and decisions are shaped by memories, and the memories can be wrong. We can have a great experience that lasts a long time, but with a bad ending and the whole experience will be remembered as not pleasant. – important to keep in mind with customer service.
- Operates automatically and quickly, with little or no effort and no sense of voluntary control.
- Snap assessments of situations, subconscious thinking, and thoughts processed in the brain’s amygdala
- Responds to impressions of events of which System 2 is unaware.
- Continuosly generates suggestions for System 2: Impressions, Intuitions, Intentions and Feelings.
- In emergencies System 1 takes over and assigns total priority to self-protective actions (Imagine yourself at the wheel of a car that unexpectedly skids on a large oil slick. You will find that you have responded to the threat before you became fully conscious of it.)
- Localize the source of a specific sound.
- Completes the phrase “war and …”.
- Display disgust when seeing a gruesome image.
- Understands simple sentences.
- Is prone to substituting a difficult question with a simpler one.
- Allocates attention to mental activities, and is slow, effortful, infrequent, logical, calculating, conscious.
- Information is processed in the brain’s prefrontal cortex.
- Is normally in a comfortable low-effort mode, in which only a fraction of its capacity is engaged.
- Turns Impressions and intuitions into beliefs, and Impulses into voluntary actions.
- Its main functions is to monitor and control thoughts and actions suggested by System 1.
- Is mobilized when a question arises for which System 1 does not offer an answer – when an event is detected that violates the model of the world that System 1 maintains.
- A happy mood loosens the control of System 2 over performance: when in a good mood, people become more intuitive and more creative but also less vigilant and more prone to logical errors.
- Frowning generally increases the vigilance of system 2 and reduces both overconfidence and the reliance on intuition.
- Digs into your memory to recognize a sound.
- Determine the appropriateness of a behaviour in a social setting.
- Is activated when giving someone your phone number, parking into a tight parking space.
- Determine the price/quality ratio of two similar products.
Case study 1
You have been given $1.000. You are now asked to choose between:
- 50% chance to win $1.000,
- Get $500 for sure.
Which do you choose?
You have been given $2.000. you are now asked to choose between:
- 50% chance to lose $1.000,
- lose $500 for sure.
Which do you choose now?
Case study 1: Answer
Majority preferred the sure thing in Scenario 1, and the gamble in Scenario 2.
Case study 2
There is an outbreak of unusual disease, which is expected to kill 600 people. Two alternatvie programs to combat the disease have been proposed.
- If program 1 is adopted, 200 people will be saved.
- If program 2 is adopted, there is a 1/3 probability that 600 people will be saved and 2/3 probability no people will be saved.
Which do you choose?
- If program 1 is adopted 400 people will die.
- If program 2 is adopted there is a 1/3 probability that nobody will die and 2/3 probability that 600 people will die.
Which do you choose now?
Case study 2: Answer
The consequences are the same in both scenarios. But in Scenario 1 people choose the sure program, while in Scenario 2 the majority of people choose the gamble.
Puzzle 1: The Bat and ball problem
A bat and a ball cost $1.10. The bat costs one dollar more than the ball.
How much does the ball cost?
Puzzle 1: Answer
The bat costs $1,05.
The ball costs $0,05.
Almost everyone feels the temptation to answer “10 cents” because the sum $1.10 so neatly separates into $1 and 10 cents, and 10 cents seems the right price for a ball (small and light) relative to a bat (big and heavy). In fact, more than half of a group of students at Princeton and at the University of Michigan gave precisely that answer — that wrong answer.
So did was your answer correct? Or did System 1 gave you the wrong answer?
Thank you for your time. I hope you have found this book review helpful. Talk to you in the comment section.