Thinking Fast and Slow(summary)

We make decisions all the time, like to eat or to not eat,to walk or to not walk,to speak or to not speak, to buy this or not buy this, etc. It has been said that there are two systems that control you and your decisions.

System 1- this system is the one that controls your involuntary decisions.

System 2- This system is in use when you have to calculate some things in your brain and logically decide. It hence requires efforts.

Here are the differences between the two systems

System 1– Fast thinkingSystem 2– Slow thinking
QuickSlow
EasyRequires mental calculation
Involuntaryvoluntary

Fast thinking and slow thinking are both useful. According to the situation. When fast thinking we take a mental shortcut, that means taking decisions without thinking. Fast thinking is also very prejudiced and biased. Complicated it is, hence lets start to understand this biased and heuristic system of fast thinking.

Availability biased

This is when our decisions are influenced by social media, or the news. For example you wish to go to a place that is very beautiful. You are a person who does not feel very interested in watching the news, and so you are ready to pack your bags. Suddenly you see the news for the first time and you find out there has been a terrorist attack at this particular place. Shocked you unpack your bags.

Therefore is the availability bias provided to you by the media. You will be surprised to find out that you have a less risk of death in this beautiful place then your own car. Now, who would be interested in calculating so much, everyone would apply the wrong type of thinking to this situation and that is fast thinking. Hence your quick decision about unpacking your bags was wrong. Therefore this is why media has the ability to influence your mind very quickly. This results in you choosing wrongly. Hence, when taking decisions you must answer these questions.

Has my decision been researched?

answer- yes

Has this information been easily available?

answer- no

Anchoring Bias

This is related to numbers. Hence, to be more specific, comparing numbers in order to find answers. Take an example that last year the average for the present exam was 75, unfortunately you got 50. Upset you are. Then, you find out the topping marks are 52. Hence, you are delighted. First, your comparison was with 75, resulting in negative feelings. Next your comparison was with 52 which was closer to your score, thus resulting in positive feelings.

Many companies apply the same concept in their product price tags. They give your enormous prices or 2,000 dollars. At the same time they give you a sale price of 1800 dollars. Hurriedly you buy this product fearful of the discount finishing.

Framing Effect

Decisions also depend on how you frame a question. IF an old man on the door of death is asked if it is better to survive on a 90% survival rate or on a 10% death rate. What possibly would hr choose? He will want to survive on the 90% rate of survival. Looking at it logically both options mean the same. Our mind however acts on certainity and not on loss/risk.

Loss Aversion

Our brain tends to avoid pain and loss. When in the stock market, we wish to avoid losses. Thus, we buy more loss-making stocks to make an average. Or, when you wrap a baby with a blanket to avoid losses you make sure that the baby does not attain a cold.

Loss aversion also helps in convincing people. When persuading someone to stop smoking, telling them about gaining more money instead of wasting it on cigrattes will not be very convincing. However, when told about lung cancer, death and medical costs, impact of words will increase.

Endowment Effect

We overvalue what we own. When selling a car you may out it to a more heavy value then what it deserves. Whereas, people available in the market will want the value decreased. When emotionally attached our mind values this secific thing more.

Hence, it can be concluded that fast thinking is useful without any bias else the safest and best option would be slow thinking.

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