#248 | We’re All a Bit Irrational—12 Reasons Why from Daniel Kahneman’s Groundbreaking Book ‘Thinking, Fast and Slow'
Quick SUMMARY:
Douglas Vigliotti delves into Daniel Kahneman's influential nonfiction book, "Thinking, Fast and Slow." Vigliotti outlines Kahneman's background and his pioneering work in behavioral economics, including his Nobel Prize-winning prospect theory. The episode explores key concepts from the book, such as the two systems of thinking—fast, intuitive System 1 and slow, deliberate System 2—and various cognitive biases and heuristics that shape human decision-making. Tune in to learn why you think the way you do.
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TOPICS COVERED IN the EPISODE:
Introduction to the Podcast (00:09) - Overview of the podcast's purpose and introduction to the book "Thinking, Fast and Slow."
Author Introduction (01:12) - Discussion of Daniel Kahneman's background and his significant contributions to behavioral economics.
Kahneman's Achievements (02:16) - Highlighting Kahneman's Nobel Prize and Presidential Medal of Freedom awards.
Overview of the Book (03:27) - Explaining the main concepts of "Thinking, Fast and Slow" and its two systems of thinking.
Strengths and Weaknesses of Thinking (04:51) -0 Exploration of how the two thinking systems shape decision-making and judgments.
Heuristics, Biases, and Effects (05:48) - Introduction to the twelve heuristics, biases, and effects discussed in the book.
Focusing Illusion (06:16) - Description of the cognitive bias of overestimating the importance of single factors in happiness.
WYSIATI (06:16) - Explanation of the "what you see is all there is" concept and its implications.
Loss Aversion (07:24) - Discussion on the pain of losing versus the pleasure of gaining.
Endowment Effect (07:24) - Explaining the tendency to overvalue owned items.
Diminishing Sensitivity (07:24) - Impact of gains and losses diminishing as sizes increase.
Reference Dependence (08:52) - Need for references in decision-making based on current state versus absolute.
Probability Weighting (08:52) - Overvaluing rare events while underestimating common ones.
Sunk Cost Fallacy (09:51) - Tendency to continue investing in losing propositions due to prior commitments.
Anchoring Bias (10:17) - Overvaluing the first piece of information received in decision-making.
Confirmation Bias (10:17) - Tendency to seek information that confirms existing beliefs.
Framing Effect (10:17) - How the presentation of choices influences decisions.
Overconfidence Bias (11:23) - Tendency to overestimate personal abilities and knowledge.
Hindsight Bias (11:23) - Belief that outcomes were predictable after they have occurred.
Closing Thoughts and Quotes (12:34) - Final reflections on Kahneman's insights and the importance of storytelling in persuasion.
Podcast Engagement (13:40) - Encouragement to subscribe, rate the podcast, and provide feedback.
READ THE TRANSCRIPT:
Welcome back to “Books for Men”, a podcast to inspire more men to read and bring together men who do. So this week I am switching back into a work of nonfiction. It is psychology, or behavioral economics, I should say, and it's a longer work, around 500 pages or so. It is titled “Thinking, Fast and Slow” by Daniel Kahneman, and it came out in 2011. I will share a lot more about the author, the book, and some of my larger takeaways, which include a list of heuristics, biases, and effects that the author writes about in this groundbreaking work. But before I do that, I wanted to quickly make mention of my new book that is out, “Aristotle for Novelists: 14 Timeless Principles on the Art of Story”. If you are a novelist or someone who is looking at potentially writing a novel, or perhaps you're trying to tell the story of any kind on the screen page or in your life, then I think that this book will be something that you can get a lot out of.
01:12 - And if you're interested in learning more about that, then all you have to do is visit AristotleforNovelists.com. Okay, so now let me turn back to the book at hand and, more importantly, the author. So he's written seven books and countless academic research papers. He's been affiliated with Hebrew University, Stanford, the University of British Columbia, Cal Berkeley, and then for the majority of his career, I think starting in the early 90s, Princeton. In academic circles, he needs no introduction. That is just how widespread and influential his work on behavioral economics was to the actual field. And in some respects, his work with Amos Tversky in the 70s helped launch the field. And I won't dive into it too much in this episode, but if you get a chance to read about their partnership. It was as interesting and dynamic as it was influential, so Tversky was more wily, energetic, and confident to Kahneman's laid back, less sure of himself attitude, and in a way that sort of representative of the work that I am sharing with you today, “Thinking, Fast and Slow”. More on that in just a moment.
02:19 - But I should also note that in 2002, he, Daniel Kahneman, was awarded the Nobel Prize for his contributions to the field with prospect theory, which is his and Tversky's overarching model of how people make decisions under risk and uncertainty. And of course, that is written about in the work that I am sharing with you today, and also similar to someone that I featured a couple of weeks ago, Eric Hoffer, Daniel Kahneman was awarded a Presidential Medal of Freedom in 2013. So his career is very influential. It's very impactful to society at large. And sadly, he passed away in 2024, so just a year ago. Fortunately, for myself, in a selfish way, I guess during the pandemic, I was able to hear him give a private talk or an interview, I should say, around his new book, “Noise”. It was conducted by someone whom I've had on this podcast before, or my previous podcast. I should say “It's Not What It Seems”. Annie Duke, I featured the interviews “From the Vault” episodes last year or the year before. I can link those up in the show notes.
03:29 - But anyway, I was able to hear him give a talk over Zoom. Of course, enough about the author. And now let's turn specifically to this book. What's it about? In short, or in an overarching way, I should say it combines all of that groundbreaking research conducted by him and Tversky, and packages it up in a digestible way for commercial readers. The title itself. So “Thinking, Fast and Slow”. The book is about two systems that dominate our thinking: System One, being fast, intuitive, and emotional, and System Two, being slow, deliberate, and rational. This is why I said earlier that Tversky and Kahneman's relationship and their personality types, interestingly, correlate to this work as a whole, and I don't want to suggest that either man is symbolic of either of the two systems. But I do think there are some correlations that are just funny to me. Now, before you conclude one system is better than the other, I think the strength of this work is not only that, it features the foundational research and data that so many popular psychology or social science books reference, and that much of the field is built on.
04:51 - But the book, as you might expect, does a great job of exploring the strengths and weaknesses of both systems. So, most importantly, it shows how these systems shape our decision-making and judgments and ultimately, our lives. It's a book that teaches us how and why we think the way that we do. And in a nutshell, it's just a contemporary classic that I think should be on everybody's reading list. So instead of sharing my three large takeaways, which is something that I normally do, instead, I'm going to share with you 12 heuristics, biases, and effects that Daniel Kahneman talks about in this book, or that his research indicates we do as humans, unknowingly, consistently, and irrationally. All right. So the first one is the focusing illusion. This is something that has stuck with me for a very long time since I originally read about it, and basically, it is a cognitive bias or our tendency to overestimate the importance of a single thing when it comes to our happiness. But you can expand it out to a lot of different angles and impacts that it has in our life.
06:16 - The thing that most readily comes to mind is something else that he talks about in the book called WYSIATI, and that's an acronym, WYSIATI—what you see is all there is. This is something that has stuck with me forever, as I just mentioned, since I read it. And it's an important reminder that what you see is not all there is, even though our tendency is to dial in on the things that we can readily observe, it's important to remember there is a lot more behind the person, the situation, the idea that everything and your eyes are really just deceiving you. There's a great quote that he has in the book that I've said a zillion times to people since I read it, and it's: “Nothing is as important as you think it is, while you are thinking about it.” The second thing that I want to share with you is probably one of the things that he's most known for, and it's part of that prospect theory, and it's called loss aversion. So all that basically means is it's more painful to lose something than it is to gain that thing.
07:24 - Going hand in hand with that is another effect known as the endowment effect. And that is our tendency to overvalue the things we own. The next thing I wanted to share with you in the fourth that I have written down here is diminishing sensitivity. And what that means is the impact of gains and losses in one's life diminishes as the overall size increases. If you think about that from a financial sense, it's the easiest way to interpret that. And of course, I should mention that all of these things are detailed in this book. It's what the research indicates we do as human beings. Number five thing that I have written down here is reference dependence. So we have a need for references. But our tendency is to use the current state rather than the absolute meaning. We'll look at the current state of affairs and not what it means in the aggregate or in the entire picture, and that is what we utilize to make that decision. Number six is probability weighting. So this is the overvaluation of the likelihood of rare events in underestimating the likelihood of common events.
08:52 - This is a really interesting one. I think that there are a lot of societal factors that contribute to it. Number seven is the sunk cost fallacy or as he refers to it in this work, the escalation of commitment. And that's just the tendency to not quit based on resources that you've already committed to something, despite evidence that suggests that you should not proceed with that thing. So we feel committed, and that escalation continues to rise as we commit more resources to it. Number eight is anchoring bias. And so this is just the tendency to overvalue the first piece of information that a person receives. You see this a lot in negotiations in business. And sales start high because people are not going to go up, but they're going to anchor on that number and work down from it. Relating closely with that is confirmation bias, and this is our tendency to confirm existing beliefs and seek out information that does that, and avoid information that dispels those beliefs. I wrote about this in The Gap because it is a really big blind spot that we have in our reasoning and our understanding of a lot of subject matter, whether it's politics or books, it doesn't matter.
10:17 - Confirmation bias is resting at the heart of trying to close the gap on understanding any of those on a deeper level. Number ten is the framing effect. So this is just the structuring of choices that will influence your decision, even if the core info is identical. Meaning how I show it to you is going to impact the decision that you make. I find this really, really interesting because the essential information doesn't change. It's just how it's delivered, and that affects us. Excess number 11 is overconfidence bias, and this is our tendency to overestimate our own abilities and knowledge. I think that we see this all the time. There's some positive to this, some negative. Some might see the correlation with the Dunning-Kruger effect, something that is being popularized by social scientists galore. But I don't believe or I don't remember, Kahneman talking about that in this book. And then the final thing that I want to share with you. Number 12 is hindsight bias. And that's our tendency to believe you knew the answer all along. Or you could have predicted it well before it actually happened.
11:23 - Annie Duke, we'll talk about this as resulting when you're making a decision. So you're using the result of that decision to evaluate how you made the decision, whether it was right or wrong. And that's a bad idea because the outcome should be differentiated from the actual decision-making process. You could make a good decision and have a bad outcome. You could make a bad decision and have a good outcome. And this idea relates to this bias known as hindsight bias. All right. So I've been going on long enough. So I'm going to wrap this up. Before I do, though, I would like to share a quote from Daniel Kahneman that comes from this book. And he says, “The premise of this book is that it is easier to recognize other people's mistakes than our own.” And I think that this is interesting because I've even heard him say in an interview or conversation that he was having with Sam Harris on his podcast, “Making Sense” that just because, you know, these heuristics, biases, and effects, it doesn't actually make you better at avoiding them.
12:34 - And in some cases, it could actually make you worse because Sam Harris was asking him, basically, since you know all this about human behavior, are you able to avoid it? And he was in shorter terms, like, no, I am not. And I just always thought this was really interesting. And actually I will close this with a quote that I heard him say during that interview and he said, “If you want to move people, you have to tell stories, not numbers … If you want to convince people, you need to convince them by telling them stories about individuals, because numbers just don't capture the imagination of people.” And I love that quote for so many reasons, many of which, including the power of stories you've probably heard me blabber about on this podcast before, so I won't hammer that home now. All right, that's all I've got. I hope you enjoyed this episode. If you did, I want to please remind you to click subscribe on whatever podcast platform you're listening to this on, or take two seconds and rate the podcast.
13:40 - Either one of those goes a long way in helping new listeners find the show and inspiring more men to read. Of course, I'd also love to hear from you about either this episode, some suggestions for special edition episodes in the future, or just about the podcast more broadly. In that case, there are two ways that you could reach out to me: either on Instagram @DouglasVigliotti. It's the only social media that I have, or via my website, DouglasVigliotti.com. As I mentioned at the top of this episode, I have a new book out. It is titled “Aristotle for Novelists,” and you can find out more information about that at AristotleforNovelists.com. All of these links will be in the show notes. And, last but not least, I want to thank you so much for listening. And if you want more information on this podcast specifically, which includes signing up for the monthly newsletter, then all you have to do is visit the website BooksforMen.org.
