THINKING FAST AND SLOW BY DANIEL KAHNEMAN

Key Concepts: The Machinery of the Mind
Kahneman introduces a dual-process framework to explain how we navigate the world:

System 1 vs. System 2:

• System 1 (Fast): Intuitive, emotional, and automatic. It’s what allows you to read a facial expression or drive on an empty road. It is prone to error and loves simple stories.
• System 2 (Slow): Logical, calculating, and effortful. It’s what you use to solve a complex math problem or file taxes. It is "lazy" and prefers to let System 1 take the lead whenever possible.

• The Law of Small Numbers: We are hardwired to see patterns in random data. We often draw sweeping conclusions from tiny sample sizes that have no statistical significance.
• Anchoring: Our judgment is easily manipulated by the first number we hear. If a "suggested price" is high, we will likely pay more than we should, even if that number is completely arbitrary.
• Availability Heuristic: We judge the probability of an event (like a plane crash or a shark attack) based on how easily we can recall an example, rather than on actual data.
• Loss Aversion: The pain of losing $100 is twice as powerful as the joy of gaining $100. This instinct makes us irrationally "risk-averse" when we should be calculating odds.
• Prospect Theory: A Nobel-winning concept showing that people make decisions based on perceived gains or losses relative to a "reference point," rather than the final outcome.
• The Planning Fallacy: We consistently underestimate how much time, money, and effort a project will take because we focus on the "best-case" story rather than historical data.
• The Experiencing Self vs. The Remembering Self: We don't choose between experiences; we choose between memories of experiences. A long vacation with one bad ending is remembered more poorly than a short one that ended well, even if the total "joy" was higher in the first.

Thinking, Fast and Slow is a humbling, essential look at the flaws of human nature, proving that the first step to thinking clearly is realizing just how often you don't.