First, the author introduces two different systems of thinking: fast and slow. Fast thinking could be described as an idea that you get automatically, instinctively, and emotionally, while slow thinking is a process that is deliberate and detail oriented. According to the author, fast thinking doesn’t require much effort and it is only natural for our body to employ it most of the time for managing routine tasks, but the efficiency of the fast way of thinking often comes at the price of making incorrect assumptions. Interestingly, the author notes that it is impossible to shut fast thinking off, at least while the mind is awake. Therefore, fast thinking is an ongoing process of constantly scanning the environment and making conclusions before the slow way of thinking has a chance to analyze the situation thoroughly. That is why many of our conclusions are biased due to a halo effect which makes us accept an incorrect conclusion, even when presented opposing information. The author compares the fast way of thinking with a machine for jumping into conclusions. Our mind elects to jump into conclusions, because it is efficient, considering the fact that the answer has a high chance of being correct, and only occasionally wrong. Kahneman illustrates that our mental capacity is normally limited to one of two extremes. He observes that people tend to remember extreme aspects of their life and forget normalities of day to day life. Often, individuals try to make a decision based on their forecast of what will make them happier in the future and don’t think that statistics apply to them. This makes predicting ineffective and makes happiness quickly fade away. This phenomena makes people substantially unreliable in reporting on their well-being, especially, considering that mental bias is shaped by the strong influence of the media.Later, Kahneman describes why it is so hard for our minds to think statistically and logically. He resorts to a number of doctrines such as anchor theory, the substitution theory, the optimism bias, the framing effect, and others in order to describe the process of making a faulty judgment. He demonstrates how our prior experiences subconsciously create a point of reference and cage our response, allowing emotions to shut our logic off. For example, in the process of believing that money improves our life, being poor would take away the feeling of “well-being”, while being rich improves our satisfaction, but not an actual “well-being”. The author believes that fast thinking continuously provides slow thinking with suggestions, intentions and feelings, and if slow thinking accepts those suggestions they become beliefs and voluntary actions. This demonstrates how both of these systems assist one another, hand in hand. Kahneman illustrates that both of these processes work together, and when a fast way of thinking requires additional attention it turns to the slow way of thinking, which applies more focus on the problem. Kahneman looks at risk aversion, framing, and reference points to explain how our mind assesses options available to us in decision making processes. He defends an idea of two selves, where one self is the remembering self and other is the experiencing self. He holds that the idea of two selves is important in how we evaluate our life experiences. The experiencing self is associated with a fast way of thinking, while the remembering self comes from thinking about our life rather than living it. The author uses Cognitive illusion phenomenon to demonstrate that our memories are facts that are often overlooked in favor of our perceptual experiences. This means that our remembering self creates stories for our future references biased by our perception of the event, and our mind mistakes these references for that experience.
Overall, Kahneman helps readers understand they the way they think. He helps us understand this complex phenomena by allowing us to see for ourselves inherent flaws and limitations of the processes employed into thinking. He also offers his readers an opportunity to overcome these flaws by deliberately electing to think slow. This book confirms teachings of personal finance and reinforces a number of ideas employed in it. First, it shows that our impulsive selves tend to make poorer spending choices, and if we were to spend some extra time and logically assess our needs by employing slow way of thinking we would make wiser financial decisions. Secondly, it shows that the deliberate, slow way of thinking requires effort and it often has to compete with fast way of thinking for a limited sources, which naturally makes our minds pick easier options, and as we learned from our personal finance course; it is easier to spend than to save. For instance, the priming effect holds that if an individual is primed with a specific word, he/she will be drawn to pair that word with one that suits the same category. Good examples of it would be: car and road, school and student, etc. The author suggests that priming is also applicable for actions and emotions. I
n his experiments, Kahneman shows that culture that surrounds us with different ideas shapes our behavior and attitudes. The priming effect shows that we are primed to the ideas we learn from our experiences and environment and if we were never exposed to the practice of good money management, subconsciously, it makes it so much harder for us to make a good financial decisions. All of this shows that understanding how one’s mind works could help us work towards training our minds to make better decisions in life and in finances. Personal finance is a way of living and is often neglected in home and institutional education practices.