Heuristics and Biases: This section explains why we struggle to think statistically. Two systems: Book initially describes two system, system 1 and system 2 by giving examples of how and when both are used by us and how they arrive at different results even given the same input. (Detailed explanation of each section is provided in section below) The book is divided into five sections namely two systems, heuristics and biases, overconfidence, choices and two shelves. The plot of his book is how to, “recognize situations in which mistakes are likely and try harder to avoid significant mistakes when stakes are high.” He offers practical and enlightening insights into how choices are made in both our business and our personal lives-and how we can use different techniques to guard against the mental glitches that often get us into trouble. He shows that certain heuristics lead to muddled thinking, and gives each a name such as “halo effect,” “availability bias,” “associative memory,” and so forth.” Kahneman reveals where we can and cannot trust our intuitions and how we can tap into the benefits of slow thinking. Author calls these assumptions heuristics. The book shows that our intuition is biased and we assume certain things without having thought through them carefully. Author further uses the example of prospect theory to demonstrate decision making under risk and uncertainty. Thinking fast and slow by Daniel Kahneman provides an insight and understanding for topics like psychology, perception, irrationality, decision making, errors of judgment, cognitive science, intuition, statistics, uncertainty, illogical thinking, stock market gambles, and behavioral economics. System 2 = The slower, conscious, rational, reasoning, deliberate thinking. System 1 = The instant, unconscious, automatic, emotional, intuitive thinking.
System 2, which is a slow system and intervenes when output of system 1 is insufficient, infringe or less rational. System 1 which is fast and is responsible for intuitive decisions based on emotions, imagery and associative memory. Thinking fast and slow in based on two systems of decision making.
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