“Cognitive Currents: Managing Two Thinking Systems – An Overview of Daniel Kahneman’s “Thinking, Fast and Slow” | Andrew | Coins | January 2024

Nobel Prize-winning psychologist Daniel Kahneman’s book “Thinking, Fast and Slow” examines two different mental processes that underpin human cognition: System 1 (fast, instinctive, automatic) and System 2 (slow, planned, analytical). . Published in 2011, this book provides insight into how people think and make decisions by exploring the cognitive biases and errors that influence decision-making.

Two systems of thought:

• Kahneman presents the idea that mental processes are driven by two systems. While System 2 is more systematic and analytical, System 1 is instinctive and operates quickly.

Cognitive Bias:

• This book examines various cognitive biases, such as representativeness, availability, and fixity, that affect decision making. Kahneman shows how these biases can lead to persistent errors in judgment.

Prospect Theory:

• Prospect theory, which contradicts traditional economic models by asserting that people’s decisions are influenced more by perceived costs and benefits than by ultimate outcomes, was created by Amos Tversky and Kahneman.

Loss aversion:

• The main topic of the book is loss aversion. This highlights the notion that people generally avoid losses rather than seek similar gains. This loss aversion can affect your ability to take risks and make decisions.

Grant effect:

• The tendency for people to place a higher value on their possessions is called the endowment effect. This can affect your trading, buying and selling decisions.