Thinking Fast And Slow 4l2h9

BOOK REVIEW THINKING FAST AND SLOW

Presented By:

Ramanjeet Singh MBA 4th Sem

ABOUT THE AUTHOR •

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Daniel Kahneman is a nobel prize winner. He is Ph.D from university of California He is professor emeritus of psychology and public affairs at Princeton University. He is known for cognitive biases, behavioral economics and prospect theory. Thinking Fast and Slow Review by: Ramanjeet Singh

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TWO SYSTEMS

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JUMPING TO CONCLUSION FALLACY 

Drawing a conclusion without taking the needed time and evaluating all the facts to reason through the argument.

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ASSOCIATIVE COHERENCE Association between events, circumstances and regular occurrences.  The more these events fits into our stories the more normal they seem.  Example: 

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After spending a day exploring beautiful sights in the crowded streets of New York, Jane discovered that her wallet was missing.

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Thinking Fast and Slow Review by: Ramanjeet Singh

SUNK COST FALLACY The tendency of people to irrationally follow through on an activity that is not meeting their expectations because of time or money they have already spent on it. Example: 

• X has already been invested in project Y. • Z more investment would be needed to complete project Y otherwise X will be lost. • Therefore, Z is justified.

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OVERLOOKING STATISTICS 

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The tendency of people to misjudge the likelihood of event because of too little weightage given to statistical information and giving more weightage to other information. Example: 

Only 6% of applicants make it into this school, but my son is brilliant!  They are certainly going to accept him!

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EXPERT INTUITION 

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Intuition means knowing something without knowing how we know it. Intuition is immediate pattern recognition, not magic. When can you trust it?

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THINKING NARROWLY Most of us are so risk averse that we say no to all gambles.  Sometime we lose money because of risk aversion behavior. 

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TWO SELVES

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ECONS AND HUMANS Economists operate on the assumption that consumers are rational and always will do the rational thinking.  Heuristics influence our choices which are mostly irrational.  We need help to make rational choices. 

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STRENGTH 

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The writing style of the author in this book is very reader friendly. The book explains many aspects of human psychology. The book explains almost all the aspects of behavioral finance. It tells us how behavior of the human affects the financial decision making. 12 Thinking Fast and Slow Review by: Ramanjeet Singh

“Humans rarely meet the standards of rationality, even when they think that they are reasonable.”

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