Review of Thinking, Fast and Slow by Daniel Kahneman

- Daniel Kahneman, 2023

“We are prone to overestimate how much we understand about the world and to underestimate the role of chance in events.”

Daniel Kahneman's Thinking, Fast and Slow has been hailed as a groundbreaking book, exploring how our minds work through the lens of psychology and behavioral economics. However, despite its acclaim, my experience with the book was marked by frustration and disappointment.

The Problem with “Trick” Questions

Kahneman, along with his collaborator Amos Tversky, devised various thought experiments that reveal our cognitive biases. But to me, many of these experiments feel more like trick questions designed to trip up the reader rather than offer genuine insights.

The Dinnerware Example

One experiment involved pricing two sets of dinnerware:

• Set A:

  • 8 plates, good condition
  • 8 soup bowls, good condition
  • 8 dessert plates, good condition
  • 8 cups (6 in good condition and 2 broken)
  • 8 saucers (1 in good condition and 7 broken)

• Set B:

  • 8 plates, good condition
  • 8 soup bowls, good condition
  • 8 dessert plates, good condition

When participants were shown both sets, they valued Set A at $32 and Set B at$30. But when shown each set separately, they valued Set A at $23 and Set B at$33. Kahneman calls this the "less is more" effect, claiming it demonstrates how our brains fail to process probabilities correctly.

However, I believe there's a more rational explanation: When shown Set A alone, participants likely doubted the overall quality of the dinnerware due to the broken pieces, leading to a lower valuation. This isn't necessarily evidence of a cognitive bias—it's a reasonable reaction to uncertainty about quality.

The Linda Problem

Kahneman's famous "Linda problem" asks participants to judge the likelihood of two scenarios:

• Scenario A: Linda is a bank teller.
• Scenario B: Linda is a bank teller and active in the feminist movement.

Most participants choose Scenario B, despite the fact that, statistically, Scenario A is more probable. Kahneman interprets this as proof that our heuristics are incompatible with logic.

But there's another way to view this. Participants may have chosen Scenario B not because they misunderstand probability, but because they were trying to align with what they perceived the researchers wanted. The problem here isn't necessarily with human cognition but with the design of the question itself.

The Hot Hand in Sports

Kahneman also challenges the idea of the "hot hand" in sports, arguing that it's a fallacy based on misperceptions of randomness. While statistically, small sample sizes don't support the idea of a hot hand, in the real world, coaches and players don't have the luxury of waiting for large sample sizes to make decisions. If a player seems to be "on fire," it makes sense to give them the ball, even if the hot hand doesn't exist in a strict probabilistic sense.

Regression to the Mean

Kahneman discusses regression to the mean, the phenomenon where extreme performances tend to be followed by more average ones. He extends this concept to businesses, suggesting that a company that performs poorly one year is likely to do better the next.

However, real-world evidence, such as the "Dogs of the Dow" investment strategy, shows that regression to the mean doesn't always play out as expected in the stock market. Companies can continue to underperform or overperform for years, defying the simplicity of this concept.

Prospect Theory

Kahneman won the Nobel Prize for his work on Prospect Theory, which explains how people make decisions under risk. The theory highlights that people are more averse to losses than they are motivated by gains, leading to risk-averse behavior in some situations and risk-seeking behavior in others.

While Prospect Theory is insightful, it has a significant flaw: it assumes that participants' answers to hypothetical questions reflect how they would behave in real life. However, real-world behavior often differs from what people say they would do on paper.

Concerns About Research Integrity

Finally, Kahneman's anecdote about using Canadian government funds to conduct irrelevant surveys raises ethical concerns. It suggests a disconnect between the theoretical world Kahneman operates in and the real-world consequences of such actions. Moreover, the broader issue of the reproducibility of psychological experiments casts doubt on the robustness of his findings.

Conclusion

Thinking, Fast and Slow is a significant work that highlights the fallibility of human judgment. However, the book's reliance on "gotcha" experiments, its assumptions about human behavior, and ethical concerns surrounding its research methods make it less convincing to me. While Kahneman's ideas are valuable, they should be taken with a grain of salt, especially when applied to real-world scenarios.

Edwin Wong Author and critic Sine memoria nihil