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XXX's Reviews > Thinking, Fast and Slow
Thinking, Fast and Slow
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Given Kahneman's credentials and the press this book has received, I was disappointed in the read. The overall themes of the book (humans are inconsistent, we rely on heuristics in ways that do not conform to rational rules) and many of the studies have been covered already by books such as "Blink" and "Predictably Irrational." Whether or not it's fair to penalize the book for (re)covering such areas is debatable, but it certainly makes for a more boring read.
Ultimately, it's hard to disagree with most of the points Kahneman makes--the research he cites is, for the most part, solid and quite convincing. Humans are quite likely to be bad at forecasting, experience regret for difficult choices, have the judgments swayed by small, meaningless cues in the environment, base opinions on questionably general associations (e.g. "halo effect"), reinterpret our memories... the System 1 (quick, associative) vs. System 2 (conscious, ponderous, but more consistent) framework is useful for understanding why these occur and he sets out potential evolutionary reasons why these systems make sense for organisms. This is useful and important.
A big weakness of the work, however, is that it mostly discusses experimental ("in-lab") studies. Because of the controlled conditions, these are certainly the most convincing for breaking down the idiosyncrasies of the human mind. Yet, when he tries to generalize these ideas to the "real world" the connection is inevitably weak. For instance, Kahneman seems to denigrate the majority of the industry of trading (i.e. the stock market) because traders (as human beings) show many inconsistencies. If X sells a stock to Y (expecting to make a profit), what does X know that Y doesn't? He claims that 2/3 of hedge funds underperform the market in a given year and that the list of those 2/3 is not constant. It seems it's all baloney, right? Yet, as he admits, he knows little about the stock market. If he knew more, he would have realized 1) Stocks are often traded in order to ensure against different types of risk; traders X & Y might both benefit based on other outcomes of the world 2) Hedge funds strive for a reliable return, overperforming the market in its bad years and underperforming in good years. So, indeed, we should actually expect underperformance 3) "The Market" performs well because many people all add little pieces of information. We should expect X & Y to differ in their beliefs, but averaging over all traders will give us a powerful calculation on how to value different stocks and commodities. It's hard to beat the market, but only because many people try.
Other applications to the "real world" are weak as well. It's possible that having a polling place in a school changes your mindset, but it's hard to tell from the evidence presented. After all, communities that vote in schools may be quite different from ones that vote in other buildings.
The reported happiness section which closes the book is one of the weaker parts. Certainly, these statistics are valuable and getting people to report subjective wellbeing is an important endeavor. It's good to remember that a paraplegic person soon returns to the same levels of reported happiness as anyone else--we should not forget that they're human, too, and their lives are not wholly defined by their physical abilities. But the example also shows the weakness of such statistics--clearly they are failing to capture important components of wellbeing. Likely, people and their emotions adjust to some baseline of normality, and these statistics of happiness correspond to unexpected deviations from that. As such, they are hardly ready for use in policy, suggesting, as they do, that the world would suffer only temporarily from disability, great loss of income, etc.
Overall, there are many useful points and examples in the book, but there seems to have been little care in applying the lessons of lab experiments to the trickier business of the outside world. The book is important, but readers should apply the careful thinking of System 2 rather than the quick but inconsistent belief of System 1 when considering which parts are accurate and which overstated. No doubt Kahneman would be quite pleased by such an exercise in conscious thought.
Ultimately, it's hard to disagree with most of the points Kahneman makes--the research he cites is, for the most part, solid and quite convincing. Humans are quite likely to be bad at forecasting, experience regret for difficult choices, have the judgments swayed by small, meaningless cues in the environment, base opinions on questionably general associations (e.g. "halo effect"), reinterpret our memories... the System 1 (quick, associative) vs. System 2 (conscious, ponderous, but more consistent) framework is useful for understanding why these occur and he sets out potential evolutionary reasons why these systems make sense for organisms. This is useful and important.
A big weakness of the work, however, is that it mostly discusses experimental ("in-lab") studies. Because of the controlled conditions, these are certainly the most convincing for breaking down the idiosyncrasies of the human mind. Yet, when he tries to generalize these ideas to the "real world" the connection is inevitably weak. For instance, Kahneman seems to denigrate the majority of the industry of trading (i.e. the stock market) because traders (as human beings) show many inconsistencies. If X sells a stock to Y (expecting to make a profit), what does X know that Y doesn't? He claims that 2/3 of hedge funds underperform the market in a given year and that the list of those 2/3 is not constant. It seems it's all baloney, right? Yet, as he admits, he knows little about the stock market. If he knew more, he would have realized 1) Stocks are often traded in order to ensure against different types of risk; traders X & Y might both benefit based on other outcomes of the world 2) Hedge funds strive for a reliable return, overperforming the market in its bad years and underperforming in good years. So, indeed, we should actually expect underperformance 3) "The Market" performs well because many people all add little pieces of information. We should expect X & Y to differ in their beliefs, but averaging over all traders will give us a powerful calculation on how to value different stocks and commodities. It's hard to beat the market, but only because many people try.
Other applications to the "real world" are weak as well. It's possible that having a polling place in a school changes your mindset, but it's hard to tell from the evidence presented. After all, communities that vote in schools may be quite different from ones that vote in other buildings.
The reported happiness section which closes the book is one of the weaker parts. Certainly, these statistics are valuable and getting people to report subjective wellbeing is an important endeavor. It's good to remember that a paraplegic person soon returns to the same levels of reported happiness as anyone else--we should not forget that they're human, too, and their lives are not wholly defined by their physical abilities. But the example also shows the weakness of such statistics--clearly they are failing to capture important components of wellbeing. Likely, people and their emotions adjust to some baseline of normality, and these statistics of happiness correspond to unexpected deviations from that. As such, they are hardly ready for use in policy, suggesting, as they do, that the world would suffer only temporarily from disability, great loss of income, etc.
Overall, there are many useful points and examples in the book, but there seems to have been little care in applying the lessons of lab experiments to the trickier business of the outside world. The book is important, but readers should apply the careful thinking of System 2 rather than the quick but inconsistent belief of System 1 when considering which parts are accurate and which overstated. No doubt Kahneman would be quite pleased by such an exercise in conscious thought.
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August 13, 2014
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August 13, 2014
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