Pete Combe's Reviews > Thinking, Fast and Slow

This is a little bit of a weird book. It's almost like two separate books. The first part deals with what the author calls systems 1 and 2, essentially these are the intuitive and analytical minds respectively. The second part of the book gets into economic utility theory, and the author's (Nobel Prize winning) research on the economics and psychology of decision-making, particularly with respect to the different psychological reactions/incentives to equivalent gains and losses, and the importance of reference/starting points as opposed to absolute utility/wealth.

I have two main critiques:

1. The portion on intuitive vice analytical decision making essentially says that all outcomes are based on chance, and can be more accurately predicted by applying a statistical regression analysis (i.e. pure chance/probability) as opposed to looking at either volitional decisions or talent/expertise on the part of the actors. One example that the Kahneman uses is Google. He argues that Google's founders (Larry Page & Sergey Brin) got rich essentially as a result of chance, and that you could have predicted the outcome with a simple regression analysis. This ignores two main points about the Google example: (a) Page and Brin had to "create their own luck." Kahneman indicates that they created a "superior algorithm" for searching the internet, but got lucky because their initial sale request for $1 million was rejected as too high, enabling them to wait for a (much) higher offer. This ignores two facts. First that Page and Brin had to create the opportunity be being talented, and creating said superior algorithm. (b) Second, that even if they had sold, if Google was indeed a superior algorithm, the buyer likely would have gone on to great success with Google. The talent and ingenuity of Page and Brin likely would have ended up with Google dominating internet search engines (and other services) with or without them at the helm. This isn't luck, this was creating a superior product that people want/need.

This same type of argument applies to almost of all of his examples, including the IQ of people we end up marrying. This ignores the volitional part of decision-making. We don't throw a dart at a board full of pictures of potential spouses and marry whichever person's picture we hit. There's a volitional aspect to marriage, that in many ways defeats his conception of random chance as the driving factor. The distribution of IQs among spouses may be no more correlated than random, but his analysis ignores the fact that there are many other factors (in most marriages) that go into choosing a spouse than simply how smart that person is. The distribution of a single trait may look like chance, but the problem is that he focuses only on that single trait, rather than a holistic view of the spouses, and the volitional aspect of choosing a spouse based on that holistic view.

2. My critique of the second part of the book is simpler. Beating the dead horse.

He takes like half the book to explain the following 3 sentences. Humans are generally loss averse, and the key piece of information for ascertaining someone's utility in a certain amount of something (i.e. utility in money) depends on where they start off. This gives us two basic outcomes. (a) 2 people won't have the same subjective utility in $1 million if one started off at $10,000 (happy), and the other started off at $5 million (pissed). (b) all things being equal, people are more averse to a particular probability/size of loss, than they value an equivalent probability/size of gain. That's it. Full stop.