Wednesday, December 9, 2020

Daniel Kahneman, Thinking, Fast and Slow (Farrar, Strausand Giroux, 2013)

Indulge me for a moment — a baseball bat and a ball cost $1.10. The bat costs $1 more than the ball. How much does the ball cost? 

If you are like me (and most of Daniel Kahneman’s subjects), you answered this question easily, quickly, and incorrectly. Most of the population answers this way — that the bat costs $1.00 and the ball costs $0.10. Return to the problem and you can see that this answer is incorrect. Very simple math reveals the correct solution: that the bat costs $1.05 and the ball costs a dollar less at $0.05. 

This simple experiment showcases the central question of Thinking, Fast and Slow: why does the mind sometimes use answers it knows to be false as solutions to questions it is most certainly capable of answering correctly? Daniel Kahneman, the Israeli psychologist and Nobel Prize winning economist, answers this question by examining the irrationality of the human mind in his international bestseller, Thinking, Fast and Slow.

Kahneman’s book takes the reader on a tour of the human mind — urging the reader to take a step back and examine their own irrationality, to tap into the benefits of what he calls “slow thinking.” He begins by describing the two systems (or characters as he refers to them throughout the book) which govern our thinking. System 1 is fast thinking. It operates automatically and quickly, with little or no effort and no sense of voluntary control. System 2 is slow thinking. It allocates attention to the effortful mental activities that demand it — deliberation and strategic thinking. System 1 is our motor. It continuously generates impressions, intuitions, intentions and feelings. System 2 is our steering wheel — turning those impressions, intuitions and impulses into voluntary actions.

Entrepreneurs, and, frankly, most humans, spend most of their time in System 1 — making decisions, putting out fires and navigating the multitude of minute decisions in our day-to-day lives. A well-developed System 1 is at the core of every entrepreneur — the ability to make snap decisions, follow your gut and irrationally believe that a business will prevail. But oftentimes that is how we end up with a baseball bat that costs 90 cents more than the ball.

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