Thinking fast and slow

Daniel Kahneman

System 1 is automatic and impulsive; System 2 is very conscious, aware and considerate.
The target question is the assessment you intend to produce; The heuristic question is the simpler question that you answer instead: ★
```
- Target Question: How happy are you with your life these days?
- Heuristic Question: What is my mood right now?
```
System 1 can deal with stories in which the elements are causally linked, but it is weak in statistical reasoning.

Mood affects the operation of System 1: ★

- Good mood = creativity, intuition (safe environment) 
- Bad mood = better logical operations (sad, vigilance, paranoid)

We are drove by What You See Is All There Is (WYSIATI). When the mind makes decisions, it deals primarily with Known Knowns. It rarely considers Known Unknowns.
1. Entrepreneurs imagine a future where their actions determine the outcome of the firm, and not their competitors.
2. How to see the unseen? Asking the right questions.
3. Uses distributional information to create a baseline prediction. This adopts an outside view.

Gorila effect (Inattentional blindness)
1. We are blind to the obvious
2. And we are also blind to our blindness
A *conjunction fallacy (Linda Problem)* is when a specific conditions are more probable than a single general one. ★
```
- Linda is a bank teller.
- Linda is a bank teller and is active in the feminist movement.
```
Adding detail to scenarios makes them more persuasive, but harder to be true.
Endowment Effect
1. We naturally assign more value to things just because we own them.
2. Being poor is living below one's reference point. Small amounts of money they receive are a reduced loss, not a gain. All their choices, then, are between losses.
Framing Effect: Different reactions depending on how the problem is framed:

"200 of 600 lives will be saved"

"400 of 600 people will die".

When look for a statistical problem, find the Base rate because each new piece of information affected the original probability, and that is a Bayesian inference. Blue/Green cab example:

Bayes Theorem
Regression to the mean is when poor performance is followed by improvement, and good performance is followed by deterioration.
1. It’s important to understand the natural fluctuations of quantifiable performance.
2. Sports Illustrated cover jinx
Decision Weights. Percent of winning. ★

<aside> 📊 Two scenarios: A) 1% chance to win $1 million. B) 1% change to not win $1 million. The anxiety of the second situation appears to be more salient than the hope in the first.

</aside>
Performance was better with the bad font. Cognitive strain, whatever its source, mobilizes System 2.

<aside> 📊 40 Princeton students take a Cognitive Reflection Test. Half of them saw the puzzles in a small font in washed-out gray print. The puzzles were legible, but the font induced cognitive strain. 90% of the students who saw the CRT in normal font made at least one mistake. But the proportion dropped to 35% when the font was barely legible.

</aside>